<PAGE> 1
As filed with the Securities and Exchange Commission on August 8, 1995
Registration No. 33-_________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________
HARKEN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
____________________
DELAWARE 95-2841597
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
HARKEN ENERGY CORPORATION
5605 NORTH MACARTHUR BLVD., SUITE 400
IRVING, TEXAS 75038
(214) 753-6900
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
________________________________
copy to:
BRUCE N. HUFF HAYNES AND BOONE, L.L.P.
SENIOR VICE PRESIDENT 1300 BURNETT PLAZA
AND CHIEF FINANCIAL OFFICER 801 CHERRY STREET
HARKEN ENERGY CORPORATION FORT WORTH, TEXAS 76102
5605 NORTH MACARTHUR BLVD., SUITE 400 ATTN: WILLIAM D. GREENHILL
IRVING, TEXAS 75038 (817) 347-6600
(214) 753-6900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
________________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
________________________________
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
==============================================================================================================================
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered registered offering price per aggregate offering registration fee
unit(1) price(1)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 1,226,308 $1.50 $1,839,462 $634.30
per share
==============================================================================================================================
</TABLE>
-----------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based on the average of the high and low prices
reported on the American Stock Exchange on August 2, 1995.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 2
CROSS REFERENCE SHEET
BETWEEN ITEMS OF FORM S-3 AND THE PROSPECTUS
<TABLE>
<CAPTION>
Item
No. Prospectus Caption or Page
---- --------------------------
<S> <C> <C>
1 Forepart of the Registration Statement Facing Page; Cross-Reference Sheet;
and Outside Front Cover Page of Outside Front Cover Page of Prospectus
Prospectus
2 Inside Front and Outside Back Cover Pages Inside Front and Outside Back Cover
of Prospectus Pages of Prospectus
3 Summary Information, Risk Factors and Outside Front Cover Page of Prospectus;
Ratio of Earnings to Fixed Charges Risk Factors
4 Use of Proceeds Use of Proceeds
5 Determination of Offering Price *
6 Dilution *
7 Selling Security Holders Selling Stockholders
8 Plan of Distribution Plan of Distribution
9 Description of Securities to be *
Registered
10 Interests of Named Experts and Counsel *
11 Material Changes *
12 Incorporation of Certain Information by Inside Front Cover Page of Prospectus
Reference
13 Disclosure of Commission Position on *
Indemnification for Securities Act
Liabilities
</TABLE>
_________________
* Not Applicable
<PAGE> 3
***************************************************************************
* *
* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may not *
* be sold nor may offers to buy be accepted prior to the time the *
* registration statement becomes effective. This prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* nor shall there be any sale of these securities in any State in which *
* such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any such *
* State. *
* *
***************************************************************************
PROSPECTUS
1,226,308 Shares
HARKEN ENERGY CORPORATION
Common Stock
(par value $0.01 per share)
____________________
The 1,226,308 shares ("Shares") of common stock, par value $0.01 per
share ("Common Stock" or "Harken Common Stock"), of Harken Energy Corporation,
a Delaware corporation ("Harken"), offered hereby are being sold by the holders
thereof (the "Selling Stockholders"). See "SELLING STOCKHOLDERS." Harken will
not receive any part of the proceeds from the sale of the Shares by the Selling
Stockholders.
The Selling Stockholders may sell the Shares from time to time
directly or indirectly, through agents designated from time to time, in one or
more open market transactions, including block trades, on the American Stock
Exchange, in negotiated transactions or in a combination of any such methods of
sale or through dealers or underwriters also to be designated, on terms to be
determined at the time of sale. To the extent required, the specific Shares to
be sold, the name of the Selling Stockholders, purchase price, public offering
price, the name of any such agent, dealer or underwriter, and any applicable
commission or discount with respect to a particular offer will be set forth in
an accompanying prospectus supplement. The aggregate proceeds to the Selling
Stockholders from sales of the Shares will be the purchase price of the Shares
sold less the aggregate agents' commissions and underwriters' discounts, if
any, and other expenses of issuance and distribution. All of the registration
expenses of this offering will be paid for by Harken. Harken has agreed with
the Selling Stockholders with respect to 1,140,000 of the Shares to use its
best efforts to maintain the effectiveness of the Registration Statement of
which this Prospectus is a part for the shorter of one year from the date of
this Prospectus or the date on which all the Shares have been sold by the
Selling Stockholders. See "PLAN OF DISTRIBUTION."
The Selling Stockholders and any broker-dealers, agents or
underwriters that participate with the Selling Stockholders in the distribution
of any of the Shares may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933, as amended (the "Securities Act"), and any
commission received by them and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. See "PLAN OF DISTRIBUTION" for indemnification
arrangements.
<PAGE> 4
The Common Stock, including the Shares, is listed on the American
Stock Exchange ("AMEX"). On August 7, 1995, the closing sales price of the
Common Stock as reported on the American Stock Exchange was $1.50 per share.
PROSPECTIVE INVESTORS SHOULD CONSIDER AND REVIEW THE INFORMATION UNDER
THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 7 IN CONNECTION WITH THEIR
DECISION CONCERNING THE PURCHASE OF THE SECURITIES OFFERED HEREBY.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
____________________
The date of this Prospectus is August __, 1995.
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AVAILABLE INFORMATION
Harken is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"), which can be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549, and at the
following regional offices of the Commission: Chicago Regional Office, 500 W.
Madison Street, Suite 1400, Chicago, Illinois 60661; and New York Regional
Office, 7 World Trade Center, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at prescribed
rates. In addition, the Common Stock is listed on the American Stock Exchange,
and such reports, proxy statements and other information concerning Harken may
be inspected at the offices of the American Stock Exchange, 86 Trinity Place,
New York, New York 10006.
Harken has filed with the Commission a Registration Statement
("Registration Statement") under the Securities Act with respect to the
securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to Harken and such securities, reference is
made to such Registration Statement and to the exhibits thereto.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed with the Commission are
incorporated herein by reference:
(1) Harken's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994;
(2) Proxy Statement for the Annual Meeting of Stockholders of
Harken to be held on June 16, 1995;
(3) Description of the Harken Common Stock contained in Harken's
Registration Statements filed under Section 12 of the Exchange
Act, including Form 8-A dated March 13, 1991;
(4) Form 8-K/A of Harken dated January 3, 1995, amending the
Current Report on Form 8-K dated November 4, 1994;
(5) Harken's Current Report on Form 8-K dated April 27, 1995,
reporting the results on an exploration well in Colombia,
South America;
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(6) Harken's Quarterly Report on Form 10-Q dated May 10, 1995, for
the quarter ended March 31, 1995;
(7) Harken's Current Report on Form 8-K dated May 16, 1995,
reporting the placement of its 8% Senior Convertible Notes due
May 1998;
(8) Harken's Current Report on Form 8-K dated June 2, 1995,
reporting the acquisition of Search Exploration, Inc.
("Search"); and
(9) Form 8-K/A of Harken dated August 3, 1995, amending the
Current Report on Form 8-K dated June 2, 1995.
All documents filed by Harken pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering made hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of the filing of such documents. Any statement contained in this
Prospectus, in a supplement to this Prospectus or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed supplement to this Prospectus or
in any document that also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Harken hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been or may be incorporated in this Prospectus by reference,
other than exhibits to such documents unless such exhibits are specifically
incorporated by reference in such documents. Written or oral requests for such
copies should be directed to Wayne Hennecke, Harken Energy Corporation, 5605
North MacArthur Blvd., Suite 400, Irving, Texas 75038 (Telephone:
214/753-6900).
____________________
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<PAGE> 7
BUSINESS OF HARKEN
General
Harken is engaged in oil and gas exploration, development and
production operations both domestically and internationally through its various
wholly-owned subsidiaries and joint venture investments. Harken's domestic
operations primarily consist of the oil and gas exploration and production
operations of its wholly-owned subsidiaries, Harken Southwest Corporation
("HSW") and Search. Harken's international operations include three exclusive
Colombian Association Contracts between Harken's wholly-owned subsidiary,
Harken de Colombia, Ltd., and Empresa Colombiana de Petroleos ("Ecopetrol"),
as well as a production sharing agreement between Harken's wholly-owned
subsidiary, Harken Bahrain Oil Company, and the Bahrain National Oil Company
("Banoco"). Harken's international operations currently consist solely of
exploration activities, however, management is continuing to pursue
international opportunities in all areas of Harken's operations, including oil
and gas exploration and development. Harken considers that the opportunities
to profitably deploy Harken's expertise and assets internationally are
generally greater than those available domestically.
Harken was incorporated in 1973 in the State of California and
reincorporated in 1979 in the State of Delaware. Harken's principal offices
are located at 5605 North MacArthur Blvd., Suite 400, Irving, Texas 75038 and
its telephone number is (214) 753-6900.
Recent Developments
Colombian Activities. On December 14, 1994, Harken entered into its
third Association Contract with Ecopetrol, the national oil company of
Colombia, covering a tract of land of approximately 10,000 acres in size
referred to as the Playero Contract Area. This area is located in the Llanos
Basis of Colombia and lies adjacent to Harken's Alcaravan Contract Area. On
December 20, 1994, Harken awarded a contract to Perforaciones El Dorado, S.A.
("El Dorado") to drill the Alcaravan #1 well in the Llanos Basin of Colombia.
Harken announced on April 24, 1995, that the well failed to produce commercial
quantities of oil.
On January 19, 1995, Harken notified Ecopetrol of Harken's commitment
to drill a well on its Bocachico Association Contract Area and thereby extended
the contract into its second year. Harken has selected a well site and
currently anticipates completing this drilling effort in the fourth quarter of
1995. The Bocachico area is located in Colombia's Middle Magdalena Basin.
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<PAGE> 8
Bahrain Activities. In July 1995, Banoco granted an extension to
Harken's contract to explore for oil and gas in designated offshore waters of
Bahrain. Such contract would have expired on July 29, 1995. Harken retains
its exploration and production rights to approximately 500,000 acres for six
months, with an additional six months should certain conditions be met.
CHAP Interest. In October 1994, Harken purchased an approximate
additional 20% participating interest in properties which it currently
operates, through the CHAP Joint Venture ("CHAP"), in the Paradox Basin, thus
increasing its and one of its subsidiary's total combined interest in CHAP to
approximately 70%. Each CHAP co-venturer, in proportion to its respective
participating interest, pays its share of the costs and expenses and receives
its share of revenues; thus, as a result of the acquisition, Harken and its
subsidiary's proportionate share in such costs, expenses, and revenues
increased by approximately 20% with respect to CHAP. The acquisition also
included the sellers' interests in certain oil and gas leases relating to
exploration acreage and development drilling locations and increased Harken's
ownership interest in the Aneth Gas Plant, all located in the Paradox Basin.
These sellers acquired 960,000 shares of Harken Common Stock pursuant to this
transaction. On April 12, 1995, the Commission declared effective Harken's
Registration Statement on Form S-3 (File No. 33-86829) with respect to the
resale of these 960,000 shares of Harken Common Stock.
In March 1995, Harken purchased approximately 12% additional
participating interest in CHAP, thus increasing its and one of its subsidiary's
total combined interest in CHAP to approximately 82%. The acquisition also
included the Seller's interest in certain oil and gas leases relating to
exploration acreage and development drilling locations and increased Harken's
ownership interest in the Aneth Gas Plant. One of the Selling Stockholders,
Paroo (U.S.A.), Inc., acquired 534,000 shares of Harken Common Stock pursuant
to this transaction, which are a portion of the Shares being offered by this
Prospectus. (See "Selling Stockholders.")
8% Senior Convertible Notes. On May 12, 1995, Harken entered into a
Note Purchase Agreement with several European purchasers providing for the sale
by Harken of up to a $15,000,000 aggregate principal amount of its 8% Senior
Convertible Notes due May 1998 (the "Notes"). An aggregate of $15,000,000
principal amount of the Notes were issued and sold effective as of May 11,
1995. At their option, the holders of the Notes may, on or after June 21,
1995, convert the Notes into Harken Common Stock at an initial price of $1.50
per share, subject to adjustment under certain circumstances ("Conversion
Price"). Therefore, the Notes are convertible into 10,000,000 shares of Harken
Common Stock. Further, at Harken's option, from and after May 11, 1996, if for
any period of thirty (30) consecutive days the closing price of Harken Common
Stock (as quoted on the AMEX
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or any subsequent exchange or market system on which Harken Common Stock is
traded) for each trading day during such period equals or exceeds $2.10 (140%
of the Conversion Price), Harken may require the holders of the Notes to
convert such Notes into 10,000,000 shares of Harken Common Stock at the
Conversion Price, subject to adjustment in certain circumstances. (See "Risk
Factors - Effect of Sales of Common Stock and Other Events on Market Price.")
RISK FACTORS
The following matters should be considered with all other information
contained and incorporated by reference in this Prospectus in evaluating an
investment in the Harken Common Stock.
Losses From Continuing Operations
Harken reported income (losses) from continuing operations for the
fiscal years ended December 31, 1992, 1993, and 1994, in the amounts of
$661,000, $(1,797,000), and $(8,211,000), respectively. While the reasons for
most of these losses, as explained below, are nonrecurring, there can be no
assurance that Harken will not continue to report losses, including future
losses from other nonrecurring items.
Harken reported a net loss from continuing operations for the year
ended December 31, 1994, of $8,211,000 primarily due to a reduction in Harken's
carrying value in its investment in E-Z Serve Series C Preferred and related
accrued dividends by approximately $5.8 million due to a permanent decline in
value as indicated by efforts of Harken management to sell the investment in
early 1995. Despite production declines on existing wells and the lack of new
production from drilling activities, Harken did increase its oil and gas
reserve and revenue base through the acquisition of approximately an additional
20% of CHAP during the last half of 1994. Total gross revenues from oil and
gas operations were $4,156,000 with a gross profit before depreciation and
amortization and general and administrative expenses of $2,621,000.
Harken reported a net loss from continuing operations for the year
ended December 31, 1993, of $1,797,000. Effective February 15, 1993, Harken
consummated a merger pursuant to which Chuska Resources Corporation ("Chuska")
became a wholly-owned subsidiary of Harken. As a result of the merger with
Chuska, Harken began reflecting oil and gas sales revenues and related
operating expenses and depreciation and amortization in 1993. Harken's
exploration and production operations generated gross revenues of $5,505,000
and gross profit before depreciation and amortization and general and
administrative expenses totaled $3,680,000 during 1993, primarily generated
from the Chuska acquisition.
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Contributing to the loss from continuing operations was the expensing of a
total of $551,000 of accrued interest related to certain non-recourse notes
receivable from certain current and former employees, officers and directors.
Harken reported net income from continuing operations for the year
ended December 31, 1992, of $661,000. In December 1992, Harken entered into a
Purchase and Sale Agreement pursuant to which Harken sold its 12% general
partner's interest in its managed limited partnership, Harken Anadarko
Partners, L.P. ("HAP"), for cash of $2,650,000. The transaction resulted in
Harken recognizing a gain on the sale of $1,449,000 during December 1992. As
a result of this gain, operating profit for Harken's exploration and production
operations was $2,872,000 during 1992.
Effect of Sales of Common Stock and Other Events on Market Price
As of June 30, 1995, there were 64,436,850 shares of Harken Common
Stock outstanding. Harken, on behalf of the Selling Stockholders, is
registering for sale 1,226,308 shares of Harken Common Stock pursuant to the
Registration Statement of which this Prospectus is a part. Harken has no
knowledge of a proposed plan of distribution of the Shares other than as
described in this Prospectus. See "PLAN OF DISTRIBUTION." In addition, Harken
has previously registered with the Commission an aggregate of 2,160,000 shares
of Harken Common Stock for resale by certain selling stockholders. Pursuant to
the terms of the Merger Agreement among Harken, Search Exploration, Inc.
("Search") and a wholly-owned subsidiary of Harken (the "Search Acquisition"),
11 million shares of Harken Common Stock were authorized for issuance and
registered with the Commission. Upon the consummation of the Search
Acquisition on May 22, 1995, approximately 2.2 million shares of Harken Common
Stock were issued. Of the remaining approximately 8.8 million shares of Harken
Common Stock which may be issued in connection with the Search Acquisition, (i)
up to 722,486 shares of Harken Common Stock may be issued upon the exercise of
certain warrants issued by Harken, and (ii) the remaining shares of Harken
Common Stock ("Contingent Shares"), if any, may be issued on or about September
30, 1996, to the holders of record at the effective time of the merger of
certain Search securities issued by Search and overriding royalty interests in
certain properties held by Search, based in part upon the increase that may
subsequently be realized in the value of a group of undeveloped leases and
properties of Search. In addition, Harken's 8% Senior Convertible Notes are
presently convertible by the holders thereof into 10,000,000 shares of Harken
Common Stock (see "RECENT DEVELOPMENTS - 8% Senior Convertible Notes"). There
can be no assurance that any sales of the 1,226,308 Shares by the Selling
Stockholders pursuant to this Prospectus or the shares of Harken Common Stock
(i) presently registered for resale in the aggregate amount of 2,160,000 and
described above, (ii) which may be issued in
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connection with the Search Acquisition, or (iii) which may be issued in
connection with the conversion of the Notes into Harken Common Stock (see
"Recent Developments - 8% Senior Convertible Notes") will not have a material
adverse effect on the then prevailing market price of the Harken Common Stock.
The closing price of a share of Harken Common Stock on AMEX on August 7, 1995,
was $1.50.
Preferred Stock Authorized for Issuance
Harken has available for issuance 10 million shares of preferred
stock, par value $1.00 per share. The Board of Directors is authorized to
provide for the issuance of such preferred stock in one or more series and to
set the designations, preferences, powers and relative participating, optional
or other rights and restrictions thereof. Presently, Harken has three series
of preferred stock authorized, of which only one has any shares currently
outstanding. Such shares have certain preferences over the shares of Harken
Common Stock with respect to the payment of dividends and upon liquidation,
dissolution, winding-up and in certain instances, voting. The Board of
Directors of Harken also may authorize other series of preferred stock in the
future that have similar as well as other preferences over the shares of Harken
Common Stock.
Contingent Liabilities of Harken.
Harken has certain contingent liabilities that could have a material
adverse affect on its financial condition if Harken were required to satisfy
the liabilities, including the following:
HSW owns an interest in the Aneth Gas Plant. The Aneth Gas Plant
facility was in operation for many years prior to HSW's becoming an owner. The
operations at the Aneth Gas Plant previously used open, unlined drip pits for
storage of various waste products. The plant owners have replaced all of the
open ground pits currently being used with steel tanks. The plant owners are
currently in the process of closing the open ground pits.
Texaco, the plant's operator, received a letter from the Environmental
Protection Agency ("EPA") dated July 2, 1991 and a subsequent letter dated
June 8, 1992, in which the EPA requested certain information in order to
determine if there had been at the Aneth Gas Plant the release of hazardous
substances into the environment. Texaco has advised HSW that certain
information was supplied to the EPA pursuant to this request. Subsequently,
core samples in and around certain pit areas were taken by the EPA and Texaco
jointly. The EPA has responded to the initial sampling of the drip pits, and
Texaco is now completing a Phase II
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investigation to provide further test results in response to evaluation
procedures required by the EPA related to the drip pits.
The prior owner of the Aneth Gas Plant facility has agreed to accept
financial responsibility for at least some portion of this remediation work.
Texaco and the other current plant owners are presently negotiating a formal
agreement with the prior owner to allocate and provide for how such costs will
be shared by such parties. At this time, however, it is impossible for HSW to
determine or estimate the costs of the cleanup at the Aneth Gas Plant facility
or if the prior owner will indemnify the present owners, including HSW, for all
or substantially all of such costs.
Factors Related to International Operations
Harken conducts international operations presently and anticipates
that it will conduct significant international operations in the future.
Foreign properties, operations or investments may be adversely affected by
local political and economic developments, exchange controls, currency
fluctuations, royalty and tax increases, retroactive tax claims, renegotiation
of contracts with governmental entities, expropriation, import and export
regulations and other foreign laws or policies governing operations of
foreign-based companies, as well as by laws and policies of the United States
affecting foreign trade, taxation and investment. In addition, as certain of
Harken's operations are governed by foreign laws, in the event of a dispute,
Harken may be subject to the exclusive jurisdiction of foreign courts or may
not be successful in subjecting foreign persons to the jurisdiction of courts
in the United States. Harken may also be hindered or prevented from enforcing
its rights with respect to a governmental instrumentality because of the
doctrine of sovereign immunity. Exploration and production activities in areas
outside the United States are also subject to the risks inherent in foreign
operations, including loss of revenue, property and equipment as a result of
hazards such as expropriation, nationalization, war, insurrection and other
political risks.
Regarding Harken's activities in Colombia, management anticipates that
full development of reserves in the Alcaravan area of the Llanos Basin and the
Bocachico area of the Middle Magdalena Basin may take several years and may
require extensive production facilities which could require significant
additional capital expenditures. The ultimate amount of such expenditures
cannot be presently predicted. Harken anticipates that amounts required to
fund international activities, including those in Colombia, will be funded from
existing cash balances, asset sales, stock issuances, operating cash flows and
potentially from industry partners; however, there can be no assurances that
industry partners can be obtained to fund such international activities, nor
that Harken will have adequate funds available to it to fund its international
activities without participation from industry partners.
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While pipelines presently connect the major producing fields in Colombia to
export facilities and various refineries, Harken anticipates that additional
pipeline capacity will likely be needed in the future. Guerilla activity in
Colombia has in the past disrupted the operation of certain oil and gas
projects. Harken does not anticipate that future guerilla activity will have a
material impact on Harken's eventual exploration and development of the
Alcaravan or Bocachico areas. However, there can be no assurance that such
activity will not occur or have such an impact.
Price Volatility
The revenues generated by Harken are highly dependent upon the prices
of crude oil and natural gas. Fluctuations in the energy market make it
difficult to estimate future prices of oil and natural gas. Fluctuations in
energy prices are caused by a number of factors, including regional, domestic
and international demand, energy legislation, federal or state taxes (if any)
on sales of crude oil and natural gas, production guidelines established by the
Organization of Petroleum Exporting Countries, and the relative abundance of
supplies of alternative fuel such as coal. Additionally, changing
international economic and political conditions may have a dramatic impact upon
crude oil and natural gas prices. Many of these factors are beyond the control
of Harken.
Business Risks
Harken must continually acquire or explore for and develop new oil and
gas reserves to replace those being depleted by production. Without successful
drilling or acquisition ventures, Harken's oil and gas assets, properties and
revenues derived therefrom will decline over time. To the extent Harken
engages in drilling activities, such activities carry the risk that no
commercially viable oil or gas production will be obtained. The cost of
drilling, completing and operating wells is often uncertain. Moreover,
drilling may be curtailed, delayed or canceled as a result of many factors,
including title problems, weather conditions, shortages of or delays in
delivery of equipment, as well as the financial instability of well operators,
major working interest owners and drilling and well servicing companies. The
availability of a ready market for Harken's oil and gas depends on numerous
factors beyond its control, including the demand for and supply of oil and gas,
the proximity of Harken's natural gas reserves to pipelines, the capacity of
such pipelines, fluctuation in seasonal demand, the effects of inclement
weather, and government regulation. New gas wells may be shut-in for lack of a
market until a gas pipeline or gathering system with available capacity is
extended into the area.
In February 1994, the Navajo Nation (the "Nation") issued a moratorium
on future oil and gas development agreements and exploration on Nation acreage
including lands situated within
11
<PAGE> 14
the Aneth Chapter (the "Chapter") of the Navajo Reservation, which is an area
that includes some of HSW's undeveloped acreage. Although Harken understands
that the moratorium issued by the Nation has officially ended, Harken is
uncertain whether the Chapter will allow further oil and gas development
agreements and exploration of lands within this Chapter of the Navajo Nation.
If the Chapter continues to prohibit such development agreements and
exploration, Harken does not anticipate that such prohibition would have a
material adverse affect on HSW's operations.
All acreage under the 1987 Tribal Agreement which was not held by
production as of July 31, 1995, expired. Harken does not anticipte that the
loss of such undeveloped acreage will have a material adverse affect on HSW's
operations.
Operating Hazards and Uninsured Risks
The operations of Harken are subject to the inherent risks normally
associated with exploration for and production of oil and gas, including
blowouts, cratering, pollution and fires, each of which could result in damage
to or destruction of oil and gas wells or production facilities or damage to
persons and property. As is common in the oil and gas industry, Harken is not
fully insured against these risks, either because insurance is not available or
because Harken has elected to self-insure due to high premium costs. The
occurrence of a significant event not fully insured against could have a
material adverse effect on Harken's financial condition.
Environmental Regulation
The activities of Harken are subject to various Navajo, federal,
state, and local laws and regulations covering the discharge of material into
the environment or otherwise relating to protection of the environment. In
particular, Harken's oil and gas exploration, development, production, its
activities in connection with storage and transportation of liquid hydrocarbons
and its use of facilities for treating, processing, recovering, or otherwise
handling hydrocarbons and wastes therefrom are subject to stringent
environmental regulation by governmental authorities. In addition to these
domestic laws and regulations, Harken's international operations are subject to
the laws, regulations and governmental approvals of each foreign country in
which it conducts activities including, but not limited to, environmental laws
and regulations governing oil and gas operations. Such domestic and foreign
laws and regulations have increased the costs of planning, designing, drilling,
installing, operating and abandoning Harken's oil and gas wells and other
facilities. (See "Contingent Liabilities" above with respect to a certain
environmental matter.)
12
<PAGE> 15
Imprecise Nature of Reserve Estimates
Reserve estimates are imprecise and may be expected to change as
additional information becomes available. Furthermore, estimates of oil and
gas reserves, of necessity, are projections based on engineering data, and
there are uncertainties inherent in the interpretation of such data as well as
the projection of future rates of production and the timing of development
expenditures. Reserve engineering is a subjective process of estimating
underground accumulations of oil and gas that cannot be measured in an exact
way, and the accuracy of any reserve estimate is a function of the quality of
available data and of engineering and geological interpretation and judgment.
Competitive Factors in Oil and Gas Industry
The oil and gas industry is competitive in all its phases.
Competition is particularly intense respecting the acquisition of desirable
producing properties and the sale of oil and natural gas production. Harken's
competitors in oil and gas exploration, development and production, include
major oil companies and numerous independent oil and gas companies, and
individual producers and operators. Many of Harken's competitors possess and
employ financial and personnel resources substantially greater than those which
are available to Harken, and may, therefore, be able to pay greater amounts for
desirable leases and to define, evaluate, bid for and purchase a greater number
of producing prospects than the financial or personnel resources of Harken will
permit.
Regulatory Items
The production of oil and gas is subject to extensive Navajo, federal
and state laws, rules, orders and regulations governing a wide variety of
matters, including the drilling and spacing of wells, allowable rates of
production, prevention of waste and pollution and protection of the
environment. In addition to the direct costs borne in complying with such
regulations, operations and revenues may be impacted to the extent that certain
regulations limit oil and gas production to below economic levels. Although
the particular regulations applicable in each state in which operations are
conducted vary, such regulations are generally designed to ensure that oil and
gas operations are carried out in a safe and efficient manner and to ensure
that similarly-situated operators are provided with reasonable opportunities to
produce their respective fair shares of available oil and gas reserves.
However, since these regulations generally apply to all oil and gas producers,
management of Harken believes that these regulations should not put Harken at a
material disadvantage to other oil and gas producers.
13
<PAGE> 16
Certain sales, transportation, and resales of natural gas by Harken
are subject to Navajo, federal and state laws and regulations, including, but
not limited to, The Natural Gas Act of 1938, as amended ("NGA"), the Natural
Gas Policy Act of 1978, as amended ("NGPA") and regulations promulgated by the
Federal Energy Regulatory Commission ("FERC") under the NGA, the NGPA and other
statutes. The provisions of the NGA and NGPA, as well as the regulations
thereunder, are complex, and can affect all who produce, resell, transport,
purchase or consume natural gas.
Although recent FERC transportation regulations do not directly apply
to Harken because they are not engaged in rendering jurisdictional
transportation services, these regulations do affect the operations of Harken
by virtue of the need to deliver its gas production to markets served by
interstate or intrastate pipelines. In most instances, interstate pipelines
represent the only available method of accomplishing such transportation.
In addition to these domestic laws and regulations, Harken's
international operations are subject to the laws, regulations and governmental
approvals of each foreign country in which it conducts activities including,
but not limited to, environmental laws and regulations governing oil and gas
operations.
USE OF PROCEEDS
Harken will not receive any part of the proceeds from the sale of
Shares by the Selling Stockholders.
SELLING STOCKHOLDERS
This Prospectus covers offers from time to time by the Selling
Stockholders of their shares of Harken Common Stock. Set forth below is the
name of each Selling Stockholder, the number of shares of Harken Common Stock
owned of record by each Selling Stockholder as of August 7, 1995, the number
of shares of Harken Common Stock which may be offered by each Selling
Stockholder pursuant to this Prospectus, and the number of shares of Harken
Common Stock and percentage of the class of Harken Common Stock to be owned by
each Selling Stockholder upon completion of the offering if all Shares are
sold. Any or all of the Shares listed below may be offered for sale by a
Selling Stockholder from time to time.
14
<PAGE> 17
<TABLE>
<CAPTION>
Shares Shares
Owned Prior Shares Owned After Percent of Class
to the Registered the After the
Selling Stockholders Offering Hereunder Offering(1) Offering
-------------------- -------- --------- ----------- --------
<S> <C> <C> <C> <C>
MCM Partners, L.P. 160,000 160,000 -0- -0-
John E. McConnaughy 80,000 80,000 -0- -0-
Gail D. Forster 80,000 80,000 -0- -0-
Peter Dixon, Trustee 80,000 80,000 -0- -0-
Sandy Keesler 200,000 200,000 -0- -0-
Paroo (USA), Inc. 534,000 534,000 -0- -0-
EnCap Investments, 92,308 92,308 -0- -0-
L.C.
</TABLE>
-----------------
(1) Assumes no other disposition or acquisition of Common Stock and all
Shares included herein are sold.
PLAN OF DISTRIBUTION
Any or all of 1,140,000 of the Shares may be sold from time to time
for a period from the date of this Prospectus to the earlier to occur of the
expiration of one year from the date of the Prospectus or the date all the
Shares are sold. The Shares may be sold to purchasers directly by the Selling
Stockholders in one or more open market transactions, including block trades on
the American Stock Exchange, in negotiated transactions or in a combination of
any such methods of sale. Alternatively, the Selling Stockholders may from
time to time offer the Shares through underwriters, dealers or agents, who may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Stockholders or the purchasers of the Shares for
whom they may act as agent. The Selling Stockholders and any such
underwriters, dealers or agents that participate in the distribution of the
Shares may be deemed to be underwriters, and any profit on the sale of the
Shares by them and any discounts, commissions or concessions received by any
such underwriters, dealers or agents might be deemed to be underwriting
discounts and commissions under the Securities Act. At the time a particular
offer of the Shares is made, to the extent required, a Prospectus Supplement
will be distributed that will set forth the aggregate amount of Shares being
offered and the terms of the offering,
15
<PAGE> 18
including the name or names of any underwriters, dealers or agents, any
discounts, commissions and other items constituting compensation from the
Selling Stockholders and any discounts, commissions or concessions allowed or
reallowed or paid to dealers, including the proposed selling price to the
public. Harken will not receive any of the proceeds from the sale by the
Selling Stockholders of the Shares offered hereby. All of the registration
expenses of the offering will be paid by Harken.
The Shares may be sold from time to time in one or more transactions
at a fixed offering price, which may be changed, or at varying prices
determined at the time of sale or at negotiated prices.
Harken has agreed to indemnify in certain circumstances some of the
Selling Stockholders and any underwriter, selling brokers, dealer managers or
similar persons who participate in the distribution of the Shares, if any, and
certain persons related to the foregoing persons, against certain liabilities,
including liabilities under the Securities Act. Some of the Selling
Stockholders have agreed to indemnify, in certain circumstances, Harken and
certain persons related to Harken against certain liabilities, including
liabilities under the Securities Act.
In order to comply with certain states' securities laws, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless the Shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is
available and is complied with.
LEGAL MATTERS
The validity of the Shares will be passed upon for Harken by Haynes
and Boone, L.L.P., Fort Worth, Texas.
16
<PAGE> 19
EXPERTS
The (i) consolidated financial statements and schedules of Harken
included in Harken's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and (ii) financial statements of the CHAP Venture as of
December 31, 1993, included in Harken's Amendment to Application or Report on
Form 8-K/A dated January 3, 1995, each of which are incorporated by reference
in this Registration Statement of which this Prospectus forms a part, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
The consolidated financial statements and schedules of Search for the
year ended December 31, 1994, included in Search's Annual Report on Form 10-K
for the year ended December 31, 1994, included herein and incorporated by
reference in the Registration Statement of which this statement forms a part,
have been audited by Hein + Associates LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
17
<PAGE> 20
<TABLE>
<S> <C>
------------------------------------------------ ------------------------------------------------
No dealer, salesperson or any other
individual has been authorized to give any
information or to make any representation not
contained or incorporated by reference in this
Prospectus and, if given or made, such
information or representation must not be
relied upon as having been authorized by Harken 1,226,308 Shares
or any Selling Stockholders. This Prospectus
does not constitute an offer to sell or a
solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction HARKEN ENERGY CORPORATION
to any person to whom it is unlawful to make
such offer or solicitation in such
jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall, COMMON STOCK
under any circumstances, create any implication
that the information herein is correct as of
any time subsequent to the date hereof or that
there has been no change in the affairs of
Harken since such date.
---------------
TABLE OF CONTENTS
Page
--------------------
Available Information . . . . 3
Incorporation of Certain
Documents by Reference . . . . 3
Business of Harken . . . . . . 5
Risk Factors . . . . . . . . . 7 P R O S P E C T U S
Use of Proceeds . . . . . . . . 14
Selling Stockholders . . . . . 14
Plan of Distribution . . . . . 15
Legal Matters . . . . . . . . . 16
Experts . . . . . . . . . . . . 17 --------------------
___________, 1995
------------------------------------------------ ------------------------------------------------
</TABLE>
<PAGE> 21
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses (other than underwriting discounts and
commissions) in connection with the offering described in this Registration
Statement are as follows:
<TABLE>
<S> <C>
SEC Registration Fee . . . . . . . . . . . . $ 634.30
AMEX Listing Fee . . . . . . . . . . . . . . 52,000.00
Printing and Engraving Expenses . . . . . . 5,000.00
Accounting Fees and Expenses . . . . . . . . 5,000.00
Legal Fees and Expenses . . . . . . . . . . 7,500.00
Blue Sky Fees and Expenses . . . . . . . . . -
Miscellaneous . . . . . . . . . . . . . . . 1,865.70
Total . . . . . . . . . . . . . . . . . 72,000.00
</TABLE>
---------------
(1) This amount is the aggregate amount of three separate Supplemental Listing
Applications filed with Amex.
All of the foregoing expenses will be paid by Harken.
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware
provides generally and in pertinent part that a Delaware corporation may
indemnify its directors and officers against expenses, judgments, fines and
settlements actually and reasonably incurred by them in connection with any
civil, criminal, administrative, or investigative suit or action except actions
by or in the right of the corporation if, in connection with the matters in
issue, they acted in good faith and in a manner they reasonably believed to be
in or not opposed to the best interests of the corporation, and in connection
with any criminal suit or proceeding, if in connection with the matters in
issue, they had no reasonable cause to believe their conduct was unlawful.
Section 145 further provides that in connection with the defense or settlement
of any action by or in the right of the corporation, a Delaware corporation may
indemnify its directors and officers against expenses actually and reasonably
incurred by them if, in connection with the matters in issue, they acted in
good faith, in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made
with respect to any claim, issue or matter as to which such person has been
adjudged liable for negligence or misconduct unless the Court of Chancery or
the court in which such action or suit is brought approves such
indemnification. Section 145 further permits
II-1
<PAGE> 22
a Delaware corporation to grant its directors and officers additional rights of
indemnification through bylaw provisions and otherwise, and to purchase
indemnity insurance on behalf of its directors and officers.
Article Ten of the Registrant's Certificate of Incorporation and
Article VII of the Registrant's bylaws provide, in general, that the Registrant
shall indemnify its directors and officers under certain of the circumstances
defined in Section 145. The Registrant has entered into agreements with each
member of its Board of Directors pursuant to which it will advance to each
director costs of litigation in accordance with the indemnification provisions
of the Registrant's Certificate of Incorporation and bylaws.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act") may be permitted to
directors, officers or persons controlling the Registrant pursuant to the
foregoing provisions, the Registrant has been informed that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
Item 16. Exhibits.
<TABLE>
<S> <C>
4.1 - Certificate of Incorporation of Harken Energy Corporation, as amended (incorporated by reference as
Exhibit 3.1 to Harken Energy Corporation's Annual Report on Form 10-K for fiscal year ended
December 31, 1989)
4.2 - Amendment to the Certificate of Incorporation of Harken Energy Corporation (incorporated by reference
as Exhibit 28.8 to the Registration Statement on Form S-1, as amended, of E-Z Serve Corporation and
Tejas Power Corporation -- Registration No. 33-37141); Amendment dated February 28, 1991, to the
Certificate of Incorporation of Harken (incorporated by reference as Exhibit 3 to Harken's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1991); Amendment dated July 8, 1991, to Harken's
Certificate of Incorporation (incorporated by reference as Exhibit 3 to Harken's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1991); and Amendment dated June 30, 1992, to Harken's
Certificate of Incorporation (incorporated by reference as Exhibit 3 to Harken's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1992)
</TABLE>
II-2
<PAGE> 23
<TABLE>
<S> <C>
4.3 - Bylaws of Harken Energy Corporation, as amended (incorporated by reference as Exhibit 3.2 to Harken
Energy Corporation's Annual Report on Form 10-K for fiscal year ended December 31, 1989)
4.4 - Certificate of the Designations, Powers, Preferences and Rights of Series C Cumulative Convertible
Preferred Stock, $1.00 par value of Harken Energy Corporation (incorporated by reference as
Exhibit 4.3 to Harken Energy Corporation's Annual Report on Form 10-K for fiscal year ended
December 31, 1989)
*5.1 - Opinion of Haynes and Boone, L.L.P.
*23.1 - Consent of Arthur Andersen LLP
*23.2 - Consent of Haynes and Boone, L.L.P. (included in opinion filed as Exhibit 5.1)
*23.3 - Consent of Hein + Associates LLP
*24.1 - Powers of Attorney.
*99.1 - Concession and Lease Purchase Agreement dated as of May 15, 1995, and effective as of March 31, 1995,
by and between Harken Energy Corporation and Paroo Petroleum (USA), Inc.
*99.2 - Note Purchase Agreement among Harken Energy Corporation and certain Purchasers relating to Harken's
8% Senior Convertible Notes due 1998.
*99.3 - Form of Private Subscription Agreement among Harken and the purchasers named therein relating to the
purchase and sale of 600,000 shares of Harken Common Stock.
</TABLE>
-------------
* Filed herewith.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the Registrant's Annual Report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange
II-3
<PAGE> 24
Act) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
Registration Statement (or the most recent
post-effective amendment thereto) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price
represent no more than a 20% change in the maximum
aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed
in the Registration Statement or any material
change to such information in the Registration
Statement;
provided, however, that paragraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of
II-4
<PAGE> 25
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-5
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Irving, State of Texas, on August 8, 1995.
HARKEN ENERGY CORPORATION
*
----------------------------------------
Mikel D. Faulkner, Chairman of the Board
and Chief Executive Officer (Principal
Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and August 8, 1995
------------------------------------ Chief Executive Officer
Mikel D. Faulkner (Principal Executive
Officer)
* President and Director August 8, 1995
------------------------------------
Richard H. Schroeder
/s/ Bruce N. Huff Senior Vice President and August 8, 1995
------------------------------------ Chief Financial Officer
Bruce N. Huff (Principal Accounting
Officer and Principal
Financial Officer)
* Director August 8, 1995
------------------------------------
Michael M. Ameen, Jr.
</TABLE>
II-6
<PAGE> 27
<TABLE>
<S> <C> <C>
* Director August 8, 1995
------------------------------------
Michael R. Eisenson
* Director August 8, 1995
------------------------------------
Edwin C. Kettenbrink, Jr.
* Director August 8, 1995
------------------------------------
Talat M. Othman
* Director August 8, 1995
------------------------------------
Donald W. Raymond
* Director August 8, 1995
------------------------------------
Gary B. Wood
</TABLE>
*Bruce N. Huff, by signing his name hereto, does hereby sign this Registration
Statement on behalf of Harken Energy Corporation and each of the above-named
officers and directors of such Company pursuant to powers of attorney, executed
on behalf of the Company by each officer and director.
/s/ Bruce N. Huff
-----------------------
Bruce N. Huff,
Attorney-in-Fact
II-7
<PAGE> 28
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Exhibit Page
----------- ------- ----
<S> <C>
4.1 Certificate of Incorporation of Harken Energy Corporation, as amended
(incorporated by reference as Exhibit 3.1 to Harken Energy Corporation's
Annual Report on Form 10-K for fiscal year ended December 31, 1989)
4.2 Amendment to the Certificate of Incorporation of Harken Energy Corporation
(incorporated by reference as Exhibit 28.8 to the Registration Statement on
Form S-1, as amended, of E-Z Serve Corporation and Tejas Power
Corporation -- Registration No. 33-37141); Amendment dated February 28,
1991, to the Certificate of Incorporation of Harken (incorporated by
reference as Exhibit 3 to Harken's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1991); Amendment dated July 8, 1991, to Harken's
Certificate of Incorporation (incorporated by reference as Exhibit 3 to
Harken's Quarterly Report on Form 10-Q for the quarter ended June 30, 1991);
and Amendment dated June 30, 1992, to Harken's Certificate of Incorporation
(incorporated by reference as Exhibit 3 to Harken's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1992)
4.3 Bylaws of Harken Energy Corporation, as amended (incorporated by reference
as Exhibit 3.2 to Harken Energy Corporation's Annual Report on Form 10-K for
fiscal year ended December 31, 1989)
4.4 Certificate of the Designations, Powers, Preferences and Rights of Series C
Cumulative Convertible Preferred Stock, $1.00 par value of Harken Energy
Corporation (incorporated by reference as Exhibit 4.3 to Harken Energy
Corporation's Annual Report on Form 10-K for fiscal year ended December 31,
1989)
*5.1 Opinion of Haynes and Boone, L.L.P.
*23.1 Consent of Arthur Andersen LLP
*23.2 Consent of Haynes and Boone, L.L.P. (included in opinion
filed as Exhibit 5.1)
*23.3 Consent of Hein + Associates LLP
*24.1 Powers of Attorney
*99.1 Form of Concession and Lease Purchase Agreement dated as of May 15, 1995,
and effective as of March 31, 1995, by and between Harken Energy
Corporation and Paroo Petroleum (USA), Inc.
*99.2 Note Purchase Agreement among Harken Energy Corporation and certain
Purchasers relating to Harken's 8% Senior Convertible Notes due 1998.
*99.3 Form of Private Subscription Agreement among Harken and the purchasers named
therein relating to the purchase and sale of 600,000 shares of Harken
Common Stock.
</TABLE>
-----------------
* Filed herewith.
<PAGE> 1
[HAYNES AND BOONE, L.L.P. LETTERHEAD]
EXHIBIT 5.1
August 8, 1995
Harken Energy Corporation
5605 North MacArthur, Suite 400
Irving, Texas 75038
Gentlemen:
We have asked as counsel to Harken Energy Corporation, a Delaware
corporation (the "Company"), in connection with the registration of 1,226,308
shares of the Company's common stock, $0.01 par value (the "Common Stock"),
pursuant to a Registration Statement ("Registration Statement") on Form S-3 to
which this opinion is being filed as Exhibit 5.1. In our capacity as counsel
to the Company, we have examined and relied upon the Company's Certificate of
Incorporation, as amended, and Bylaws, as amended, the opinions of Larry E.
Cummings, Vice President, Secretary and General Counsel of the Company, and
records of corporate proceedings with respect to the sale of the Common Stock
to the purchasers thereof, and have made such other investigation as we have
deemed necessary for the purposes of this opinion.
Based upon the foregoing, we are of the opinion that the shares of
Common Stock being registered pursuant to the terms of the Registration
Statement are legally issued, fully paid, and nonassessable shares of the
Common Stock of the Company.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement and to the
use of our name therein and in the Prospectus constituting a part thereof.
Respectfully submitted,
/s/ HAYNES AND BOONE, L.L.P.
HAYNES AND BOONE, L.L.P.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-3 of our report dated
February 10, 1995, included in Harken Energy Corporation's Form 10-K for the
year ended December 31, 1994, and of our report dated December 22, 1994, on the
financial statements of the CHAP Venture as of and for the year ended December
31, 1993, included in Harken Energy Corporation's Form 8-K/A dated January 3,
1995, and to all references to our Firm included in this registration
statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Dallas, Texas
August 8, 1995
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in the Registration Statement on
Form S-3 of Harken Energy Corporation of our report dated February 10, 1995,
accompanying the consolidated financial statements of Search Exploration, Inc.
incorporated by reference in such Registration Statement, and to the use of our
name and the statements with respect to us, as appearing under the heading
"Experts" in the Registration Statement.
/s/ HEIN + ASSOCIATES LLP
HEIN + ASSOCIATES LLP
August 8, 1995
Dallas, Texas
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Mikel D. Faulkner, Bruce N. Huff or Larry E. Cummings, or any of them
(with full power to each of them to act alone), his true and lawful
attorney-in-fact and agent, with full power of substitution, for him and on his
behalf and in his name, place and stead, in any and all capacities, to sign,
execute, and file a Registration Statement on Form S-3 (with respect to
1,226,308 shares of Common Stock of Harken Energy Corporation) ("Corporation")
under the Securities Act of 1933, as amended, and any or all amendments
(including without limitation, post-effective amendments and any amendment or
amendments increasing the amount of securities for which registration is being
sought), with all exhibits and any and all documents required to be filed with
respect thereto, with the Securities and Exchange Commission and/or any
regulatory authority relating to the registration of the Corporation's Common
Stock, $0.01 par value, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully and to all intents and purposes as he himself
might or could do if personally present, hereby ratifying and confirming all
that the said attorneys-in-fact and agents, or any of them, or their substitute
or substitutes, may lawfully do or cause to be done.
IN WITNESS WHEREOF, this Power of Attorney has been signed by the following
persons in the capacities indicated on the 2nd day of August, 1995.
<TABLE>
<CAPTION>
NAME CAPACITIES
---- ----------
<S> <C>
/s/ MIKEL D. FAULKNER Chairman of the Board, Director and
---------------------------------- Chief Executive Officer
Mikel D. Faulkner (Principal Executive Officer)
/s/ BRUCE N. HUFF Senior Vice President and
---------------------------------- Chief Financial Officer
Bruce N. Huff (Principal Financial and Accounting Officer)
/s/ RICHARD H. SCHROEDER President and Director
----------------------------------
Richard H. Schroeder
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
/s/ MICHAEL M. AMEEN, JR. Director
-------------------------------------
Michael M. Ameen, Jr.
/s/ MICHAEL R. EISENSON Director
-------------------------------------
Michael R. Eisenson
/s/ TALAT M. OTHMAN Director
-------------------------------------
Talat M. Othman
/s/ DONALD W. RAYMOND Director
-------------------------------------
Donald W. Raymond
/s/ EDWIN C. KETTENBRINK, JR. Director
-------------------------------------
Edwin C. Kettenbrink, Jr.
/s/ GARY B. WOOD Director
-------------------------------------
Gary B. Wood
</TABLE>
<PAGE> 1
EXHIBIT 99.1
CONCESSION AND LEASE PURCHASE AGREEMENT
This CONCESSION AND LEASE PURCHASE AGREEMENT, (the "Agreement") is
entered into effective as of March 31, 1995, (the "Effective Time") by and
between PAROO PETROLEUM (USA), INC., a Delaware corporation (herein called
"Seller"), and HARKEN ENERGY CORPORATION, a Delaware corporation (herein called
"Purchaser").
RECITALS
WHEREAS, pursuant to that certain Concession Purchase Agreement (the
"Acquisition Agreement") and that certain Joint Operations Agreement (the
"JOA") each dated effective as of August 1, 1988, by and among Seller (and
others) and Chuska Energy Company, Seller acquired a Participating Interest in
the Concession Properties (hereafter defined), including, without limitation,
those Concession Properties described on Exhibit "A" attached hereto.
WHEREAS, Seller owns an undivided interest, beneficially, in and to
those certain oil and gas leases described on Exhibit "B" attached hereto (the
"BIA Leases").
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, all of Seller's right, title and interests in and to the
Concession Properties and the BIA Leases.
NOW, THEREFORE, for and in consideration of the premises, of the
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and confessed, the
parties agree as follows:
1. Definitions. For purposes of this Agreement, unless otherwise
defined herein, capitalized terms set forth in this Agreement shall have the
meaning ascribed to them in the Acquisition Agreement.
2. Purchase and Sale. Subject to the terms and conditions
hereinafter set forth, Purchaser shall purchase from Seller, and Seller shall
sell, assign, transfer, grant, convey and deliver to Purchaser, effective as of
the Effective Time, free and clear of all mortgages, liens, pledges, security
interests, charges, claims, restrictions, and encumbrances created by, through
or under Seller, but not otherwise, the following:
(a) Concession Properties. All of Seller's right, title
and interest in and to the properties described in Section 2 of the Acquisition
Agreement (all of Seller's right, title and interest in all of such property is
herein called the "Concession Property"), such property to include, without
limitation, Seller's right, title and interest, if any, in and to the
following:
(i) Seller's interest in the Concession Property
described or referred to on Exhibit "A" hereto;
(ii) Seller's interest in the JOA and all rights
of Seller created under or by virtue of the JOA; and
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(iii) Seller's interest in all other properties,
assets, rights or interests owned by Seller under or pursuant to the
Acquisition Agreement and/or the JOA, regardless of whether such properties,
assets or interests are described or referred to on Exhibit "A" attached
hereto.
(b) BIA Leases. All of Seller's right, title and
interest in and to the BIA Leases, together with any and all producing,
non-producing and shut-in oil and gas wells, salt water disposal wells, water
wells, injection wells, and all other wells attributable to Seller's right,
title and interest in the BIA Leases, all equipment, rights- of-way, easements,
appurtenances, contract rights, personal property, and hydrocarbons located on
or used in connection with Seller's right, title and interest in the BIA
Leases.
All of Seller's right, title and interest in the Concession Properties
and the BIA Leases are herein collectively called the "Properties".
Notwithstanding anything to the contrary, Purchaser agrees to and
shall assume and pay, perform and discharge when due all liabilities and
obligations of Seller relating to the Properties, other than the liabilities
and costs set forth in Section 10 hereof.
3. Purchase Consideration. Seller and Purchaser agree that the
purchase consideration to be paid by Purchaser at the Closing of this Agreement
for the Properties (the "Purchase Price") shall be 534,000 newly issued shares
of Purchaser's common stock, par value $.01 per share, (the "Purchaser Common
Stock") and three hundred thousand dollars US (US $300,000) (the "Purchase
Cash").
4. No Adjustment to Purchase Price. There shall be no adjustment
made to the Purchase Price, no right of look back or audit by either Seller or
Purchaser following the Closing. Any and all proceeds and revenues which have
not been distributed by Purchaser on or before the date of Closing shall be
retained by Purchaser as part of the Properties. Seller shall have no right,
title nor call to any undistributed revenues. Any and all proceeds and
revenues which have been distributed by Purchaser to Seller on or before the
date of Closing shall be retained by Seller and shall not be a part of the
Properties. Purchaser shall have no right, title nor call to any distributed
revenues. Any and all revenues or other disbursements relating to the
Properties which may be received by the Seller after the date of Closing, shall
be immediately returned and paid over by the Seller to the Purchaser.
Except as set forth in Section 10 hereof, any and all costs,
billings, obligations, cash calls or other liabilities which have accrued or
arisen, whether invoiced by Purchaser to Seller or not, shall be and are
hereby assumed by Purchaser and Seller shall thereafter have no obligation or
liability therefor.
4.A. Allocation of Taxable Income and Expenses for CHAP Venture.
Seller's interest in the Properties is operated by a joint venture known as the
CHAP Venture which reports its income and losses as a partnership for federal
income tax purposes. Seller and Purchaser are both Venturers of the CHAP
Venture. The sale by Seller of its entire interest in the CHAP Venture
contemplated
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<PAGE> 3
by this Agreement permits Purchaser and Seller, by agreement, to estimate
(using any reasonable method) the pro rata part of the Seller's share of
distributive items described in the Internal Revenue Code of 1986, as amended
(the "Code"), Section 702(a), which Seller would have included in taxable
income had it remained a Venturer until the end of the CHAP Venture's taxable
year. Consequently, the allocation of the CHAP Venture items of income and
expense attributable to Seller's interest for federal income tax purposes for
the 1995 tax year between Seller and Purchaser may be based on any reasonable
method. Through the Effective Time, the CHAP Venture has received certain
amounts of income attributable to Seller's interest which have not, and
pursuant to Section 4 of this Agreement will not, be distributed to Seller.
In addition, Seller has made certain cash contributions to the CHAP Venture in
response to CHAP Venture cash calls. Paragraph 6(a) of the Tax Partnership
Agreement ("TPA") for the CHAP Venture allocates income from the sale of oil
and gas to the Venturers according to their respective contributions to the
costs and expenses to which the items relate. Based on the foregoing, Seller
and Purchaser agree that the CHAP Venture items described in Code Section
702(a) for the 1995 tax year with respect to the Seller's interest will be
allocated as follows:
1. Seller will be allocated income from the CHAP Venture equal to
the amount of the cash distributions (arising from CHAP Venture sales made
during the 1995 tax year) from the CHAP Venture actually received by Seller
prior to Closing.
2. Seller will be allocated deductions from the CHAP Venture
equal to the amounts of cash contributions made by Seller with respect to the
cash calls prior to Closing.
3. Except as provided in 1 and 2, Purchaser will be allocated all
items of income, gain, loss, deduction and credit attributable to Seller's
interest in the CHAP Venture.
5. Registration Rights.
(a) Certain Definitions. As used in this Section 5,
the following terms shall have the following respective meanings:
(i) "Commission" means the Securities and
Exchange Commission, or any other federal agency at the time administering the
Securities Act of 1933, as amended (the "Act").
(ii) "Registration Statement" means the Registration
Statement filed by Purchaser with the Commission for a public offering and sale
of securities of Purchaser pursuant to this Section, but shall not include a
Registration Statement on Form S-8 or Form S-4, or any other registration
statement filed by Purchaser with the Commission covering only securities
proposed to be issued in exchange for securities or assets of another
corporation, or in connection with any benefit or compensation plan of the
Purchaser.
(iii) "Registerable Shares" means the shares of Purchaser
Common Stock acquired by Seller pursuant to the terms of this Agreement, and
shall include any other shares of common
3
<PAGE> 4
stock of Purchaser issued in respect of such shares (whether because of stock
splits, stock dividends, reclassifications, recapitalizations, or similar
events affecting Purchaser); provided, however, that shares of common stock of
Purchaser which are Registerable Shares shall cease to be Registerable Shares
upon any sale pursuant to a Registration Statement under this Section 5, or any
other disposition by Seller of less than all of the shares of common stock of
Purchaser received by Seller pursuant to a private sale or other disposition,
including all dispositions of the common stock by Seller pursuant to Section
4(1) and Rule 144 of the Act, it being the expressed intentions of the parties
hereto that the registration rights contained herein may only be assigned by a
Seller in connection with any private sale or other transaction agreed to by
Seller subsequent to the date hereof if all of Seller's Registerable Shares are
sold or otherwise transferred pursuant to such transaction.
(b) Sale or Transfer of Shares; Legend.
(i) The Registerable Shares and shares issued in
respect of the Registerable Shares shall not be sold or transferred unless
either (A) they first have been registered under the Act, or (B) Purchaser
first shall have been furnished with an opinion of Sewell & Riggs, a
Professional Corporation, or other legal counsel, reasonably satisfactory to
Purchaser, to the effect that such sale or transfer is exempt from the
registration requirements of the Act.
(ii) All of the Registerable Shares of Purchaser
Common Stock shall bear the legend in the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES ACT AND CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED
OF UNLESS REGISTERED UNDER SUCH ACTS OR EXEMPTIONS FROM REGISTRATION
ARE AVAILABLE. THE TRANSFER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED UNDER THE CONCESSION AND LEASE PURCHASE
AGREEMENT DATED AS OF MARCH 31, 1995 BY AND AMONG PAROO PETROLEUM
(USA), INC., AND HARKEN ENERGY CORPORATION. A COPY OF SUCH AGREEMENT
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE RECORD
HOLDER OF THE CERTIFICATE TO HARKEN ENERGY CORPORATION.
(c) Demand Registration.
(i) Right to Demand Registration. In the event
that Seller has not elected to participate in a Piggyback Registration pursuant
to which all of the Registerable Shares will be registered on terms and
conditions acceptable to Seller within ninety (90) days after the date of
Closing, then Seller shall have the right at anytime thereafter up to two (2)
years following the date of Closing, to request a registration under the
Securities Act of the Seller's Registerable Shares.
(ii) Request for Registration. A request for a
Demand Registration shall specify the number of Registerable Shares requested
to be registered. Any registration requested pursuant to this subparagraph
(c)(ii) is referred to herein as a "Demand Registration."
(iii) Number of Demand Registrations. Seller will
be entitled under this
4
<PAGE> 5
Section 5(c), if applicable, to require one Demand Registration in which
Purchaser will pay all Registration Expenses (as hereinafter defined). A
registration will not count as a Demand Registration unless and until it has
remained effective for 365 days or such shorter period as shall be required to
sell all of the securities registered pursuant thereto (but not before the
expiration of the applicable prospectus delivery period); provided that in any
event Purchaser will pay all Registration Expenses in connection with any
registration initiated as a Demand Registration whether or not it has become
effective.
(iv) Priority on Registrations. Purchaser will
use reasonable efforts not to include in any Demand Registration any securities
which are not Registerable Shares without the prior written consent of the
holders of the Registerable Shares initially requesting such registration. If a
Demand Registration is an underwritten offering and the managing underwriters
advise Purchaser in writing that in their opinion the number of Registerable
Shares and, if permitted hereunder, other securities requested to be included
in such offering, exceeds the number of Registerable Shares and other
securities, if any, which can be sold in an orderly manner in such offering
within a price range acceptable to the holders of the Registerable Shares
initially requesting registration, Purchaser will include in such registration,
prior to the inclusion of any securities which are not Registerable Shares, the
number of Registerable Shares requested to be included which in the opinion of
such underwriters can be sold in an orderly manner within the price range of
such offering, pro rata among the respective holders thereof on the basis of
the amount of Registerable Shares requested by such holders to be included in
such registration.
(v) Selection of Underwriters. If any Demand
Registration is in the form of an underwritten offering, Purchaser will select
and retain the investment banker or investment bankers and manager or managers
that will administer the offering; provided, however, that such selection will
be subject to the approval of the holders of the Registerable Shares
participating in such registration, which shall not be unreasonably withheld.
Purchaser shall (together with all holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting.
If a holder of Registerable Shares disapproves of the terms of the
underwriting, such holder may elect to withdraw therefrom by written notice to
Purchaser and the managing underwriter. The Registerable Shares so withdrawn
shall also be withdrawn from registration.
(d) Piggyback Registrations.
(i) Right to Piggyback. Whenever Purchaser
proposes to register any of its securities under the Act for sale for cash and
the registration form to be used may be used for the registration of
Registerable Shares, Purchaser will give prompt written notice to all holders
of Registerable Shares of its intention to effect such a registration and will
include in such registration all Registerable Shares with respect to which
Purchaser has received written requests for inclusion therein within 15 days
after the receipt of Purchaser's notice (a "Piggyback Registration"). If
Purchaser gives notice of such a proposed registration, the total number of
Registerable Shares which shall be included in such registration shall be
limited to such number, if any, as in the reasonable opinion of the manager of
such offering would not adversely affect the marketability or
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<PAGE> 6
offering price of all of the securities proposed to be offered by Purchaser in
such offering; provided however, if the holders of Registerable Shares having
registration rights upon a Piggyback Registration are not permitted to include
all of such Registerable Shares by reason of such determination by the manager
of the offering, the Registerable Securities to be included in the offering
shall be determined in accordance with subparagraphs (d)(iii) and (iv) below.
Notwithstanding the foregoing, Purchaser may, in its sole discretion and
without the consent of any holder of Registerable Shares, withdraw such
Registration Statement and abandon such proposed public offering.
(ii) Piggyback Expenses. The prorated
Registration Expenses of the holders of Registerable Shares will be paid by
Purchaser in all Piggyback Registrations.
(iii) Priority on Primary Registrations. If a
Piggyback Registration is a primary registration on behalf of Purchaser, and
the managing underwriters advise the company in writing that in their opinion
the number of securities requested to be included in such registration exceeds
the number which can be sold in an orderly manner in such offering within a
price range acceptable to Purchaser, Purchaser will include in such
registration (i) first, the securities Purchaser proposes to sell, (ii) second,
the Registerable Shares requested to be included in such registration, pro rata
among the holders thereof on the basis of the number of shares of such
Registerable Shares requested to be included in such registration by each such
holder, and (iii) third, other securities requested to be included in such
registration.
(iv) Priority on Secondary Registrations. If a
Piggyback Registration is an underwritten secondary registration on behalf of
holders of Purchaser's securities, and the managing underwriters advise
Purchaser in writing that in their opinion the number of securities requested
to be included in such registration exceeds the number which can be sold in an
orderly manner in such offering within a price range acceptable to the holders
initially requesting such registration, Purchaser will use its reasonable
efforts to include in such registration (i) first, the securities the holders
initially requesting such registration propose to sell, and (ii) second, the
Registerable Shares requested to be included in such registration, pro rata
among the holders thereof on the basis of the number of shares of such
Registerable Shares requested to be included in such registration by each such
holder.
(e) Holdback Agreement. Each holder of Registerable
Shares agrees not to effect any public sale or distribution (including sales
pursuant to Rule 144 of the Act) of any Registerable Shares, within seven days
prior to and during the 60-day period beginning on the date specified in
writing by Purchaser to the holder as being the intended effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration in
which Registerable Shares are included (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree.
(f) Registration Procedures. Whenever the holders of
Registerable Shares have requested that any Registerable Shares be registered
pursuant to this Section, Purchaser will use reasonable efforts to effect the
registration and the sale of such Registerable Shares in accordance with the
intended method of disposition thereof, and pursuant thereto Purchaser will as
expeditiously
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<PAGE> 7
as possible:
(i) prepare and file with the Commission ( within
thirty days of receipt of a request for registration from Seller as
contemplated by Section 5(c)(ii) hereof) a Registration Statement on the
appropriate form with respect to such Registerable Shares and use 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, Purchaser will furnish to the counsel selected by the holders of the
Registerable Shares covered by such Registration Statement copies of all such
documents proposed to be filed, which documents will be subject to the review
of such counsel);
(ii) prepare and promptly 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 365 consecutive
days or such shorter period which will terminate when Registerable Shares
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 Seller thereof as
set forth in such Registration Statement;
(iii) furnish to each seller of Registerable Shares
the number of copies of such Registration Statement, each amendment and
supplement thereto, the prospectus included in such Registration Statement
(including each preliminary prospectus) and such other documents as such seller
may reasonably request in order to facilitate the disposition of the
Registerable Shares owned by such seller;
(iv) use its reasonable efforts to register or
qualify such Registerable Shares 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 Registerable Shares owned by such seller (provided
that Purchaser will not be required to qualify generally to do business or file
any general consent to service of process in any jurisdiction where it would
otherwise not be required to qualify or file but for this subparagraph);
(v) notify each seller of such Registerable
Shares, at any time when a prospectus relating thereto is required to be
delivered under the Act, of the happening of any event as a result of which the
prospectus included in such Registration Statement contains an untrue statement
of a material fact or omits 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, Purchaser will prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
Registerable Shares, 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 misleading;
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<PAGE> 8
(vi) use its reasonable efforts to cause all such
Registerable Shares to be listed on each securities exchange on which similar
securities issued by Purchaser are then listed and, if not so listed, to be
listed on the NASD automated quotation system and, if listed on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), use
its reasonable efforts to secure designation of all such Registerable Shares
covered by such Registration Statement as a NASDAQ "national market system
security" within the meaning of Rule 11Aa2-1 of the Commission or, failing
that, to secure NASDAQ authorization for such Registerable Shares and, without
limiting the generality of the foregoing, to arrange for at least one market
maker to register as such with respect to such Registerable Shares with the
NASD:
(vii) provide a transfer agent and registrar (which
may be Purchaser) for all such Registerable Shares not later than the effective
date of such Registration Statement;
(viii) enter into such customary agreements
(including underwriting agreements in customary form) and take all such other
actions as the holders of the Registerable Shares being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registerable Shares (including, without limitation,
effecting a stock split or a combination of shares);
(ix) make available for inspection by any seller
of Registerable Shares, any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and other
records (reasonably requested), pertinent corporate documents and properties of
Purchaser as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause Purchaser's officers, directors, employees
and independent accountants to supply all information reasonably requested by
any such seller, underwriter, attorney, accountant or agent in connection with
such Registration Statement; provided, however, each seller of Registerable
Shares agrees that information obtained by it as a result of such inspections
which is deemed confidential shall not be used by it as the basis for any
market transaction in securities of the Purchaser unless and until such
information is made generally available to the public and each such seller
shall cause any attorney, accountant or agent retained by such seller to keep
confidential any information so deemed;
(x) otherwise use reasonable efforts to comply
with all applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least 12 months beginning with the first
day of Purchaser'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;
(xi) permit any holder of Registerable Shares,
which holder, in its reasonable judgment, might be deemed to be an underwriter
or a controlling person of Purchaser to participate in the preparation of such
registration or comparable statement and to make comments thereon;
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<PAGE> 9
(xii) 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
qualification of any common stock included in such Registration Statement for
sale in any jurisdiction, Purchaser will use reasonable efforts promptly to
obtain the withdrawal of such order;
(xiii) use reasonable efforts to cause such
Registerable Shares 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 Seller thereof to consummate the disposition of such
Registerable Shares;
(xiv) use reasonable efforts to obtain a cold
comfort letter from the Purchaser's independent public accountants in customary
form and covering such matters of the type customarily covered by cold comfort
letters as the holders of the Registerable Shares being sold in such
registration reasonably request; and
(xv) use reasonable efforts thereafter to cause
the Registerable Shares to qualify as "margin stock" within the meaning of
Regulations G, T and U promulgated by the Federal Reserve Board.
(g) Allocation of Registration Expenses. Purchaser shall
be responsible for and pay all Registration Expenses (as defined below).
Seller shall only be responsible for and pay the following fees and expenses of
registration:
(i) Underwriting discounts and selling
commissions attributable to the sale of the Seller's Registerable Shares; and
(ii) Fees and expenses of Seller's independent
legal counsel.
Notwithstanding the foregoing, if a registration is
withdrawn at the written request of Seller and if Seller elects in writing not
to have such registration counted as a registration requested under
subparagraph (c) of this Section, Seller shall pay all reasonable Registration
Expenses of such registration For purposes of this Section "Registration
Expenses" shall mean and include all fees and expenses incident to Purchaser's
performance of or compliance with this Section 5 (other than those specifically
payable by Seller pursuant to this subparagraph (g)), including, without
limitation, all registration and filing fees, listing fees, fees and expenses
of compliance with securities or blue sky laws, printing and engraving
expenses, messenger and delivery expenses, and fees and disbursements for
counsel, all independent certified public accountants, underwriters and any
others retained by Purchaser.
(h) Certain Delays. Purchaser shall have the right from
time to time and at anytime to defer for a period not to exceed 30 days, the
filing of any Registration Statement requested under Sections 5(c) or 5(d)
above if, in reasonable judgment of Purchaser's board of directors, such
registration would materially interfere with or materially and adversely affect
any
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then existing negotiations for financing arrangements of financing plans of
Purchaser, or any arrangement or plan of Purchaser, then pending or being
negotiated in good faith, relating to any acquisition, disposition, merger or
similar transaction.
6. Representations and Warranties of Seller. The Seller
represents and warrants to Purchaser the following:
(a) Seller is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted;
(b) Seller has full power and authority under its
articles of incorporation and by-laws to conduct its business as presently
conducted and to perform its obligations under this Agreement.
(c) This Agreement is a legal and binding obligation of
Seller, enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency reorganization, moratorium and similar laws and
equitable principles relating to or limiting creditors' rights generally.
(d) Seller owns a 11.625% Participating Interest in the
Concession Properties; free and clear of all mortgages, liens, pledges,
security interests, charges, claims, and encumbrances of any nature whatsoever
that have been created by, through or under Seller, but not otherwise.
(e) Seller owns its beneficial interest in BIA Leases
free and clear of all mortgages, liens, pledges, security interests, charges,
claims and encumbrances of any nature whatsoever that have been created by,
through, or under Seller, but not otherwise.
(f) To Seller's knowledge, Seller has not received any
material prepayment respecting any of the Properties and Seller has not entered
into any agreement which contains a "take or pay" clause or similar arrangement
that has obligated Seller to deliver oil, gas or other hydrocarbons at some
future time without then or thereafter receiving full payment thereof. To
Seller's knowledge, Seller is not currently obligated to "make up" any
deliveries of oil or gas to any third parties out of future production from any
of the Properties.
(g) To Seller's knowledge, no suit, action or other
proceeding is pending before any court or governmental agency as of the date of
this Agreement of which Seller is a party and which might result in substantial
impairment or loss of any of Seller's title to any material part of the
Properties or the ability of any Seller to perform its obligations hereunder.
(h) With respect to the "Basic Documents" (defined
below), to Seller's knowledge and in all material respects:
(i) Seller is not in breach or default with
respect to any of its material obligations pursuant to such Basic Documents, or
any regulations incorporated therein or governing
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<PAGE> 11
same;
(ii) Seller or any other party to any Basic
Documents has not given or threatened to give notice of any action to
terminate, cancel, rescind or procure a judicial reformation of any Basic
Documents or any provision thereof; and
(iii) Subject to any requisite consents to
assignment or transfer of the Properties, the execution of this Agreement and
the consummation of the transactions contemplated hereby will not result in a
breach of, constitute default under, or result in a violation of the material
provisions of any Basic Document.
As used herein the term "Basic Documents" shall mean the Acquisition Agreement,
the JOA, the BIA Leases, agreements in respect of or affecting the purchase,
sale gathering, delivery, compression, transferring, processing, marketing or
any other disposition of oil, gas or condensate produced from or attributable
to the Properties, unitization or pooling agreement and all other material
executory contracts relating to the Properties.
(j) Seller has been furnished with or has had access to
the information it has requested from Purchaser and has had an opportunity to
ask questions and receive answers from management of Purchaser. Seller
acknowledges that it has received and had the opportunity to review copies of
Purchaser's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, Purchaser's Quarterly Reports on Form 10-Q for the quarters ended March
31, and June 30 and September 30, 1994 and its Proxy Statement dated April 22,
1994 (collectively referred to herein as the "Purchaser SEC Filings"). Seller
is either (i) an "accredited investor" (as defined in Rule 501(a) of the Act)
or (ii) alone, or together with a "purchaser representative" (as defined in
Rule 501(h) promulgated pursuant to the Act), has knowledge, experience and
skill in business and financial matters and with respect to investments in
securities so as to enable it to understand and evaluate the merits and risks
of the acquisition of the Purchaser Common Stock and to form an investment
decision with respect to such investment. Seller agrees that each certificate
representing shares of Purchaser Common Stock issued pursuant to this Agreement
will contain the restrictive legend set forth in Section 5(b)(ii) hereof and
acknowledge that stop transfer instructions will be given to Purchaser's
transfer agent for the shares of Purchaser Common Stock.
7. Representations and Warranties of Purchaser. Purchaser
represents and warrants to Seller the following:
(a) Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) Purchaser has full power and authority to carry on
its business as presently conducted, to enter into this Agreement, to purchase
the Properties on the terms described in this Agreement, and to perform its
other obligations under this Agreement.
(c) The execution, delivery and performance of this
Agreement and the
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<PAGE> 12
transactions contemplated hereby have been duly and validly authorized by all
requisite action on the part of Purchaser.
(d) This Agreement is a legal and binding obligation of
Purchaser, enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws and
equitable principles relating to or limited creditors' rights generally.
(e) Purchaser has incurred no liability, contingent or
otherwise, for brokers' or finders' fees relating to the transactions
contemplated by this Agreement for which Seller shall have any responsibility
whatsoever.
(f) Purchaser is knowledgeable, competent, and
experienced in the oil and gas industry and has independently evaluated and
interpreted all information and data relating to the Properties prior to
entering into this Agreement, understands and is financially able to bear the
risk associated with the Properties, and has independently conducted all the
due diligence investigations and reviews of all technical, geological,
environmental and legal matters concerning the Properties as it deems necessary
prior to Closing. Purchaser acknowledges that Seller has made no statements or
representations concerning the present or future value of anticipated income,
costs or profits, if any, to be derived from the Properties, and Purchaser has
relied solely upon its independent inspections, estimates, computations,
evaluations, reports, studies and knowledge of the Properties.
8. Survival of Representations and Warranties. The
representation and warranties of Seller in Section 6 and the representations
and warranties of Purchaser in Section 7 shall survive the Closing for a period
of one (1) year from the Closing Date (as hereinafter defined).
9. Covenants of Purchaser.
(a) Purchaser agrees to indemnify and hold Seller's
Indemnified Group as hereinafter defined) and any member thereof, harmless
from, and shall reimburse Seller and its agents, directors, officers,
employees and predecessors in interest (collectively "Seller's Indemnified
Group") with respect to all claims, demands, causes of action, losses, damages,
liabilities, costs and expenses, including attorneys' fees and court costs,
including, without limitation, the environmental liabilities discussed in
Section 9(b) below (collectively the "Claims"), arising out of, and/or
incurred, in connection with the ownership, development and operation of the
Properties asserted against or incurred by any member of Seller's Indemnified
Group for any Claims for acts, events, omissions, occurrences or conditions
arising or occurring before or after the Effective Time, except for Seller's
Indemnified Claims as described in Section 10 hereof, regardless of whether
such Claims are founded in whole or in part upon the negligent acts or
omissions of any member of the Seller's Indemnified Group.
(b) Without limiting the generality of the foregoing,
Purchaser agrees to indemnify and hold Seller's Indemnified Group and any
member thereof harmless from, and shall reimburse Seller's Indemnified Group
and any member thereof, with respect to any and all fines,
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penalties, costs, clean-up charges, remediation expenses and assessments (other
than Seller's Indemnified Claims) levied or assessed against Seller's
Indemnified Group or any member thereof by any person, party or entity,
including, but not limited to, any local, state or federal government entity or
authority, together with any and all Claims of every kind or character, except
for Seller's Indemnified Claims, asserted against or incurred by Seller's
Indemnified Group or any member thereof at any time for any Claims for acts,
events, omissions, conditions or occurrences, except for Seller's Indemnified
Claims, arising or occurring before or after the Effective Time by reason of,
or arising from, the Properties or the presence, generation, transportation,
treatment, disposal or release of any hazardous substances or any other
environmental contamination regarding the Properties that arises or occurs
before or after the Effective Time in any manner, including but not limited to
the above-referenced presence of hazardous substance or any other environmental
contamination upon the Properties that arises or occurs after the Effective
Time, regardless of whether such Claims are founded in whole or in part upon
the negligent acts or omissions of Seller's Indemnified Group or any member
thereof, but excluding Seller's Indemnified Claims. For purposes of this
Section 9, "hazardous substances" and "environmental contamination" shall
include, without limitation, oil, gas and other hydrocarbons, radioactive
materials, including NORM, asbestos or asbestos containing materials,
polychlorinated biphenyels and any chemicals, materials, wastes or substances
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "toxic substances," "toxic pollutants,"
"contaminants," or "pollutants" or words of similar import under any
environmental laws or regulations, ordinances, codes and policies, now in
effect or hereinafter enacted, and as such may be amended from time to time,
relating to the environment or human health or safety, including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the
Hazardous Material Transportation Act, as amended, 49 U.S.C. Section 1801 et
seq., the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C.
Section 6901 et seq., Federal Water Pollution Control Act, as amended, 33
U.S.C. Section 1201 et seq., the Safe Drinking Water Act, 42 U.S.C. Section
3808 et seq., the Toxic Substances Control Act, as amended, 15 U.S.C. Section
2601 et seq., and the Clean Air Act, as amended, 42 U.S.C. Section 7401 et
seq.
(c) Purchaser hereby agrees, as of the Effective Time, to
assume, perform and comply with all of the provisions and obligations (express
or implied) that are attributable to the Properties or that are attributable to
acts, operations, omissions or conditions arising before or after the Effective
Time (except for Seller's Indemnified Claims), including, but not limited to:
all of the terms and conditions of the JOA, the BIA Leases and all applicable
and valid agreements, contracts and instruments, unit agreements, joint
operating agreements, pooling agreements, communitization agreements and
easements and rights-of-way respecting the BIA Leases; all existing lease
burdens (including, but not limited to, royalties, overriding royalties,
production payments, net profits interest, carried working interest or similar
burdens); and all duties imposed by governmental law, rule or regulation.
(d) All covenants of Purchaser contained in this Section
9 shall survive Closing.
10. Covenants of Seller. Seller agrees to indemnify and hold
Purchaser harmless from, and shall reimburse Purchaser and its agents,
directors, officers, and employees (collectively
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<PAGE> 14
"Purchaser's Indemnified Group") with respect to all Claims, including
attorneys' fees and court costs including, relating to, arising out of or in
connection with any of the following (the Claims set forth in subparagraphs (a)
and (b) below for which Seller shall indemnify Purchasers' Indemnified Group
are herein collectively called "Seller's Indemnified Claims"):
(a) All fines penalties, clean-up charges remediation
expenses and assessments levied or asserted against Purchasers' Indemnified
Group by any local, state or federal government entity or authority by reason
of or arising from the clean-up or remediation of any hazardous substances or
any other environmental contamination that exists on or at the Aneth Gas Plant
as of the Effective Time, but only to the extent that any of the foregoing (i)
is not subject to indemnification by El Paso Natural Gas Company and (ii) is
based on or attributable to Seller's interest in the Aneth Gas Plant; and
(b) All amounts, including interest, penalties and fines,
levied or asserted against Purchaser's Indemnified Group by reason of or
arising from an investigation or audit by the Minerals Management Service
pending as of the Effective Time respecting the alleged underpayment of
royalties or other amounts payable to the Tribe under or pursuant to Tribal
Agreements or the BIA Leases, but only to the extent that such amounts are
based on or attributable to Seller's interest in the Properties.
Notwithstanding any other provision of this Section 10, Seller shall
not be obligated to reimburse the Purchaser's Indemnified Group for any
Seller's Indemnified Claims until Seller has received invoices and related
backup documents sufficient to identify the item of cost, the amount of the
cost, the party to whom the cost was paid, Seller's share of such cost, why
such cost was incurred and that the amount of cost was reasonable in light of
all circumstances. Seller may request and Purchaser shall provide to Seller
all information necessary to establish the foregoing to the reasonable
satisfaction of Seller and Purchaser.
Notwithstanding the provisions of Section 4 of this Agreement to the
contrary, should Purchaser be reimbursed by El Paso Natural Gas Company, the
Minerals Management Service or any successor, assign or other party related
thereto for any item of cost related to Seller's Indemnified Claims, Seller
shall be entitled to Seller's Participating Interest (as defined in the Joint
Operations Agreement dated August 1, 1988) share of such reimbursement whether
the cost reimbursed was originally incurred by the CHAP Venture before or after
the Effective Time and Purchaser shall promptly remit Seller's share of such
reimbursement to Seller.
All covenants of Seller contained in this Section 10 shall survive
Closing.
11. Seller's Conditions to Closing. The obligations of Seller at
the Closing are subject, at the option of Seller, to the satisfaction at or
prior to the Closing that all representations and warranties of Purchaser
contained in this Agreement shall be true in all material respects at and as of
the Closing as if such representations and warranties were made at and as of
the Closing, and Purchaser shall have performed and satisfied all material
agreements in all material respects required by this Agreement to be performed
and satisfied by Purchaser at or prior to the Closing.
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<PAGE> 15
12. Purchaser's Conditions. The obligations of Purchaser at the
Closing are subject, at the option of Purchaser, to the satisfaction at or
prior to the Closing that all representations of Seller contained in this
Agreement shall be true in all material respect at and as of the Closing as if
such representations and warranties were made at and as of the Closing, and
Seller shall have performed and satisfied all material agreements in all
material respects required by this Agreement to be performed and satisfied by
Seller at or prior to the Closing.
13. Closing. Unless the parties hereto mutually agree otherwise
and subject to the conditions stated in this Agreement, the Consummation of the
transactions contemplated hereby (herein called the"Closing" and the date of
which herein called the "Closing Date") shall be held on or before May 15, 1995
at 12:00 noon, Dallas, Texas time. The Closing shall be held at the office of
Purchaser or at such other place as Purchaser and Seller may agree in writing.
14. Closing Obligations. At the Closing, the following events
shall occur, each being a condition precedent to the others and each being
deemed to have occurred simultaneously with the others.
(a) Seller shall execute, acknowledge and deliver an
Assignment and Bill of Sale to Purchaser covering the Concession Properties in
the form (executed in sufficient counterparts to facilitate recording)
substantially set forth in Exhibit "C" hereto.
(b) Purchaser shall instruct and cause its transfer agent
to issue the Purchaser Common Stock to Seller as specified in Section 3 hereof.
(c) Purchaser shall pay the Purchase Cash to Seller by
check or wire transfer as Seller shall request prior to Closing.
15. Obligations after Closing.
(a) Sales Taxes and Recording Fees. Purchaser shall pay
all sales taxes and assessments occasioned by the sale of the Properties, and
Purchaser shall pay all filing and recording fees required in connection with
the filing and recording of any assignments.
(b) Further Assurances. After Closing, Seller and
Purchaser shall execute, acknowledge and deliver or cause to be executed,
acknowledged and delivered such instruments and take such other action as may
be reasonably necessary or advisable to carry out their obligations under this
Agreement and under any document, certificate or other instrument delivered
pursuant hereto or required by law. If at any time subsequent to the Closing,
either party comes into possession of money or property belonging to the other,
such money or property shall be promptly turned over to the party entitled
thereto. If requested by Purchaser, after Closing Seller shall execute,
acknowledge and deliver a Declaration of Ownership in the form reasonably
satisfactory to Seller and Purchaser, to be executed in sufficient counterpart
for filing with (i) the Minerals Division of the Tribe, (ii) the Bureau of
Indian Affairs in Window Rock, Arizona, (iii) San Juan
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County, New Mexico, (iv) Apache County, Arizona, and (v) San Juan County, Utah.
16. Termination. This Agreement and the transaction contemplated
hereby may be terminated in the following instances:
(a) By Seller if the conditions set forth in Section 10
are not satisfied in a material way or waived as of the Closing Date.
(b) By Purchaser if the conditions set forth in Section
11 are not satisfied in a material way or waived as of the Closing Date.
(c) At any time by the mutual written agreement of
Purchaser and Seller.
17. Title and Warranty.
(a) Title. Purchaser has had the opportunity to examine
all files, title information and production data that Seller has in its
possession relating to the Properties. The furnishing of such files, title
information and production data shall create no liability or responsibility on
the part of Seller and Seller makes no warranty or representation as to the
correctness or completeness of the files, title information and production data
so furnished. Purchaser has conducted, or will conduct prior to Closing, such
examination of title and other information as it sees fit and has notified
Seller that this examination revealed no title defects which would cause
Seller's title to be not merchantable. The purchase and sale of the Properties
shall be made pursuant to a special warranty of title subject to all
reservations, exceptions, limitations, claims, encumbrances or burdens (i)
contained herein, (ii) which are of record, (iii) of which Purchaser has actual
notice, or (iv) which are not claimed by, through or under Seller.
(b) Warranty. At the Closing, Seller shall convey the
Properties subject to a special warranty of title that the Properties are free
and clear from all mortgages, liens, claims or other encumbrances by or on
behalf of any person or entity claiming by, through or under Seller, but not
otherwise. Purchaser acknowledges that it has relied solely on the basis of
its own investigation of the Properties. NOTWITHSTANDING ANYTHING TO THE
CONTRARY, EXCEPT FOR THE FOREGOING SPECIAL WARRANTY OF TITLE, SELLER MAKES NO
REPRESENTATIONS OR WARRANTIES WITH RESPECT TO TITLE TO THE PROPERTIES. AT THE
CLOSING, SELLER SHALL CONVEY THE PROPERTIES "AS IS, WHEREAS," WITHOUT ANY
EXPRESS OR IMPLIED WARRANTIES OF ANY KIND, INCLUDING WARRANTIES AS TO
DESCRIPTION, VALUE, QUALITY, CONDITION, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
18. Miscellaneous Provisions.
(a) Successors and Assigns. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Notwithstanding the foregoing, neither
Purchaser nor Seller may assign their rights or obligations hereunder prior to
Closing without the written consent of the other parties.
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(b) Counterparts. This Agreement may be executed in two
or more identical counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. All
proceedings to be taken and all documents to be executed and delivered by the
parties at Closing shall be deemed to have been taken and executed
simultaneously with all other proceedings to be taken and documents to be
executed and delivered at Closing and no proceeding shall be deemed taken or
any documents delivered or executed until all have been taken, executed and
delivered at Closing.
(c) Titles and Subtitles. The titles and subtitles used
in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(d) Finder's Fee. Seller and Purchasers represent that
they neither are nor will be obligated for any finders fee or commission in
connection with this transaction.
(e) Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
(f) Notices. Any notice, demand or other communication
required to be given or made under this Agreement shall be in writing and be
deemed duly given or made if delivered or sent by telex or facsimile as
follows:
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<TABLE>
<S> <C>
SELLER: PAROO PETROLEUM (USA), INC.
10 Floor, 145 Eagle Street
Brisbane, Queensland, Australia 4000
Attention: Mr. Dennis D. Benbow
Facsimile: (011) 61-7-832-6411
with copy to: Sewell & Riggs
333 Clay Avenue, Suite 800
Houston, Texas 77002-4086
Attention: N.L. Stevens, Esq.
Facsimile: (713) 652-8807
PURCHASER: HARKEN ENERGY CORPORATION
5605 N. MacArthur Boulevard, Suite 400
Irving, Texas 75038
Attention: Larry E. Cummings, General Counsel
Facsimile: (214) 753-6963
</TABLE>
Any party may change its address for the purpose of this Agreement by
giving notice of such change to the other parties pursuant to the provisions of
this section. Any notice, demand or other communication sent by facsimile
shall be deemed given, in absence of proof to the contrary, upon receipt in a
legible form by the party being served.
(g) Legal Costs. The costs of legal counsel incidental
to the instructions for and the preparation and execution of this Agreement,
all counterparts thereof and all documents executed in connection therewith
shall be borne and paid by the parties who engage such counsel or on whose
behalf such counsel was engaged.
(h) Governing Law; Jurisdiction and Venue. The terms
and interpretation of this Agreement shall be governed by the laws of the State
of Texas. In no event shall any Texas laws or principles of conflicts of law
be used to permit the laws of another jurisdiction to govern, nor to permit
jurisdiction or venue to be other than those specified herein. The courts of
the State of Texas shall have exclusive jurisdiction over any dispute related
to this Agreement.
(i) Amendments. No modification, variation or
amendment of this Agreement shall have any force or effect unless it is in
writing and signed by all Parties. Unless the context otherwise so requires, a
reference to this Agreement shall include a reference to this Agreement as
modified, varied or amended from time to time.
(j) Powers of Attorney. If this Agreement is executed
for and on behalf of any of the parties by an attorney-in-fact, each attorney
so executing declares that at the time of execution of this Agreement, no
notice of the revocation of the power of attorney under the authority of which
he or she executes this Agreement has bee received. A copy of each such power
of attorney shall be furnished to each other Party to this Agreement upon
request.
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<PAGE> 19
(k) Entire Agreement. This Agreement supersedes all
prior proposals, whether oral or written, and all previous negotiations and
understanding among Purchaser and Seller with respect to the subject matter
hereof.
(l) Conflicts. In the event that the provisions of this
Agreement conflict with the provisions of the JOA or any other agreement or
instrument executed and delivered to effectuate the transactions contemplated
by this Agreement, the provisions of this Agreement shall prevail over all
others.
(m) Incorporation of Exhibits and Schedules. All
Exhibits and Schedules referred to herein are incorporated herein and made a
part of this Agreement for all purposes.
(n) Publicity. Seller and Purchaser shall consult with
each other with regard to all press releases and other publicity issued at or
prior to the Closing concerning this Agreement or the transactions contemplated
hereby, except as may be required by applicable laws or the applicable rules
and regulations of any governmental agency or stock exchange.
(o) Arbitration. If the parties are unable to resolve
a dispute arising under this Agreement, then such dispute shall be settled by
binding arbitration in Houston, Texas, before an independent and impartial
arbitrator. Any party may call for arbitration by written notice to the other.
If within twenty (20) days after receipt of such notice, the parties are unable
to agree upon an arbitrator, then any party may apply to the then sitting Chief
Judge of the United States District Court for the Southern District of Texas
requesting the appointment of an arbitrator. The arbitration shall be governed
by the United States Arbitration Act (9 U.S.C. Sections 1-16) and, except as
contradicted by the United States Arbitration Act, shall be conducted in
accordance with the rules of the American Arbitration Association then in
effect, including, without limitation, the Code of Ethics for Arbitrators in
Commercial Disputes. The decision of the arbitrator on any point or points will
be final. Judgment may be entered upon any award rendered by the arbitrator in
any court having jurisdiction. Each party shall pay its own costs of the
arbitration, including attorneys' fees, preparation costs and travel expenses.
All other costs of arbitration, including the cost of the arbitrator, shall be
borne equally by the parties.
(p) Attorneys' Fees. If any litigation is commenced
between the parties concerning this Agreement, the party prevailing in such
litigation shall be entitled to the reasonable attorneys' fees and expenses of
counsel and court costs incurred by reason of such litigation.
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EXECUTED, this the 15th day of May, 1995, but effective for all
purposes as of the Effective Time.
SELLER:
PAROO PETROLEUM (USA), INC.
a Delaware corporation
By: ___________________________________
Name: N.L. Stevens, III
Title: Attorney-in-Fact
PURCHASER:
HARKEN ENERGY CORPORATION,
a Delaware corporation
By: ____________________________________
Larry E. Cummings, Vice President
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<PAGE> 1
EXHIBIT 99.2
________________________________________________________________________________
________________________________________________________________________________
HARKEN ENERGY CORPORATION
___________________
NOTE PURCHASE AGREEMENT
____________________
Dated as of __________, 1995
Re:
U.S.$15,000,000 8% Senior Convertible Notes Due 1998
________________________________________________________________________________
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
SECTION 1. PURCHASE AND SALES OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. ISSUE OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. THE CLOSINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER . . . . . . . . . . . . . . . . 5
1.4. FAILURE TO DELIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.5. EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.6. SEGREGATED ACCOUNT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1. CORPORATE ORGANIZATION AND AUTHORITY OF THE COMPANY AND SUBSIDIARIES . . . . . . . . . . . 11
2.2. AUTHORIZED CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.3. SALE IS LEGAL AND AUTHORIZED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.4. NO DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.5. GOVERNMENTAL CONSENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.6. CONVERSION SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.7. BUSINESS AND PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.8. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.9. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.10. FULL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.11. USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.12. COMPLIANCE WITH REGULATION S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.13. CERTAIN LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1. OPINIONS OF COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.3. COMPLIANCE WITH THIS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.4. OFFICERS' CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.5. CORPORATE EXISTENCE AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.6. CONSENT OF HOLDERS OF OTHER SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.7. RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.8. PROCEEDINGS SATISFACTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.9. DELIVERY AND AUTHENTICATION OF GLOBAL NOTE . . . . . . . . . . . . . . . . . . . . . . . . 19
3.10. WAIVER OF CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4. PURCHASER'S SPECIAL RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.1. DELIVERY EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2. ISSUE TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 5. PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6. PAYING AGENT; SUBSTITUTION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1. PAYING AGENT; TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2. REPLACEMENT OF DEFINITIVE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 7. COMPANY COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1. FINANCIAL REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.2. PAYMENT OF NOTES AND MAINTENANCE OF OFFICE . . . . . . . . . . . . . . . . . . . . . . . . 22
7.3. LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.4. MAINTENANCE OF ASSET VALUE COVERAGE RATIO . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.5. REPURCHASE OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.6. RESTRICTIONS ON CHARTER AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.7. UNITED STATES WITHHOLDING AND REPORTING REQUIREMENTS . . . . . . . . . . . . . . . . . . . 25
7.8. PARI PASSU; COVENANT TO SECURE NOTES EQUALLY . . . . . . . . . . . . . . . . . . . . . . . 26
----------
7.9. ANNUAL MEETING WITH INVESTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 8. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.1. EVENTS OR DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2. DEFAULT REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.3. ANNULMENT OF ACCELERATION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 9. INTERPRETATION OF THIS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1. TERMS DEFINED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.2. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.3. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 10. CONVERSION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1. CONVERSION RIGHT AND CONVERSION PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.2. EXERCISE OF CONVERSION RIGHT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.3. FRACTIONS OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.4. ADJUSTMENT OF CONVERSION PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.5. NOTICE OF ADJUSTMENTS OF CONVERSION PRICE . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.6. NOTICE OF CERTAIN CORPORATE ACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.7. COMPANY TO RESERVE COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.8. TAXES ON CONVERSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.9. CANCELLATION OF CONVERTED DEFINITIVE NOTES . . . . . . . . . . . . . . . . . . . . . . . . 48
10.10. PROVISIONS IN CASE OF RECLASSIFICATION CONSOLIDATION, MERGER OR SALE OF ASSETS . . . . . . 48
10.11. REQUIRED CONVERSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.1. NOTICES; PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.2. SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.3. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.4. AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.5. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
11.6. HEADINGS AND TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
ii
<PAGE> 4
INDEX TO EXHIBITS AND SCHEDULE
<TABLE>
<CAPTION>
EXHIBIT
<S> <C>
A Form of Global Note
B Form of Definitive Note
C Form of Opinion of Larry E. Cummings, Esq., Vice President, General
Counsel and Secretary of the Company
D Form of Certificate from the Company's Chief Financial Officer
Transmitting Quarterly Financial Statements
E Form of Certificate from the Company's Chief Financial Officer
Transmitting Annual Financial Statements
F Forms of Certificates from the Company's Chief Financial Officer re
Compliance with Section 7.4 (Asset Value Coverage Ratio)
G Form of Notice from Holder of Exercise of Conversion Rights
H Form of Notice from the Company of Exercise of Required Conversion
Option
I Form of Auditor's Certificate
SCHEDULE
7.3(a)(i) Liens
</TABLE>
iii
<PAGE> 5
HARKEN ENERGY CORPORATION
5605 N. MacArthur Boulevard, Suite 400
Irving, Texas 75038
NOTE PURCHASE AGREEMENT
Re:
U.S.$15,000,000 8% Senior Convertible Notes Due 1998
Dated as of ________, 1995
To the Purchaser which is a signatory to this Agreement
Gentlemen:
The undersigned, Harken Energy Corporation, a Delaware corporation
(the "Company"), hereby agrees with you as follows:
SECTION 1. PURCHASE AND SALES OF NOTES.
1.1. ISSUE OF NOTES.
(a) Summary of Terms of the Notes. The Company has
authorized the issue and sale of 8% Senior Convertible Notes Due 1998 in the
aggregate principal amount of up to U.S.$15,000,000 (the "Notes"). Each Note
will bear interest at the rate of 8% per annum payable semi-annually in arrears
and will mature and be due in full three (3) years after issuance. The Notes
will be issued in denominations of $50,000 each and in multiple integrals
thereof. The Notes are convertible by the holders into shares (the "Conversion
Shares") of common stock (the "Common Stock") the Company at any time after
forty (40) days (the "Restricted Period") following the date of issuance at a
Conversion Price per share equal to the average of the daily low and closing
market prices of the Common Stock for the three (3) Trading Days prior to the
date of the Final Offering Memorandum dated April 27, 1995, subject to certain
adjustments and are secured by a negative pledge of certain assets. The
Company can require conversion of the Notes into Shares at any time following
one (1) year after the date of issuance if the market price of the Common Stock
shall have equalled or exceeded 140% of the Conversion Price for each Trading
Day in any thirty (30) consecutive day period. The Notes will initially be
represented by a single temporary global note (the "Global Note") in bearer
form without interest coupons or
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<PAGE> 6
conversion rights, in the form attached hereto as Exhibit A. On or before the
Closing Date, the Global Note shall be executed by the Company and delivered to
the Paying Agent for authentication, and shall be authenticated and delivered
for deposit with a common depositary (the "Common Depositary") to be named by
Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System ("Euroclear") and Cedel Bank, societe anonyme ("Cedel"), for
credit to the accounts of the respective Purchasers or their nominees with
Euroclear or Cedel. The Swiss securities number for the issuance of the Notes
is 364 751.
(b) Payment of Principal and Interest. The principal of
and interest on the Notes shall be payable, subject to any laws or regulations
applicable thereto in the country of any Paying Agent and subject to the right
of the Company to vary or to terminate the appointment of any Paying Agent or
to appoint any additional or other Paying Agents, in such places outside of the
United States as the Company may determine from time to time. Interest shall
be payable on the Notes on May 11 and November 11 (commencing November 11,
1995) until the principal amount thereof is paid or payment thereof is provided
for, or until the Notes are converted in accordance with Section 10 hereof.
The Notes will mature on May 11, 1998, at which time all principal and interest
on the Notes shall become due and payable. During the term of the Notes, the
Company has appointed as the initial Paying Agent the main office of Banca del
Gottardo, in Lugano, Switzerland. The Notes shall bear interest on overdue
principal (including any overdue required prepayment of principal) and (to the
extent legally enforceable) on any overdue installment of interest at the rate
of 10% per annum, to be expressed to mature on May 11, 1998. Interest on the
Notes shall be computed on the basis of a 360-day year consisting of twelve
30-day months. The principal of the Notes and interest thereon shall be
payable in accordance with the terms set forth in the Notes. The Notes are not
subject to prepayment or redemption at the option of the Company prior to their
Maturity Date and are not subject to any sinking fund provisions. The term
"Notes" as used herein shall include all 8% Senior Convertible Notes Due 1998,
whether in global or definitive form, of the Company delivered pursuant to this
Agreement and the separate agreements with the other purchasers of the Notes.
You and the other purchasers of the Notes are hereinafter sometimes referred to
collectively as the "Purchasers". The terms which are capitalized herein shall
have the meanings set forth in Section 9.1 hereof unless the context shall
otherwise require.
(c) Payment to be Made Outside the United States. No
payment with respect to any Notes will be made at the offices of the Company or
at any offices of any Paying Agent in the United
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<PAGE> 7
States, nor will any payment be made by transfer to an account, or by mail to
an address, in the United States.
(d) Conversion Rights. The Notes shall be convertible as
provided in Section 10.
(e) Seniority. The Notes shall be general unsecured
obligations of the Company and shall be senior in right of payment to all
Subordinated Obligations.
(f) Voting Rights. The holders of the Notes shall have no
voting rights with respect to the corporate affairs and management of the
Company.
(g) Execution and Authentication. An officer or duly
authorized attorney-in-fact shall sign the Global Note and each of the
Definitive Notes and the coupons appertaining thereto on behalf of the Company
by manual or facsimile signature. The Company's seal shall be reproduced on
the Definitive Notes.
If an officer or duly authorized attorney-in-fact whose signature
is on the Global Note or any of the Definitive Notes no longer holds such
office at the time such Global Note or Definitive Note is authenticated or at
any time thereafter, the Global Note or Definitive Note shall nevertheless be
valid.
The Global Note and any Definitive Notes shall not be valid until
authenticated by the manual signature of the Paying Agent. The signature shall
be conclusive evidence and the only evidence that the Global Note and any
Definitive Notes have been authenticated under this Agreement.
The Paying Agent shall authenticate the Global Note for original
issue up to the aggregate principal amount of $15,000,000 and any Definitive
Note for original issue in the principal amount of $50,000 and integral
multiples thereof up to an aggregate principal amount of $15,000,000 upon a
written order of the Company signed by its duly authorized officer or
attorney-in-fact. If the actual original principal amount of Notes issued at
the Closing is less than the maximum principal amount of $15,000,000 as stated
on the face of the Global Note, the Global Note on its execution and
authentication shall represent an obligation of the Company for only the total
amount of such actual original principal amount of Notes issued and not the
face amount of such Global Note.
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<PAGE> 8
(h) Paying Agent and Conversion Agent. The Company shall
maintain an office or agency outside the United States where Definitive Notes
and coupons appertaining thereto may be presented for payment (the "Paying
Agent") and an office or agency outside the United States where Definitive
Notes may be presented for conversion (the "Conversion Agent"). The term
"Paying Agent" includes any additional or successor Paying Agent; the term
"Conversion Agent" includes any additional or successor Conversion Agent. Any
one Person may serve as both Paying Agent and Conversion Agent concurrently, if
so appointed by the Company. The Company has appointed the main office of
Banca del Gottardo in Lugano, Switzerland as the initial Paying and Conversion
Agent.
(i) Temporary Global Note; Exchange for Definitive Notes.
Not earlier than the first Business Day following termination of the Restricted
Period, upon the election made by any holder of a beneficial interest in the
Global Note, all of the interests in the Global Note shall be exchanged,
without charge, as a whole but not in part, for definitive certificated Notes
(each a "Definitive Note") in bearer form in denominations of $50,000 or
integral multiples thereof with coupons attached and with the conversion rights
provided in Section 10 of this Agree-ment, in the form attached hereto as
Exhibit B. On or after the first Business Day following termination of the
Restricted Period, the Global Note shall be surrendered by the Common
Depositary to the Paying Agent, as the Company's agent for such purpose, upon
the request of such Paying Agent, to be exchanged in whole for Definitive
Notes, without charge and the Paying Agent shall authenticate and deliver in
exchange for the Global Note to be exchanged, to each of the beneficial owners
of interests in the Global Note or nominees thereof such aggregate principal
amount of Definitive Notes as the beneficial owner thereof shall be entitled to
receive. The Company has appointed the Lugano office of the Paying Agent as
its agent outside the United States for delivery of Definitive Notes in
exchange for beneficial interests in the Global Note.
Until so exchanged, the Global Note and the respective interests of
the beneficial owners therein shall in all respects be entitled to the same
benefits as the holders of Definitive Notes, except that the holder of the
Global Note shall not be entitled to receive payment of interest thereon nor
shall the holder of the Global Note be entitled to convert such Global Note
into Common Stock of the Company.
4
<PAGE> 9
1.2. THE CLOSINGS.
Subject to the terms and conditions hereof and on the basis of the
representations and warranties hereinafter set forth, the Company agrees to
issue and sell to you, and you agree to purchase from the Company, an interest
in the Global Note equal to the principal amount of the Note or Notes set forth
on the signature page of this Agreement at a price of 100% of the principal
amount thereof (the "Purchase Price").
Delivery of the Global Note to the Common Depositary will be made
at the offices of the Common Depositary on or before May 11, 1995 (the "Closing
Date") against payment of the Purchase Price into the Segregated Account. The
consummation of the purchase of the Notes by each of the Purchasers of Notes
pursuant hereto shall be referred to as a "Closing".
Concurrently with the execution and delivery of this Agreement, the
Company is entering into a similar agreement with each of the other Purchasers.
Your obligations and those of the other Purchasers shall be several and not
joint and you shall not be liable or responsible for the acts or defaults of
any other Purchaser.
1.3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER.
The Purchaser hereby represents, warrants and covenants to and for
the benefit of the Company as follows:
(a) The Purchaser understands and acknowledges that (i) the
Notes have not been and will not be, and the Conversion Shares will not be,
registered under the United States Securities Act of 1933, as amended (the
"Securities Act"), or under any state securities or blue sky laws, and may not
be offered, sold, transferred, pledged or otherwise disposed of, in the United
States or to, or for the account or benefit of, any "U.S. Person" (as defined
in Regulation S, which definition is set out in the Confidential Final Offering
Memorandum dated April 27, 1995, prepared by the Company (together with any
supplements or amendments thereto, the "Offering Memorandum"), unless such
securities are registered under the Securities Act and any applicable state
securities or blue sky laws or exemptions from the registration requirements of
such laws are available, (ii) the Notes and the Conversion Shares are being
offered and sold in a manner intended to comply with the conditions contained
in Regulation S, which permits securities to be sold to persons who are not
"U.S. Persons" in "offshore transactions" (as defined in Regulation S), subject
to certain terms and conditions, (iii) the
5
<PAGE> 10
Purchaser is not purchasing the Notes or the Conversion Shares in any
transaction or series of transactions that, although in tech-nical compliance
with Regulation S, is part of a plan or scheme to evade the registration
provisions of the Securities Act and (iv) the Purchaser shall not offer, sell,
transfer, pledge or otherwise dispose of, the Notes in the United States or to,
or for the account or benefit of, any "U.S. Person" without the prior written
consent of the Company.
(b) The Purchaser is purchasing the Notes for investment
purposes only and not for any trading or arbitrage purposes and not with a view
to, or for sale in connection with, any public distribution of the Notes or the
Conversion Shares and not with the intent to affect the management or
operations of the Company or otherwise obtain control of the Company. Neither
the Purchaser nor any Person or account on behalf of which the Purchaser is
purchasing is a "U.S. Person" or is acquiring the Notes for the account or
benefit of any "U.S. Person". The Purchaser has exe- cuted this Agreement
outside the United States, and at the time the buy order for the Notes was
originated, the Purchaser was outside the United States. The Purchaser (and
any Person or account on whose behalf the Purchaser is purchasing) is
knowledge-able, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in restricted secur-ities (such as
the Notes) and has requested, received, reviewed and considered all information
it deems relevant in making a decision to execute this Agreement and to
purchase the Notes.
(c) During the Restricted Period following the Closing Date
(which Restricted Period shall expire not earlier than midnight (New York time)
on June 19, 1995), the Purchaser shall not engage in any activity for the
purpose of, or which may reasonably be expected to have the effect of,
conditioning the market in the United States for the Conversion Shares and
shall not offer, sell, transfer, pledge or otherwise dispose of the Notes, the
Conversion Shares or any interest therein in the United States or to, or for
the account or benefit of, a "U.S. Person". The Purchaser shall not deliver
the Offering Memorandum to any Person (other than its professional advisers).
The Purchaser will not, directly or indirectly, offer, sell, pledge, transfer
or otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) the Notes or the Conversion Shares otherwise than
in compliance with the Securities Act, any applicable state securities or blue
sky laws and any applicable securities laws of jurisdictions outside the United
States, and the rules and regulations promulgated thereunder.
6
<PAGE> 11
(d) The Purchaser acknowledges that if it sells all or any
part of the Notes or the Conversion Shares in the United States, the Purchaser
(and/or certain persons who participate in any such sale) may be deemed, under
certain circumstances, to be an "underwriter" as defined in Section 2(11) of
the Securities Act. Prior to offering or selling all or any part of the Notes
or the Conversion Shares in the United States, the Purchaser and any subsequent
owner of the Notes or the Conversion Shares, shall consult with United States
legal counsel in order to determine its liabilities and obligations under this
Agreement, the Securities Act and any applicable state securities or blue sky
laws.
(e) During the period from February 15, 1995 to the
execution of this Agreement by the Purchaser, the Purchaser did not, and from
such date and through the expiry of the Restricted Period the Purchaser will
not, directly or indirectly, execute or effect or cause to be executed or
effected any short sale, option, or equity swap transaction in or with respect
to the Common Stock of the Company or any other derivative security transaction
the purpose or effect of which is to hedge or transfer to a third party all or
any part of the risk of loss associated with the ownership of the Notes or the
Common Stock of the Company, in-cluding the Conversion Shares, by the
Purchaser.
(f) The Purchaser has full right, power, authority and
capacity to enter into this Agreement and to consummate the transactions
contemplated hereby; the execution, delivery and performance of this Agreement
by the Purchaser have been duly authorized by all requisite corporate,
partnership or similar legal action of the Purchaser. Upon the execution and
delivery of this Agreement by the Purchaser, this Agreement shall constitute
the legal, valid and binding obligation of the Purchaser, enforce-able in
accordance with its terms, except as the enforceability thereof may be limited
by any applicable bankruptcy, insolvency, reorganization or other similar laws
relating to or affecting the enforcement of creditors' rights generally and by
general equit-able principles, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(g) Each of the representations and warranties contained in
this Section 1.3 is true and correct as of the date of this Agreement. By
payment for the Notes and acceptance of delivery of the Notes, the Purchaser
will be deemed to have made to the Com-pany the same representations and
warranties on the Closing Date and such representations and warranties when so
made will be true and correct as of the Closing Date.
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<PAGE> 12
(h) Notwithstanding any investigation made by either party
to this Agreement, all covenants, agreements, represent-ations and warranties
made by the Purchaser herein and in the Notes delivered pursuant hereto shall
survive the execution of this Agreement, the delivery to the Purchaser of the
Notes and the Conversion Shares and the receipt by the Company of payment for
the Notes.
1.4. FAILURE TO DELIVER.
If at the Closing of the sale of the Notes to you the Company fails
to tender the Global Note to the Common Depositary or if the conditions
specified in Section 3 have not been ful-filled, you may thereupon elect to be
relieved of all further obligations under this Agreement. Nothing in this
Section 1.4 shall operate to relieve the Company from any of its obligations
hereunder or to waive any of your rights against the Company.
1.5. EXPENSES.
Whether or not the Notes are sold, the Company will pay the
following expenses relating to this Agreement:
(a) the fees and disbursements of Cresvale
(Switzerland) Ltd. and Rauscher Pierce & Clark Inc. in connection
with the sale of the Notes, as and to the extent required pursuant
to the terms of that certain letter agreement between the Company
and Rauscher Pierce & Clark Inc. dated March 2, 1995, as amended;
and
(b) the cost of delivering to the holder's home
office, insured to the holder's satisfaction, any Defini-tive Note
or Definitive Notes issued upon conversion of the Global Note into
Definitive Notes, and the Conversion Shares, if the holder elects
to convert any or all of the Notes at any time prior to the
Maturity Date.
The obligations of the Company under this Section 1.5 shall survive
the payment for or conversion of the Notes and the termination of this
Agreement.
1.6. SEGREGATED ACCOUNT.
(a) On the Closing Date the Purchase Price for
each of the Notes shall be paid by each of the Purchasers in a
segregated interest bearing account (the "Segregated Account") to
be held by the Paying Agent until such time as
8
<PAGE> 13
it may be distributed to the Company in accordance with the
paragraphs below.
(b) On or before the Closing Date, the Company
will establish the Segregated Account with Banca del Gottardo, in
Lugano, Switzerland, in the name of the Company. The Segregated
Account will be an interest-bearing account into which the Purchase
Price for each of the Notes will be paid by each of the Purchasers
on the Closing Date, to be held by Banca del Gottardo as Paying
Agent, until such time as it may be distributed to the Company in
accordance with this Section 1.6. Interest accruing on the cash or
investments from time to time held by the Paying Agent on deposit
in the Segregated Account will be held for the account of the
Company and the Paying Agent will distribute such interest to the
Company upon demand from the Company therefor provided that the
Asset Value Coverage Ratio, as certified by the Company to the
Paying Agent in accordance with paragraph (d) below as of the end
of the most recent fiscal quarter, shall have been met and no Event
of Default with respect to any of the Notes shall have occurred and
be continuing at the date such distribution of interest is
requested by the Company.
(c) Upon conversion of any Note, whether
represented by an interest in the Global Note or a Definitive Note,
into Conversion Shares pursuant to Section 10, from time to time,
the Company may request that the Paying Agent make a distribution
to the Company of funds held in the Segregated Account in an amount
equal to the Purchase Price of such Note. The balance of the
Purchase Price paid into the Segregated Account for such Note and
remaining on deposit therein at the Conversion Date shall be
distributed to the Company without regard to the then current Asset
Value Coverage Ratio; provided, however, that no such distribution
shall be made if an Event of Default shall have occurred and be
continuing. In addition, the Company may from time to time request
that the Paying Agent distribute to the Company any other funds
held in the Segregated Account. The Paying Agent shall distribute
to the Company such funds held in the Segregated Account to the
extent that the Company on the date of such request provides the
documents specified in paragraph (d) below to the Paying Agent.
(d) Upon making any request to the Paying Agent
for a distribution of a portion of the Purchase Price from the
Segregated Account, the Company will present to the
9
<PAGE> 14
Paying Agent a certificate from the chief financial officer in the
form set forth as Exhibit F of the Company stating the current
value of the assets referred to in Section 7.4 (giving effect to
the percentage discounts reflected therein) then held by the
Company and that the required Asset Value Coverage Ratio has been
maintained; stating that, to the knowledge of the Company no Event
of Default with respect to any of the Notes has occurred and is
continuing at the date of such certificate, and requesting a
specific distribution. Such chief financial officer's certificate
shall be in the form set forth at Exhibit F attached hereto
accompanied by an independent reserve engineering report or other
independent third party valuation (the "Independent Reserve
Report") of such assets which will justify the value of the assets
as reflected in such chief financial officer's certificate (the
"Accompany-ing Documents") and a certificate from the Company's
independent public accounting firm (the "Auditor's Certifi-cate")
to the effect that such firm has no reason to believe that the
chief financial officer's certificate is inaccurate in any material
respect, which Auditor's Certificate is set forth as Exhibit I
attached hereto. The Auditor's Certificate shall state and confirm
that the Accompanying Documents meet the formal and material
requirements as set out in the Note Purchase Agreement (the
"Required Documents"). Upon receipt of the Required Docu-ments,
the Paying Agent shall distribute the corresponding portion of the
Purchase Price to the Company as requested. The Paying Agent shall
have no obligation or liability to verify the truthfulness or
accuracy of the Required Docu-ments presented and likewise will
have no liability for relying exclusively on such documents to
verify the permis-sibility of a distribution from the Segregated
Account of the portion of the Purchase Price to the Company as
requested.
(e) At any time after the Maturity Date, the
Company may request that the Paying Agent distribute the funds held
in the Segregated Account to the Company. Upon making any such
request, the Company shall present the documents specified in
paragraph (d) above together with a certificate stating that all
principal and interest due at any time on the Notes has been paid
to the Paying Agent and certifying that no Events of Default shall
have occurred and be continuing at the date of such request.
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SECTION 2. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to you as of the date of this
Agreement that:
2.1. CORPORATE ORGANIZATION AND AUTHORITY OF THE COMPANY AND
SUBSIDIARIES.
The Company, and each Subsidiary,
(a) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation;
(b) has all requisite power and authority and
all necessary licenses and permits to own and operate its
Properties and to carry on its business as now conducted and as
presently proposed to be conducted, except as would not have a
material adverse effect on the Company and the Subsidiaries taken
as a whole; and
(c) is duly licensed or qualified and is
authorized to do business and is in good standing as a foreign
corporation in each jurisdiction where the character of its
Properties or the nature of its activities makes such licensing or
qualification necessary, except as would not have a material
adverse effect on the Company and the Subsidiaries taken as a
whole.
2.2. AUTHORIZED CAPITAL STOCK.
The authorized and outstanding capital stock of the Company is as
set out in the Offering Memorandum, and all of the issued shares of capital
stock of the Company have been duly and validly authorized and issued and are
fully paid and non-assessable. All of the outstanding shares of capital stock
of the Subsidiaries have been duly and validly authorized and issued and are
fully paid and non-assessable. All of the outstanding shares of capital stock
of each Subsidiary are owned directly by the Company free and clear of any
Liens. Except as disclosed in the Offering Memorandum, the Company does not
own, directly or indirectly, any equity or debt securities of any other
company, corporation, partnership, joint venture or other entity which are
material to the business or operations of the Company.
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2.3. SALE IS LEGAL AND AUTHORIZED.
(a) The offer, issuance, sale and delivery of the Notes and
the Conversion Shares and compliance by the Company with all of the provisions
of this Agreement and the Notes:
(i) are within the corporate powers of the
Company;
(ii) are legal and will not violate, conflict
with, result in any breach of any of the provisions of, constitute
a default under (upon notice or lapse of time or both), or result
in the creation of any Lien upon any Property of the Company under
the provisions of, any charter instrument, by-law, or any order of
any court, governmental authority or arbitration board or tribunal,
or any provision of any indenture, mortgage, contract, instrument
or other agreement to which the Company is a party or by which it
may be bound, except with respect to such consents, approvals,
releases or amendments thereof as are necessary and/or appropriate
to permit such sale and compliance that have been obtained by the
Company on the Closing Date; and
(iii) have been duly authorized by all necessary
corporate action on the part of the Company (no action by the
stockholders of the Company or of any other Person being required
by law, by the Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") or By-laws of the Company or
otherwise);
(b) This Agreement has been duly and validly executed and
delivered by the Company (and the officers or agents executing this Agreement
on behalf of the Company are duly authorized to do so). This Agreement
constitutes the legal, valid and binding obligation, contract and agreement of
the Company, enforceable in accordance with its terms, except as enforcement of
such terms may be limited by any applicable bankruptcy, insolvency,
reorganization or other similar laws relating to or affecting the enforcement
of creditors' rights generally and by general equitable principles, regardless
of whether such enforceability is considered in a proceeding in equity or at
law;
(c) Each of the Global Note, the Definitive Notes and the
coupons appertaining thereto, and the Conversion Shares conform to the
description of such Global Note, Definitive Notes and the coupons appertaining
thereto, and Conversion Shares contained in the Offering Memorandum, and the
Conversion Shares
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conform to the terms of the Common Stock contained in the Company's Certificate
of Incorporation; and
(d) The Global Note and each of the Definitive Notes (if
and when issued) shall have been duly and validly executed, issued and
delivered by the Company (and the officers or agents executing the Global Note
and each of the Definitive Notes shall have been duly authorized to do so), and
shall constitute the legal, valid and binding obligations, contracts and
agreements of the Company, enforceable in accordance with their respective
terms, except as enforcement of such terms may be limited by any applicable
bankruptcy, insolvency, reorganization or other similar laws relating to or
affecting the enforcement of creditors' rights generally and by general
equitable principles, regardless of whether such enforceability is considered
in a proceeding in equity or at law.
2.4. NO DEFAULTS.
No event has occurred and no condition exists which, upon the issue
of the Notes, would constitute a Default or an Event of Default. Neither the
Company nor any of its Subsidiaries is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any indenture, mortgage, contract, instrument or other agreement
to which it is a party, where such default could have a material adverse effect
on the condition (financial or otherwise) of the Company and its Subsidiaries
taken as a whole or on the ability of the Company to perform its obligations
contained in this Agreement or the Notes.
2.5. GOVERNMENTAL CONSENT.
Neither the nature of the Company or of any Subsidiary, or of any
of their respective businesses or Properties, nor any relationship between the
Company or any Subsidiary and any other Person, nor any circumstance in
connection with the execution and delivery of the Note Purchase Agreements or
the offer, issue, sale or delivery of the Global Note, or the Definitive Notes,
or the Conversion Shares is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any
governmental authority on the part of the Company as a condition to the
execution and delivery of this Agreement or the offer, issue, sale or delivery
of the Global Note or the Defini-tive Notes or the issuance of Conversion
Shares pursuant to conversion of the Notes.
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2.6. CONVERSION SHARES.
The Conversion Shares, as and when issued by the Company from time
to time pursuant to conversion of the Notes, will be validly issued and
outstanding, fully paid and non-assessable and will not be subject to any
pre-emptive or similar right, and the holder of each Note will receive good and
valid title to the Conversion Shares upon conversion of such Note, free and
clear of any Lien, except such as may have been created by the holder of the
Note and such restrictions on transfer as may be imposed under United States
federal or state securities or blue sky laws. No consent or approval by the
stockholders of the Company or any other Person is required to be obtained by
the Company for the consummation of the issuance of the Conversion Shares by
the Company pursuant to conversion of the Notes. As and from the expiry of the
Restricted Period (i) each stock certificate repre-senting any of the
Conversion Shares shall be free of any type of restrictive legend, (ii) the
Conversion Shares represented by each such stock certificate shall not be
subject to any "stop transfer" or similar order at the Company's transfer agent
for its Common Stock, and (iii) the Company shall have filed with the American
Stock Exchange (the "AMEX") all necessary filings in respect of the inclusion
of the Conversion Shares in the shares of Common Stock of the Company listed
for trading on the AMEX or with any other national securities exchange or
quotation system on which the Common Stock is listed, admitted to trading or
quoted.
2.7. BUSINESS AND PROPERTIES.
You have heretofore been furnished with a copy of the Offering
Memorandum, which sets forth a description of the business conducted and
proposed to be conducted by the Company and its Subsidiaries and the principal
Properties of the Company and its Subsidiaries, which description is true and
correct in all material respects.
Each of the Company and its Subsidiaries has (i) Good Title to its
Oil and Gas Properties and (ii) good and marketable title to all other
Properties and assets described in the Offering Memorandum as owned by it, in
the case of such other Properties and assets free and clear of all Liens,
except as disclosed in the Offering Memorandum or which are not material to the
business of the Company and its Subsidiaries taken as a whole. Each of the
Company and its Subsidiaries has a valid, subsisting lease for the real
Property (other than its Oil and Gas Properties, subject to clause (i) of this
sentence) described in the Offering Memorandum as leased by it. To the
knowledge of the Company's management, except as otherwise disclosed in the
Offering Memorandum, the
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Company and each of its Subsidiaries owns or possesses or is the valid licensee
of all patents, trademarks, service marks, trade names, copyrights and other
intellectual property necessary to carry on its business as described in the
Offering Memorandum, and neither the Company nor any Subsidiary has received
any notice of infringement of or conflict with asserted rights of others with
respect to any of the foregoing which, if the subject of an unfavorable
decision, ruling or finding, would result, individ-ually or in the aggregate,
in any material adverse change in, or which would materially and adversely
affect the business, opera-tions, financial position or business prospects of,
the Company and its Subsidiaries taken as a whole.
2.8. LEGAL PROCEEDINGS.
Except as otherwise described in the Offering Memorandum, there are
no actions, suits, investigations or proceedings pending to which the Company
or any Subsidiary is a party before or by any court or governmental agency or
body, which would result, individually or in the aggregate, in any material
adverse change in the financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole, or which would materially and
adversely affect the Properties or assets of the Company, and to the knowledge
of the Company, no such actions, suits, investi- gations or proceedings are
threatened by any Person.
2.9. FINANCIAL STATEMENTS.
(a) The consolidated balance sheets of the Company and its
Subsidiaries as of December 31, 1993 and 1994, and the related consolidated
statements of operations, stockholders' equity and cash flows of the Company
and its Subsidiaries for the fiscal years ended on such dates, each accompanied
by a report thereon containing an opinion without qualifications except as
therein noted, by Arthur Andersen LLP, were prepared in accordance with
generally accepted accounting principles consistently applied, except for
accounting changes noted in such reports, and present fairly the financial
position of the Company and its Subsidiaries as of such dates and the results
of their operations for such periods.
(b) Except as set forth in the Offering Memorandum, since
December 31, 1994, there has been no change in the Prop-erties, business,
profits or condition (financial or otherwise) of the Company and its
Subsidiaries except changes in the ordinary course of business, none of which
individually or in the aggregate have had a material adverse effect on the
Properties, business,
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<PAGE> 20
profits or financial condition of the Company and its Subsidiaries taken as a
whole.
2.10. FULL DISCLOSURE.
Neither this Agreement, nor the Offering Memorandum, nor any
written statement furnished by the Company or its agents to you in connection
with the negotiation of the sale of the Notes, contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements contained therein or herein, in light of the circumstances under
which they were made, not misleading. There is no fact known to the Company or
any of its Subsidiaries (or which, after due inquiry, should have been known)
which the Company has not disclosed to you in writing (other than general
economic conditions and conditions prevailing in the oil and gas industry in
general) which materially affects adversely, nor, so far as the Company can
foresee, could material-ly affect adversely, the Properties, business,
prospects, profits or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole or the ability of the Company to perform its
obligations contained in this Agreement or the Notes.
2.11. USE OF PROCEEDS.
The Company will use the proceeds from the sale of the Notes for
the purposes described in the Offering Memorandum.
2.12. COMPLIANCE WITH REGULATION S.
The Company is a "reporting issuer" (as defined in Regulation S).
The Company: (i) has not engaged (and has not permitted any of its Affiliates
or any Person acting on its behalf or on behalf of any of its Affiliates to
engage) with respect to the Notes in any "directed selling efforts" (as defined
in Regulation S) in or directed towards the United States, (ii) has complied
with all "offering restrictions" (as defined in Regu-lation S) in respect of
the Notes, (iii) has not delivered the Offering Memorandum to any "U.S. Person"
(as defined in Regulation S) (other than the Company's directors, executive
officers and employees directly involved in the preparation of the Offering
Memorandum or the execution and performance of the Placement Agent Agreement
and the Company's professional and financial advisers), (iv) has not made any
offers of any of the Notes in the United States or to, or for the account or
benefit of, any "U.S. Person", (v) has not made and will not make any offers
or sales of the Notes or any interest therein in the United States or to, or
for the account or benefit of, any "U.S. Person", (vi) has not made any offers
or sales of any of the Notes or any interest therein to
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<PAGE> 21
any Person other than the Purchasers, and (vii) shall offer and sell the Notes
only in "offshore transactions" (as defined in Regulation S).
2.13. CERTAIN LAWS.
(a) Neither the Company nor any of its Subsidiaries is,
directly or indirectly, controlled by, or acting on behalf of any Person which
is, an "investment company" or an "affiliated person" of, "promoter" or
"principal" of an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
(b) Neither the Company nor any of its Subsidiaries is a
"holding company" within the meaning of the Public Utility Holding Company Act
of 1935, as amended or a "public utility" within the meaning of the Federal
Power Act, as amended.
SECTION 3. CLOSING CONDITIONS.
Your obligation to purchase and pay for the Notes on the Closing
Date pursuant to Section 1.2 of this Agreement shall be subject to the
following conditions precedent:
3.1. OPINIONS OF COUNSEL.
Larry E. Cummings, Esq., Vice President, General Counsel and
Secretary of the Company, shall have delivered to the Placement Agent, on
behalf of each of the Purchasers, the legal opinion dated as of the Closing
Date in substantially the form attached in Exhibit C.
3.2. REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING.
The representations and warranties of the Company contained in
Section 2 shall be true in all material respects on the Closing Date with the
same effect as though made on and as of that date.
3.3. COMPLIANCE WITH THIS AGREEMENT.
The Company shall have performed and complied with all agreements
and conditions contained herein which are required to be performed or complied
with by the Company on or before the Closing Date.
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3.4. OFFICERS' CERTIFICATE.
The Company shall have delivered to the Placement Agent, on behalf
of each of the Purchasers, a certificate dated the Closing Date and signed by
the Chairman of the Board, the President or any Vice President and by the chief
financial officer of the Company, certifying that the conditions specified in
Sections 3.2 and 3.3 have been fulfilled.
3.5. CORPORATE EXISTENCE AND AUTHORITY.
You shall have received, in form and substance reasonably
satisfactory to you, such documents and evidence with respect to the Company
and its Subsidiaries as you may reasonably request in order to establish the
existence and good standing of the Company and its Subsidiaries and the
authorization of the transactions contemplated by this Agreement.
3.6. CONSENT OF HOLDERS OF OTHER SECURITIES.
Any consents or approvals required to be obtained from any holder
or holders of any outstanding security of the Company and any amendments of
agreements pursuant to which any securities may have been issued which shall be
necessary to permit the consum-mation of the transactions contemplated hereby
on the Closing Date shall have been obtained by the Company and all such
consents or amendments shall be reasonably satisfactory in form and substance
to you.
3.7. RELATED TRANSACTIONS.
Prior to or concurrently with the issuance and sale of the Notes to
you, the Company shall have entered into Note Purchase Agreements with
Purchasers providing for the purchase of all the Notes or such lesser principal
amount of Notes as shall be agreed by the Company and the Placement Agent.
3.8. PROCEEDINGS SATISFACTORY.
All proceedings taken in connection with the sale of the Notes to
be purchased by you and all documents and papers relating thereto shall be
reasonably satisfactory to you and you shall have received copies of such
documents and papers as you may reasonably request in connection therewith all
in form and substance reason-ably satisfactory to you.
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3.9. DELIVERY AND AUTHENTICATION OF GLOBAL NOTE.
In accordance with Section 1.1(g) of this Agreement, the Company
shall have executed the Global Note and shall have delivered the Global Note to
the Paying Agent for authentication, and the Paying Agent shall have
authenticated the Global Note and delivered the Global Note to the Common
Depositary.
3.10. WAIVER OF CONDITIONS.
If the Company fails to satisfy any of the conditions in this
Section 3 on the Closing Date, you may waive compliance by the Company with any
such condition to such extent as you may in your sole discretion determine.
Nothing in this Section 3.10 shall operate to relieve the Company of any of its
obligations hereunder or to waive any of your rights against the Company.
SECTION 4. PURCHASER'S SPECIAL RIGHTS.
4.1. DELIVERY EXPENSES.
If you surrender any Definitive Note to the Conversion Agent
pursuant to this Agreement, the Company will pay the cost of delivering to or
from your home office from or to the Conversion Agent, insured to your
satisfaction, the surrendered Definitive Note and any Definitive Note issued in
substitution or replacement for the surrendered Definitive Note. In addition,
if you convert any beneficial interest in the Global Note or any Definitive
Note into shares of Common Stock of the Company pursuant to this Agree-ment,
the Company will pay the cost of delivering to your home office, insured to
your satisfaction, the certificates repre-senting Conversion Shares.
4.2. ISSUE TAXES.
The Company will pay all taxes in connection with the issuance and
sale of the Global Note, the Definitive Notes and the issue of the Conversion
Shares to you and in connection with any modification of the Global Notes or
the Definitive Notes and will save you harmless without limitation as to time
against any and all liabilities with respect to all such taxes (other than any
income taxes assessed on your income). The obligations of the Company under
this Section 4.2 shall survive the payment or repayment of the Notes and the
termination of this Agreement.
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SECTION 5. PREPAYMENTS.
No prepayment of principal or interest on the Notes may be made by the Company.
SECTION 6. PAYING AGENT; SUBSTITUTION OF NOTES.
6.1. PAYING AGENT; TRANSFERS.
The Company shall have one or more Paying Agents, and it will, at
least one day Business Day prior to each due date of the principal or interest
on any Notes, deposit for the account of the such Paying Agents a sum
sufficient to pay the principal or interest then becoming due, and the Company
will promptly notify each Paying Agent of its failure so to act.
6.2. REPLACEMENT OF DEFINITIVE NOTES.
Upon receipt by the Company and the Conversion Agent of evidence
reasonably satisfactory to it of the ownership of, and the loss, theft,
destruction or mutilation of, any Definitive Note or coupon appertaining
thereto and
(a) in the case of loss, theft or destruction,
of an indemnity reasonably satisfactory to it (provided, if the
bearer of the Definitive Note or coupon appertaining thereto is an
original bearer thereof, its own agreement of indemnity shall be
deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender
and cancellation thereof to the Conversion Agent,
the Company at its expense will execute and deliver in lieu thereof, a new
Definitive Note or coupon appertaining thereto of like tenor and principal
amount, dated and bearing interest from the date to which interest has been
paid on such lost, stolen, destroyed or mutilated Definitive Note or coupon
appertaining thereto or dated the date of such lost, stolen, destroyed or
mutilated Definitive Note or coupon appertaining thereto if no interest has
been paid thereon.
SECTION 7. COMPANY COVENANTS.
From and after the Closing Date and continuing so long as any
amount remains unpaid on any Note:
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7.1. FINANCIAL REPORTS.
The Company will provide the following reports to the Paying Agent
on behalf of the holders of the Notes, and shall provide a copy of such reports
to Rauscher Pierce & Clark Inc. and to Cresvale (Switzerland) Ltd.:
(a) as soon as practicable and in any event
within 50 days after the end of each quarterly period (other than
the last quarterly period) in each fiscal year, consolidated
statements of operations, stockholders' equity and cash flows of
the Company and its Subsidiaries for the period from the beginning
of the current fiscal year to the end of such quarterly period, and
a consolidated balance sheet of the Company and its Subsidiaries as
at the end of such quarterly period, setting forth in each case in
comparative form figures for the corresponding period in the
preceding fiscal year, and certified by the chief financial officer
of the Company, subject to changes resulting from year-end
adjustments, all in the form of the certificate attached hereto as
Exhibit D; provided, however, the Company may satisfy in all
respects the foregoing obligations by timely delivery to the Paying
Agent of a copy of the report on Form 10-Q for the relevant quarter
filed by the Company with the Securities and Exchange Commission
pursuant to the requirements of the Securities Exchange Act of
1934, as amended;
(b) as soon as practicable and in any event
within 115 days after the end of each fiscal year, consolidated
statements of operations, stockholders' equity and cash flows of
the Company and its Subsidiaries for such year, and the
consolidated balance sheet of the Company and its Subsidiaries as
at the end of such year, setting forth in each case in comparative
form corresponding consolidated figures from the preceding annual
audit, all in form of the certificate attached hereto as Exhibit E
and certified to the Company by independent public accountants of
recognized national standing selected by the Company, Arthur
Andersen LLP being deemed satisfactory; provided, however, the
Company may satisfy in all respects the foregoing obligations by
timely delivery to the Paying Agent of a copy of the report on Form
10-K for the relevant fiscal year filed by the Company with the
Securities and Exchange Commission pursuant to the requirements of
the Securities Exchange Act of 1934, as amended;
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(c) as soon as practicable and in any event
within 50 days after the end of each of the first three fiscal
quarters of each fiscal year, a certificate in form of that
attached hereto as Exhibit F and certified by the chief financial
officer of the Company as to compliance with Section 7.4 hereof,
and as soon as practicable and in any event within 115 days after
the end of each fiscal year, a certificate in form of that attached
hereto as Exhibit F and certified by the chief financial officer of
the Company as to compliance with Section 7.4 hereof, it being
understood that (i) in no event will the Company be required under
the terms of this Note Purchase Agreement to prepare or obtain any
reserve report other than the annual reserve report prepared or
obtained in connection with the Company's annual report on Form
10-K filed by the Company with the Securities and Exchange
Commission pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, and (ii) in the preparation of the
certificates required to be delivered after the end of each of the
first three fiscal quarters of each fiscal year, the chief
financial officer may rely upon the most recent annual reserve
report referred to in clause (i) above and may, but shall not be
obligated to, take into account any events subsequent to the date
of such report;
(d) promptly after their becoming available,
copies of all registration statements and reports which the Company
shall have filed with the Securities and Exchange Commission or any
national securities exchange or quotation system; and
(e) promptly after the mailing thereof to the
stockholders of the Company, copies of all financial statements,
reports and proxy statements so mailed.
The holder of any interest in the Global Note and the bearer of any
Definitive Note may obtain a copy of any of the foregoing reports and
certificates from the Paying Agent at its offices in Lugano, Switzerland, upon
request.
7.2. PAYMENT OF NOTES AND MAINTENANCE OF OFFICE.
The Company will pay or cause to be paid the principal and interest
to become due in respect of the Notes on the dates when such principal and
interest shall become due according to the terms thereof whether at maturity or
otherwise. Principal and interest shall be considered paid on the date due if
the Paying Agent holds on that date money sufficient to pay all principal and
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interest then due. If the Notes are Definitive Notes, the interest thereon
shall be payable to the bearer only upon present-ation and surrender of the
several coupons for such interest installments as are evidenced thereby as they
severally mature. The Company shall pay interest on overdue principal at the
rate specified by the Notes. The Company will maintain an office which shall
at all times be outside the United States where notices, presentations and
demands in respect of this Agreement or the Notes may be made upon it. Such
office shall be maintained at Coutts & (Cayman) Company Limited, P.O. Box 707
West Bay Road, Grand Cayman, B.W.I. until such time as the Company shall notify
the Paying Agent of any change of location of such office.
7.3. LIENS.
(a) The Company will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist, any Lien upon any of
its Oil and Gas Properties, whether now owned or hereafter acquired, except:
(i) Liens existing at the date hereof and set
forth in Schedule 7.3(a)(i), provided they do not interfere
materially with the use of the Company's Oil and Gas Properties or
the conduct of its business in the ordinary course;
(ii) Liens arising after the Closing Date for
taxes, assessments or other governmental charges or levies not yet
due or which are being actively contested in good faith by
appropriate proceedings;
(iii) other Liens arising after the Closing Date
incidental to the conduct of its business or the ownership of its
Oil and Gas Properties, which are not incurred in connection with
the borrowing of money or the obtaining of advances or credit or
guaranteeing the obligations of a Person (including landlord's,
vendor's, carrier's, ware-housemen's, repairmen's, mechanics',
workmen's, material-men's, construction or similar liens and
easements, rights of way, restrictions and other similar
encumbrances), and which do not in the aggregate have or could have
a material adverse effect on the value of the Company's and its
Sub-sidiaries' Oil and Gas Properties or financial condition, or
materially impair the use of such Properties in the operation of
its business;
(iv) Liens arising after the Closing Date on any
Oil and Gas Property of any corporation at the time it
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becomes a Subsidiary, or existing prior to the time of acquisition
upon any Oil and Gas Property acquired by the Company or any
Subsidiary through purchase, merger or consolidation or otherwise,
whether or not assumed by the Company or such Subsidiary, or placed
on such Property at the time of acquisition by the Company or any
Subsidiary to secure all or a portion of (or to secure Indebtedness
incurred to pay all or a portion of) the purchase price thereof,
provided that (a) all of such Property is not or shall not thereby
become encumbered in any amount in excess of the cost thereof, (b)
any such Lien shall not encumber any other Oil and Gas Properties
of the Company or such Subsidiary and (c) any such Lien shall not
have been created in anticipation of such corporation becoming a
Subsidiary;
(v) Liens arising by operation of law in
connection with workers' compensation insurance, unemployment
insurance or other social security, old age pension or public
liability obligations; and
(vi) Liens arising after the Closing Date in
connection with any litigation or other legal proceeding against
the Company or any of its Subsidiaries or arising out of a judgment
or award with respect to which an appeal is being actively
prosecuted.
(b) In case any Oil and Gas Property is subjected to a Lien
in violation of Section 7.3(a), the Company will use its best efforts to make
or cause to be made provision whereby the Notes will be secured equally and
ratably with all other obligations secured thereby, and in any case the Notes
shall have the benefit, to the full extent that, and with such priority as the
holders may be entitled thereto under applicable law, of an equitable Lien on
any such Property securing the Notes. Such violation of Section 7.3(a) shall
constitute an Event of Default hereunder, whether or not any such provision is
made pursuant to this Section 7.3(b).
(c) Notwithstanding anything to the contrary in this
Section 7.3, the Company may hereafter create, incur, assume or permit to arise
or exist any Lien in connection with additional borrowings of money, extensions
of credit or other purposes (the "Other Borrowings") upon any of its Oil and
Gas Properties; provided however, that any such Oil and Gas Properties
committed to or included under such a Lien created for the benefit of such
Other Borrowings may not be included by the Company in the calculation of the
Asset Value Coverage Ratio under Section 7.4 hereof.
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7.4. MAINTENANCE OF ASSET VALUE COVERAGE RATIO.
The Company will maintain, such maintenance to be evidenced at the
last day of each quarterly fiscal period of each year during the term of this
Agreement, a ratio of (a) the sum of (i) 100% of the aggregate amount of the
Company's cash on deposit in the Segregated Account plus (ii) 60% of the
aggregate amount of the Company's Marketable Securities plus (iii) 40% of the
SEC Value of the Company's PDP Reserves located in the United States to (b) the
aggregate outstanding principal amount of all Notes, equal to or greater than
1:1 (the "Asset Value Coverage Ratio").
7.5. REPURCHASE OF NOTES.
Neither the Company nor any of its Subsidiaries will, directly or
indirectly, repurchase or make any offer to repurchase any Notes unless the
offer has been made to repurchase Notes, as the case may be, pro rata, from all
holders of the Notes at the same time and upon the same terms and conditions.
No holder of any Note shall be obligated to accept any offer to repurchase the
Notes made by the Company, and any such repurchase by the Company shall not
affect the Company's obligations under this Agreement. In case the Company
repurchases any Notes, such Notes shall be cancelled, and no Notes shall be
issued in substitution therefor.
7.6. RESTRICTIONS ON CHARTER AMENDMENTS.
The Company shall not amend its charter documents except as
required by law or except to the extent that such amendment would not have a
material adverse effect on (a) the ability of the Company to perform its
obligations under this Agreement or the Notes or (b) the rights of the holders
of the Notes, except that neither (i) increases in the number of shares of
authorized capital stock of the Company and issuance thereof with related
securities nor (ii) designations of preferred stock of the Company and issuance
thereof with related securities shall be deemed an amendment of charter
documents hereunder.
7.7. UNITED STATES WITHHOLDING AND REPORTING REQUIREMENTS.
To the extent permitted by law, the Company will provide to the
Paying Agent or to any holder of the Notes such statements, certificates or
other documentation concerning the organization or operations of the Company as
may be reasonably necessary to establish any exceptions or exemptions from
United States federal income tax withholding and reporting requirements.
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7.8. PARI PASSU; COVENANT TO SECURE NOTES EQUALLY.
The Company covenants that its obligations under the Notes and
hereunder do and will rank at all times at least pari passu with all other
present and future Indebtedness of the Company and shall be superior in rank to
all existing and future Subordinated Obligations.
7.9. ANNUAL MEETING WITH INVESTORS.
The Company shall hold at least once per calendar year an informal
informational meeting or meetings for the benefit of the holders of the Notes
at a location or locations to be determined from time to time in Europe.
Notice of such meeting or meetings shall be provided to the Paying and
Conversion Agent, the Placement Agent and Cresvale.
SECTION 8. EVENTS OF DEFAULT.
8.1. EVENTS OR DEFAULT.
An "Event of Default" shall exist if any of the following occurs:
(a) The Company fails to make any payment of
principal on any Note on the Business Day before the date such
payment is due, whether at maturity, upon repurchase or otherwise;
(b) The Company fails to make any payment of
interest on any Note on the Business Day immediately preceding the
date on which the same shall have become due and such default shall
continue for a period of ten (10) Business Days;
(c) The Company breaches any of its covenants
or fails to fulfill its obligations hereunder contained in Sections
7.4, 7.5, 7.6 or 7.8, or in Section 10;
(d) The Company fails to make any financial
report required to be made by it under Section 7.1 of this
Agreement and such Default shall continue for a period of thirty
(30) Business Days;
(e) The Company or any of its Subsidiaries
fails to comply with any provision of this Agreement or the Notes,
other than the covenants specified in subparagraphs (a), (b), (c)
and (d) above, and such failure continues for
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more than 30 days after the earlier of (1) the receipt of notice
thereof by the Company from the Paying Agent or any holder of any
Note or (2) the day on which such failure shall first become known
to any executive officer of the Company;
(f) Any warranty, representation or other
state-ment by or on behalf of the Company contained in this
Agreement, the Notes or in any certificate or instrument furnished
in compliance with this Agreement or the Notes is false in any
material respect when made;
(g) A custodian, receiver, liquidator or
trustee of the Company, or any of its Subsidiaries which holds a
substantial part of the Properties of the Company and its
Subsidiaries (taken as a whole), or of any substantial part of the
Properties of the Company and its Subsidiaries (taken as a whole),
is appointed by court order and such order remains in effect for
more than 90 days; or the Company, or any of its Subsidiaries which
holds a sub-stantial part of the Company and its Subsidiaries
(taken as a whole), is adjudicated bankrupt or insolvent; or any
substantial part of the Properties of the Company and its
Subsidiaries (taken as a whole), is sequestered by court order and
such order remains in effect for more than 90 days; or petition is
filed against the Company or any of its Subsidiaries which holds a
substantial part of the Properties under any bankruptcy,
reorganization, arrange-ment, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
here-after in effect, and is not dismissed or stayed within 90 days
after such filing;
(h) The Company or any of its Subsidiaries
files a petition in voluntary bankruptcy or seeking relief under
provision of any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquid-ation law
or regulation, whether now or hereafter in effect, or consents to
the filing of any petition against it under such law;
(i) The Company or any of its Subsidiaries
fails to pay its debts as such debts become due except for debts
which the Company may contest in good faith, or becomes insolvent
or bankrupt, consents to the entry of an order for relief against
it in an involuntary bankruptcy case, or the Company or any of its
Subsidiaries makes any assignment for the benefit of its creditors,
or consents to the
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appointment of a custodian (including, without limitation, a
receiver, liquidator or trustee) of the Company;
(j) The Company or any Subsidiary (whether as
primary obligor or as guarantor or other surety) shall fail, after
the expiration of any applicable grace period, to make any payment
due on, or to otherwise redeem, when due, any Indebtedness of such
Person;
(k) The Company or any Subsidiary shall fail to
perform or observe any agreement, term or condition contained in
any agreement under which an Indebtedness is created (or if any
other event thereunder or under any other agreement shall occur and
be continuing) and the holders of such Indebtedness shall have
elected as a result thereof to cause such Indebtedness to become
due (or to be repurchased by the Company or such other Subsidiary)
prior to the stated maturity thereof; or
(l) any final judgment or judgments for the
payment of money is or are outstanding against the Company or any
Subsidiary and has been outstanding for more than sixty (60) days
from the date of its entry and shall not have been discharged in
full or stayed by appeal, bond or otherwise.
8.2. DEFAULT REMEDIES.
(a) If any Event of Default described in subparagraph (a)
through (l), inclusive, of Section 8.1 occurs and is continuing, the holder of
any Note may exercise any right, power or remedy permitted to holders of the
Notes by law, and shall have, in particular, without limiting the generality of
the foregoing, the right to declare the entire principal and all interest
accrued on all Notes held by such holder then outstanding to be, and such Notes
shall thereupon become immediately due and payable, without any presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived. In addition to the foregoing rights, if any Event of Default described
in subparagraph (a) of Section 8.1 occurs and is continuing, the holder of any
Note may declare the entire principal and all interest accrued on all the Notes
then outstanding to be, and such Notes shall thereupon become immediately due
and payable, without any presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived, and such holder may exercise
any and all other rights, remedies and powers permitted to it by law. When any
Event of Default described in subparagraphs (g) (h), or (i) of
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Section 8.1 has occurred and is continuing, then all outstanding Notes shall
immediately become due and payable without present-ment, demand or notice of
any kind.
(b) Upon a Note or the Notes becoming due and payable as a
result of any Event of Default as set forth in Section 8.2(a), the Company
shall forthwith pay to the holder or holders of such Notes the entire principal
and interest accrued on such Note or Notes, as the case may be. The holder of
any Note may pursue any available remedy to collect the payment of principal of
or interest on the Notes held by it or to enforce the performance of any
provision of such Notes or this Agreement. No course of dealings on the part
of any holder of a Note nor any delay or failure on the part of any holder of a
Note to exercise any right shall operate as a waiver of such right or otherwise
prejudice such holder's rights, powers and remedies. The Company further
agrees, to the extent permitted by law, to pay to the holder or holders of the
Notes all costs and expenses incurred by any holder of the Notes in the
collection of any Notes upon default hereunder or thereon, including all
reasonable attorneys' fees, costs and expenses such holder's or holders'
attorneys for all services rendered in connection therewith.
8.3. ANNULMENT OF ACCELERATION OF NOTES.
The holder of any Note may, by written instrument filed with the
Company and the Paying Agent, rescind and annul any declaration of an Event of
Default made by it and the consequences thereof with respect to any Notes held
by it, if all existing Events of Default have been cured or waived by it. No
holder of Notes may waive the non-payment of Notes held by another Person, nor
may any holders of Notes waive on behalf of other holders the Events of Default
specified in Section 8.1.
SECTION 9. INTERPRETATION OF THIS AGREEMENT.
9.1. TERMS DEFINED.
As used in this Agreement, the following terms have the following
respective meanings:
AMEX. The term "AMEX" is defined in Section 2.6.
AFFILIATE. The term "Affiliate" shall mean a Person (other than a
Subsidiary) (a) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, the Company,
(b) which beneficially owns or holds 10% or more of any class of the Voting
Stock of the Company
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or (c) 10% or more of the Voting Stock (or in the case of a Person which is not
a corporation, 10% or more of the equity interest) of which is beneficially
owned or held by the Company or a Sub-sidiary. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
AGREEMENT. The term "Agreement" shall mean this Note Purchase
Agreement, and "Agreements" shall mean all of the Note Purchase Agreements
providing for the sale of the Notes.
ASSET VALUE COVERAGE RATIO. The term "Asset Value Coverage Ratio"
is defined in Section 7.4.
AUTHORIZED NEWSPAPERS. The term "Authorized Newspapers" shall mean
the Financial Times of London, England and the Neue Zurcher Zeitung of Zurich,
Switzerland. If either such newspaper shall cease to be published, the Company
or the Paying Agent shall substitute for it another newspaper in London or
Zurich, as the case may be, customarily published at least once a day for at
least 5 days in each calendar week, of general circulation. If, because of
temporary suspension of publication or general circulation of either such
newspaper or for any other reason, it is impossible or, in the opinion of the
Company or the Paying Agent, impracticable to make any publication of any
notice required by this Agreement in the manner herein provided, such
publication or other notice in lieu thereof which is made by the Company or the
Paying Agent in the exercise of its reasonable discretion shall constitute a
sufficient publication of such notice.
BUSINESS DAY. The term "Business Day" shall mean a day upon which
business is transacted by banks in Dallas, Texas and in Zurich, Switzerland.
CAPITALIZED LEASE. The term "Capitalized Lease" shall mean any
lease of any Person which is required to be capitalized on the balance sheet of
such Person in accordance with generally accepted accounting principles in the
United States.
CAPITALIZED LEASE OBLIGATIONS. The term "Capitalized Lease
Obligations" shall mean as to any Person, the capitalized amount of all
obligations of such Person or any of its consolidated Subsidiaries under
Capitalized Leases, as determined in accordance with generally accepted
accounting principles in the United States.
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CEDEL. The term "Cedel" is defined in Section 1.1(a).
CERTIFICATE OF INCORPORATION. The term "Certificate of
Incorporation" is defined in Section 2.3(a)(iii).
CLOSING. The term "Closing" is defined in Section 1.2.
CLOSING DATE. The term "Closing Date" is defined in Section 1.2.
CLOSING PRICE. The term "Closing Price" shall mean, on any Trading
Day with respect to the per share price of Common Stock, the last reported
sales price regular way or, in case no such reported sale takes place on such
Trading Day, the average of the reported closing bid and asked prices regular
way, in either case on the AMEX or, if the Common Stock is not listed or
admitted to trading on the AMEX, on the principal national securities exchange
on which the Common Stock is listed or admitted to trading, or if not listed or
admitted to trading on any national securities exchange, on the National
Association of Securities Dealers Automated Quotations System, National Market
System or, if the Common Stock is not listed or admitted to trading on any
national securities exchange or quoted on such National Market System, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any National Association of Securities Dealers, Inc. member firm
that is selected from time to time by the Company for that purpose.
CODE. The term "Code" shall mean the Internal Revenue Code of
1986, as it has been and as it may be amended from time to time, together with
all rules and regulations promulgated with respect thereto.
COMMENCEMENT DATE. The term "Commencement Date" is defined in
Section 10.4(g).
COMPANY. The term "Company' is defined in the preamble to this
Agreement.
COMMON STOCK. The term "Common Stock" shall mean the Common Stock
of the Company, par value $.01 per share.
CONVERSION AGENT. The term "Conversion Agent" is defined in
Section 1.1(h).
CONVERSION DATE. The term "Conversion Date" is defined in Section
10.2.
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CONVERSION PRICE. The term "Conversion Price" is defined in
Section 10.1.
CONVERSION SHARES. The term "Conversion Shares" is defined in
Section 1.1(a).
CURRENT EVENT. The term "Current Event" is defined in Section
10.4(g).
DEFAULT. The term "Default" shall mean an event or condition the
occurrence of which would, with the lapse of time or the giving of notice or
both, become an Event of Default.
DEFINITIVE NOTE. The term "Definitive Note" is defined in Section
1.1(i).
EUROCLEAR. The term "Euroclear" is defined in Section 1.1(a).
EVENT OF DEFAULT. The term "Event of Default" shall mean the
occurrence of any of those events set forth in Section 8.1.
EXPIRATION TIME. The term "Expiration Time" is defined in Section
10.4(f).
GLOBAL NOTE. The term "Global Note" is defined in Section 1.1(a).
GOOD TITLE. The term "Good Title" shall mean, with respect to Oil
and Gas Properties, good and defensible title which is (i) evidenced by an
instrument or instruments filed of record in accordance with the conveyance and
recording laws of the applicable jurisdiction and is sufficient against
competing claims of bona fide purchasers for value without notice and (ii) free
and clear of all Liens, other than such Liens that a reasonably prudent
purchaser of Oil and Gas Properties would accept in light of the value of the
Oil and Gas Property affected, the improbability of assertion of the defect or
irregularity or the degree of difficulty or the cost of performing curative
work.
GUARANTY. The term "Guaranty" shall mean all obligations of any
Person (other than endorsements in the ordinary course of business of
negotiable instruments for deposits or collection) of such Person guaranteeing
or in effect, guaranteeing any Indebted-ness, dividend or other obligation, of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including without limitation all obligations incurred through an
agreement, contingent or otherwise, by such Person: (a) to
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purchase such Indebtedness or obligation or any Property or assets constituting
security therefor, (b) to advance or supply funds (1) for the purchase or
payment of such Indebtedness or obli-gation, or (2) to enable the recipient of
such funds to maintain certain financial conditions (e.g. agreed amount of
working capital) under loan or similar documents, or (c) to lease Property or
to purchase securities or other Property or services primarily for the purpose
of assuring the owner of such Indebtedness or obligation of the ability of the
primary obligor to make payment of the Indebtedness or obligation, or (d)
otherwise to assure the owner of the Indebtedness or obligation of the primary
obligor against loss in respect thereof. For the purposes of all compu-tations
made under this Agreement, a Guaranty in respect of any Indebtedness shall be
deemed to be Indebtedness equal to the principal amount and accrued interest of
such Indebtedness which has been guaranteed, and a Guaranty in respect of any
other obligation or liability or any dividend shall be deemed to be
Indebtedness equal to the maximum aggregate amount of such obligation,
liability or dividend.
HYDROCARBON INTERESTS. The term "Hydrocarbon Interests" shall mean
all rights, titles, interests and estates in and to oil and gas leases, oil,
gas and mineral leases, oil and gas conces-sion agreements, production sharing
and similar agreements, or other liquid or gaseous hydrocarbon leases, mineral
fee interests, overriding royalty and royalty interests, net profit interests
and production payment interests, including any reserved or residual interests
of whatever nature and without regard to whether such rights cover or exist
with respect to lands located within or without the United States.
HYDROCARBONS. The term "Hydrocarbons" shall mean oil, gas,
casinghead gas, drip gasoline, natural gasoline, condensate, distillate, liquid
hydrocarbons, gaseous hydrocarbons and all products refined therefrom and all
other minerals.
INDEBTEDNESS. The term "Indebtedness" of any Person shall mean and
include all obligations of such Person which in accordance with generally
accepted accounting principles in the United States shall be classified upon a
balance sheet of such Person as liabilities of such Person, and in any event
shall include all (a) obligations of such Person for borrowed money or which
have been incurred in connection with the acquisition of Property (including,
without limitation, all obligations of such Person evidenced by any debenture,
bond, note, commercial paper or other similar security but excluding, in any
case, obligations arising from the endorsement in the ordinary course of
business of negotiable instruments for deposit or collection), (b) obligations
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secured by any Lien existing on Property owned by such Person, even though such
Person has not assumed or become liable for the payment of such obligations,
(c) obligations created or arising under any conditional sale or other title
retention agreement with respect to Property acquired by such Person,
notwithstanding the fact that the rights and remedies of the seller, lender or
lessor under such agreement in the event of default are limited to repossession
or sale of such Property, (d) Capitalized Lease Obligations, (e) all
Guaranties, whether or not reflected in the balance sheet of such Person and
(f) all reimbursement and other payment obligations (whether contingent,
matured or otherwise) of such Person in respect of any acceptance or
documentary credit.
LIEN. The term "Lien" shall mean any interest in Property securing
an obligation owed to, or a claim by, a Person other than the owner of the
Property, whether such interest is based on the common law, statute or
contract, and including but not limited to the security interest lien arising
from a mortgage, encumbrance, pledge, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes. The term "Lien" shall
include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property. For the purposes of this Agreement, the
Company or its Subsidiary shall be deemed to be the owner of any Property which
it has acquired or holds subject to a conditional sale agreement, financing
lease or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes.
MARKETABLE SECURITIES. The term "Marketable Security" shall mean
any "security" (as such term is defined in Section 2(1) of the Securities Act)
of any Person listed, admitted to trading or quoted on the New York Stock
Exchange, the AMEX or other national securities exchange, or on the NASDAQ
National Market System or other quotation system.
MATURITY DATE. The term "Maturity Date" shall mean May 11, 1998.
NOTES. The term "Notes" is defined in Section 1.1(a).
OFFERING MEMORANDUM. The term "Offering Memorandum" is defined in
Section 1.3(a).
OIL AND GAS PROPERTIES. The term "Oil and Gas Properties" shall
mean Hydrocarbon Interests; any Properties now or hereafter pooled or unitized
with Hydrocarbon Interests; all presently existing or future unitization,
pooling agreements and
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declarations of pooled units and the units created thereby (including without
limitation all units created under orders, regulations and rules of any
governmental body or agency having jurisdiction) which may affect all or any
portion of the Hydrocarbon Interests; all operating agreements, contracts and
other agreements which relate to any of the Hydrocarbon Interests or the
production, sale, purchase, exchange or processing of Hydrocarbons from or
attributable to such Hydrocarbon Interests; all Hydrocarbons in and under and
which may be produced and saved or attributable to the Hydrocarbon Interests,
the lands covered thereby and all oil in tanks and all rents, issues, profits,
proceeds, products, revenues and other income from or attributable to the
Hydrocarbon Interests; all tenements, hereditaments, appurtenances and
Properties in anywise appertaining, belonging, affixed or incidental to the
Hydrocarbon Interests, Properties, rights, titles, interests and estates
described or referred to above, including any and all Property, real or
personal, now owned or hereafter acquired and situated upon, used, held for use
or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests (excluding drilling rigs, automotive equipment or
other personal property which may be on such premises for the purpose of
drilling a well or for other similar temporary uses) and including any and all
oil wells, gas wells, injection wells or other wells, buildings, structures,
fuel separators, liquid extraction plants, plant compressors, pumps, pumping
units, field gathering systems, tanks and tank batteries, fixtures, valves,
fittings, machinery and parts, engines, boilers, meters, apparatus, equipment,
appliances, tools, implements, cables, wires, towers, casing, tubing and rods,
surface leases, rights-of-way, easements and servitudes together with all
additions, substitutions, replacement, accessions and attachments to any and
all of the foregoing.
OTHER BORROWINGS. The term "Other Borrowings" is defined in
Section 7.3(c).
OTHER EVENT. The term "Other Event" is defined in Section 10.4(g).
PAYING AGENT. The term "Paying Agent" shall mean Banca del
Gottardo and any additional or successor paying agent or agents appointed
pursuant to the Note Purchase Agreements.
PDP RESERVES. The term "PDP Reserves" shall mean "Proved Developed
Oil and Gas Reserves" located in the United States as set forth in the
Independent Reserve Report defined in Section 1.6.
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PERSON. The term "Person" shall mean an individual, partnership,
corporation, trust or unincorporated organization, and a government or agency
or political subdivision thereof.
PLACEMENT AGENT. The term "Placement Agent" shall mean Rauscher
Pierce & Clark Inc.
PROPERTY. The term "Property" shall mean any interest in any kind
of property or asset, whether real, personal or mixed, or tangible or
intangible, and including any Oil and Gas Property.
PURCHASE PRICE. The term "Purchase Price" is defined in Section
1.2.
PURCHASED SHARES. The term "Purchased Shares" is defined in
Section 10.4(f).
PURCHASERS. The term "Purchasers" is defined in Section 1.1(b).
REFERENCE DATE. The term "Reference Date" is defined in Section
10.4(f).
REGULATION S. The term "Regulation S" means Regulation S under the
Securities Act.
RESTRICTED PERIOD. The term "Restricted Period" is defined in
Section 1.1(a).
SEC VALUE. The term "SEC Value" shall mean the Standardized
Measure of Discounted Future Net Cash Flows relating to proved oil and gas
reserves as calculated under the Independent Reserve Report defined in Section
1.6.
SECURITIES ACT. The term "Securities Act" is defined in Section
1.3(a).
SUBORDINATED OBLIGATION. The term "Subordinated Obligation" shall
mean on any date any Indebtedness of the Company outstanding on such date which
is contractually subordinate or junior in right of payment to the Notes.
Notwithstanding the immediately preceding sentence, any shares of preferred
stock issued by any Subsidiary shall, for purposes of this definition, be
treated as Subordinated Indebtedness.
SUBSIDIARY. The term "Subsidiary" shall mean any corporation of
which at least a majority of the outstanding shares of stock having by the
terms thereof ordinary voting power to
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elect a majority of the board of directors of such corporation (irrespective of
whether or not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
the Company or one or more of the Subsidiaries or by the Company and one or
more of the Subsidiaries.
TRADING DAY. "Trading Day" shall mean each Monday, Tuesday,
Wednesday, Thursday and Friday, other than any day on which securities are not
traded on the applicable securities exchange or in the applicable securities
market.
U.S. PERSONS. The term "U.S. Persons" shall have the meaning set
forth in Regulation S under the Securities Act.
9.2. GOVERNING LAW.
This Agreement, the Global Note, the Definitive Notes and all other
documents contemplated hereby shall be deemed to be contracts made under and
shall be construed in accordance with and governed by the laws of the State of
Delaware (without reference to the conflicts of laws principles thereof) and
the laws of the United States of America.
9.3. SEVERABILITY.
If any provision of this Agreement is held to be invalid or
unenforceable by any judgment of a tribunal of competent juris-diction, the
remainder of this Agreement shall not be affected by such judgment, and the
Agreement shall be carried out as nearly as possible according to its original
terms and intent.
SECTION 10. CONVERSION OF NOTES
10.1. CONVERSION RIGHT AND CONVERSION PRICE.
Subject to and upon compliance with the provisions of this Section
10, at the option of the holder thereof, at any time from and after the first
Business Day following termination of the Restricted Period, any Note or any
portion of the principal amount thereof which is $50,000 or an integral
multiple of $50,000 may be converted at the principal amount thereof, or of
such portion thereof, into fully paid and nonassessable Conversion Shares at
the Conversion Price.
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The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "Conversion Price") shall be initially a price
per share of Common Stock equal to the average of the daily low and Closing
Prices for the three (3) consecutive Trading Days prior to the date of the
Final Offering Memorandum dated April 27, 1995. The Conversion Price shall be
adjusted in certain instances as provided in Section 10.4.
In case the Company shall, at any time prior to the Maturity Date,
by dividend or otherwise, declare or make a distribution on its Common Stock
referred to in paragraph (c) or (d) of Section 10.4 (including, without
limitation, dividends or distributions referred to in the last sentence of
paragraph (d) of Section 10.4), the holder of each Note, upon the conversion
thereof pursuant to this Section 10 subsequent to the close of business on the
date fixed for the determination of stockholders entitled to receive such
distribution and prior to the effective-ness of the Conversion Price adjustment
in respect of such distribution pursuant to paragraph (c) or (d) of Section
10.4, shall also be entitled to receive for each share of Common Stock into
which such Note is converted, the portion of the evidences of indebtedness,
shares of capital stock, securities, cash and assets so distributed applicable
to one share of Common Stock, provided that, at the election of the Company
(whose election shall be evidenced by a resolution of the Company's Board of
Directors) with respect to all holders so converting, the Company may, in lieu
of distributing to such holder any portion of such distribution not consisting
of cash or securities of the Company, pay such holder an amount in cash equal
to the fair market value thereof (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a
resolution of the Company's Board of Directors). If any conversion of a Note
described in the immediately preceding sentence occurs prior to the payment
date for a distribution to holders of Common Stock which the holder of the Note
so converted is entitled to receive in accordance with the immediately
preceding sentence, the Company may elect (such election to be evidenced by a
resolution of the Company's Board of Directors) to distribute to such holder a
due bill for the evidences of indebtedness, shares of capital stock,
securities, cash or assets to which such holder is so entitled, provided that
such due bill (i) meets any applicable requirements of the principal national
securities exchange or other market on which the Common Stock is then traded
and (ii) requires payment or delivery of such evidences of indebtedness, shares
of capital stock, securities, cash or assets no later than the date of payment
or delivery thereof to holders of Common Stock receiving such distribution.
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10.2. EXERCISE OF CONVERSION RIGHT.
In order to exercise the conversion right, the holder of any Note
to be converted shall provide notice to the Paying Agent and the Conversion
Agent that it intends to exercise its conversion right and shall surrender such
Definitive Note or Notes and all remaining interest coupons, including the one
for the next due interest payment, to the Conversion Agent at its offices
located at Viale S. Franscini 8, CH-6900, Lugano, Switzerland, or such other
office of any Conversion Agent as published in an Authorized Newspaper from
time to time, accompanied by written notice (as set forth in Exhibit G hereto)
to the Paying Agent and the Conversion Agent at their respective offices that
the holder elects to convert such Note.
Definitive Notes shall be deemed to have been converted immediately
prior to the close of business on the day on which the Conversion Agent
receives notice of the holder's intention to exercise its conversion right with
respect to such Notes in accordance with the foregoing provisions (the
"Conversion Date"), and at such time, except as provided in this Section 10.2
below, the rights of the holders of such Notes as holders shall cease, and the
Person or Persons entitled to receive the Common Stock issuable upon conversion
shall be treated for all purposes as the record holder or holders of such
Common Stock at such time. As promptly as practicable on or after the
Conversion Date, the Company shall issue and shall deliver through the
Conversion Agent at the Conversion Agent's office or agency a certificate or
certificates for the number of full shares of Common Stock issuable upon such
conversion, together with payment in lieu of any fraction of a share as
provided in Section 10.3. The Conversion Agent shall deliver the share
certificate or certificates in accordance with the instructions set forth in
the notice of exercise of conversion rights.
If the Conversion Date is a date other than an Interest
Payment Date the Company shall not pay and the holder shall not be entitled to
receive any interest that had accrued on the Notes from the last Interest
Payment Date prior to the Conversion Date.
No holder of Definitive Notes will be entitled upon conversion
thereof to any payment or adjustment on account of interest on the Notes or
dividends on the shares of Common Stock issued in connection therewith.
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10.3. FRACTIONS OF SHARES.
No fractional shares of Common Stock shall be issued upon
conversion of Notes. If more than one Note shall be surrendered for conversion
at one time by the same holder, the number of full shares which shall be
issuable upon conversion thereof shall be computed on the basis of the
aggregate principal amount of the Notes (or specified portions thereof) so
surrendered. Instead of any fractional share of Common Stock which would
otherwise be issuable upon conversion of any Note or Notes (or specified
portions thereof), the Company, at the time the Conversion Shares are
delivered, shall pay, or cause to be paid through the Paying Agent, a cash
adjustment in respect of such fraction in an amount equal to the same fraction
of the Closing Price per share of the Common Stock at the close of business on
the Conversion Date (or, if such day is not a Trading Day, on the Trading Day
immediately preceding such day).
10.4. ADJUSTMENT OF CONVERSION PRICE.
(a) Dividends or Distributions of Common Stock. In case
the Company shall pay or make a dividend or other distribution on its Common
Stock exclusively in Common Stock or shall pay or make a dividend or other
distribution on any other class of capital stock of the Company which dividend
or distribution includes Common Stock, the Conversion Price in effect at the
opening of business on the day next following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such Conversion Price by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such determination
and the denominator shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution, such
reduction to become effective immediately after the opening of business on the
day next following the date fixed for such determination. For the purposes of
this paragraph (a), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company but
shall include shares issuable in respect of scrip certificates issued in lieu
of fractions of shares of Common Stock. The Company shall not pay any dividend
or make any distribution on shares of Common Stock held in the treasury of the
Company.
(b) Dividends or Distributions of Rights, Warrants or
Options to Purchase Common Stock. In case the Company shall pay or make a
dividend or other distribution on its Common Stock consisting exclusively of,
or shall otherwise issue to all holders
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of its Common Stock, rights, warrants or options entitling the holders thereof
to subscribe for or purchase shares of Common Stock at a price per share less
than the current market price per share (determined as provided in paragraph
(g) of this Section 10.4) of the Common Stock on the date fixed for the
determination of stockholders entitled to receive such rights, warrants or
options, the Conversion Price in effect at the opening of business on the day
following the date fixed for such determination shall be reduced by multiplying
such Conversion Price by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business on the date
fixed for such determination plus the number of shares of Common Stock which
the aggregate of the offering price of the total number of shares of Common
Stock so offered for subscription or purchase would purchase at such current
market price and the denominator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such determination
plus the number of shares of Common Stock so offered for subscription or
purchase, outstanding at the close of business on the date fixed for such
reduction to become effective immediately after the opening of business on the
day following the date fixed for such deter-mination. For the purposes of this
paragraph (b), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company but shall include
shares issuable in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock. The Company shall not issue any rights, warrants or
options in respect of shares of Common Stock held in the treasury of the
Company.
(c) Dividends or Distributions in Cash. In case the
Company shall, by dividend or otherwise, make a distribution to all holders of
its Common Stock exclusively in cash in an aggregate amount that, together with
(i) the aggregate amount of any other distributions to all holders of its
Common Stock made exclusively in cash within the 12 months preceding the date
of payment of such distribution and in respect of which no Conversion Price
adjustment pursuant to this paragraph (c) has been made and (ii) the aggregate
of any cash plus the fair market value (as determined in good faith by the
Board of Directors, whose determination shall be conclusive and described in a
resolution of the Company's Board of Directors), as of the expiration of the
tender or exchange offer referred to below, of consideration payable in respect
of any tender or exchange offer by the Company or a Subsidiary for all or any
portion of the Common Stock concluded within the 12 months preceding the date
of payment of such distribution and in respect of which no Conversion Price
adjustment pursuant to paragraph (f) of this Section 10.4 has been made,
exceeds 5% of the product of the current market price per
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share (determined as provided in paragraph (g) of this Section 10.4) of the
Common Stock on the date fixed for stockholders entitled to receive such
distribution times the number of shares of Common Stock outstanding on such
date, the Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Conversion Price in effect immediately
prior to the effectiveness of the Conversion Price reduction contemplated by
this paragraph (c) by a fraction of which the numerator shall be the current
market price per share (determined as provided in paragraph (g) of this Section
10.4) of the Common Stock on the date of such effectiveness less the amount of
cash so distributed applicable to one share of Common Stock and the denominator
shall be such current market price per share of the Common Stock, such
reduction to become effective immediately prior to the opening of business on
the day following the date fixed for the payment of such distribution.
(d) All Other Distributions or Dividends. Subject to the
last sentence of this paragraph (d), in case the Company shall, by dividend or
otherwise, distribute to all holders of its Common Stock evidences of its
indebtedness, shares of any class of capital stock, securities, cash or
property (excluding any rights, warrants or options referred to in paragraph
(b) of this Section 10.4, any dividend or distribution paid exclusively in cash
and any dividend or distribution referred to in paragraph (a) of this Section
10.4), the Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Conversion Price in effect immediately
prior to the effectiveness of the Conversion Price reduction contemplated by
this paragraph (d) by a fraction of which the numerator shall be the current
market price per share (determined as provided in paragraph (g) of this
Section) of the Common Stock on the date of such effective-ness less the fair
market value (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the
Company's Board of Directors and shall, in the case of securities being
distributed for which prior thereto there is an actual or when issued trading
market, be no less than the value determined by reference to the average of the
Closing Prices in such market over the period specified in the succeeding
sentence), on the date of such effectiveness, of the portion of the evidences
of indebtedness, shares of capital stock, securities, cash and property so
distributed applicable to one share of Common Stock and the denominator shall
be such current market price per share of the Common Stock, such reduction to
become effective immediately prior to the opening of business on the day next
following the date fixed for the payment of such distribution (such date to
being referred to as the "Reference Date"). If the Board of Directors
determines the fair market
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value of any distribution for purposes of this paragraph (d) by reference to
the actual or when issued trading market for any securities comprising such
distribution, it must in doing so consider the prices in such market over the
same period used in computing the current market price per share pursuant to
paragraph (g) of this Section. For purposes of this paragraph (d), any
dividend or distribution that includes shares of Common Stock or rights,
warrants or options to subscribe for or purchase shares of Common Stock shall
be deemed instead to be (i) a dividend or distribution of the evidences of
indebtedness, cash, property, shares of capital stock or securities other than
such shares of Common Stock or such rights, warrants or options (making any
Conversion Price reduction required by this paragraph (d)) immediately followed
by (ii) a dividend or distribution of such shares of Common Stock or such
rights, warrants or options (making any further Conversion Price reduction
required by paragraph (a) or (b) of this Section 10.4), except (i) the
Reference Date of such dividend or distribution as defined in this paragraph
(d) shall be substituted as "the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution", "the
date fixed for the determination of stock-holders entitled to receive such
rights, warrants or options" and "the date fixed for such determination" within
the meaning of paragraphs (a) and (b) of this Section 10.4 and (ii) any shares
of Common Stock included in such dividend or distribution shall not be deemed
"outstanding at the close of business on the date fixed for such determination"
within the meaning of paragraph (a) of this Section 10.4).
(e) Subdivision of Common Stock. In case outstanding
shares of Common Stock shall be subdivided into a greater number of shares of
Common Stock, the Conversion Price in effect at the opening of business on the
day following the day upon which such subdivision becomes effective shall be
proportionately reduced, and, conversely, in case outstanding shares of Common
Stock shall each be combined into a smaller number of shares of Common Stock,
the Conversion Price in effect at the opening of business on the day following
the day upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become effective
immediately after the opening of business on the day following the day upon
which such subdivision or combination becomes effective.
(f) Tender or Exchange Offer for Common Stock. In case a
tender or exchange offer made by the Company or any Subsidiary for all or any
portion of the Common Stock shall expire and such tender or exchange offer
shall involve an aggregate consideration having a fair market value (as
determined in good faith by the
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Board of Directors, whose determination shall be conclusive and described in a
resolution of the Company's Board of Directors) at the last time (the
"Expiration Time") tenders or exchanges may be made pursuant to such tender or
exchange offer (as it may be amended) that, together with (i) the aggregate of
the cash plus the fair market value (as determined in good faith by the Board
of Directors, whose determination shall be conclusive and described in a
resolution of the Company's Board of Directors), as of the expiration of the
other tender or exchange offer referred to below, of consideration payable in
respect of any other tender or exchange offer by the Company or a Subsidiary
for all or any portion of the Common Stock concluded within the preceding 12
months and in respect of which no Conversion Price adjustment pursuant to this
paragraph (f) has been made and (ii) the aggregate amount of any distributions
to all holders of the Common Stock made exclusively in cash within the
preceding 12 months and in respect of which no Conversion Price adjustment
pursuant to paragraph (e) of this Section 10.4 has been made, exceeds 5% of the
product of the current market price per share (determined as provided in
paragraph (g) of this Section 10.4) of the Common Stock on the Expiration Time
times the number of shares of Common Stock outstanding (including any tendered
shares) on the Expiration Time, the Conversion Price shall be reduced (but not
increased) so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the Expiration Time by a
fraction of which the numerator shall be (i) the product of the current market
price per share (determined as provided in paragraph (g) of this Section 10.4)
of the Common Stock at the Expiration Time times the number of shares of Common
Stock outstanding (including any tendered or exchanged shares) at the
Expiration Time minus (ii) the fair market value (determined as aforesaid) of
the aggregate consideration payable to stockholders based on the acceptance (up
to any maximum specified in the terms of the tender or exchange offer) of all
shares validly tendered or exchanged and not withdrawn as of the Expiration
Time (the shares deemed so accepted, up to any such maximum, being referred to
as the "Purchased Shares") and the denominator shall be the product of (i) such
current market price per share at the Expiration Time times (ii) such number of
outstanding shares at the Expiration Time less the number of Purchased Shares,
such reduction to become effective immediately prior to the opening of business
on the day following the Expiration Time.
(g) Determination of Current Market Price. For the purpose
of any computation under this paragraph and paragraphs (b), (d) and (e) of this
Section 10.4, the current market price per share of Common Stock on any date in
question shall be deemed
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to be the average of the daily Closing Prices for the 10 consecutive Trading
Days before the date in question; provided, however, that (i) if the "ex" date
(as hereinafter defined) for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Conversion Price
pursuant to paragraph (a), (b), (c), (d), (e) or (f) above ("Other Event")
occurs on or after the tenth Trading Day prior to the date in question and
prior to the "ex" date for the issuance or distribution requiring such
computation (the "Current Event"), the Closing Price for each Trading Day prior
to the "ex" date for such Other Event shall be adjusted by multiplying such
Closing Price by the same fraction by which the Conversion Price is so required
to be adjusted as a result of such Other Event, (ii) if the "ex" date for any
Other Event occurs after the "ex" date for the Current Event and on or prior to
the date in question, the Closing Price for each Trading Day on and after the
"ex" date for such Other Event shall be adjusted by multiplying such Closing
Price by the reciprocal of the fraction by which the Conversion Price is so
required to be adjusted as a result of such Other Event, (iii) if the "ex" date
for any Other Event occurs on the "ex" date for the Current Event, one of those
events shall be deemed for purposes of clauses (i) and (ii) of this proviso to
have an "ex" date occurring prior to the "ex" date for the other event, and
(iv) if the "ex" date for the Current Event is on or prior to the date in
question, after taking into account any adjustment required pursuant to clause
(ii) of this proviso, the Closing Price for each Trading Day on or after such
"ex" date shall be adjusted by adding thereto the amount of any cash and the
fair market value on the date in question (as determined in good faith by the
Board of Directors in a manner consistent with any determination of such value
for purposes of paragraph (c) or (d) of this Section 10.4, whose determination
shall be conclusive and described in a resolution of the Company's Board of
Directors) of the portion of the rights, warrants, options, evidences of
indebtedness, shares of capital stock, securities, cash or property being
distributed applicable to one share of Common Stock. For the purpose of any
computation under paragraph (f) of this Section 10.4, the current market price
per share of Common Stock on any date in question shall be deemed to be the
average of the daily Closing Prices for the 10 consecutive Trading Days
selected by the Company commencing on or after the latest (the "Commencement
Date") of (i) the date 20 Trading Days before the date in question, (ii) the
date of commencement of the tender or exchange offer requiring such computation
and (iii) the date of the last amendment, if any, of such tender or exchange
offer involving a change in the maximum number of shares for which tenders are
sought or a change in the consideration offered, and ending not later than the
date of the Expiration Time of such tender or exchange offer (or, if such
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Expiration Time occurs before the close of trading on a Trading Day, not later
than the Trading Day immediately preceding the date of such Expiration Time);
provided, however, that if the "ex" date for any Other Event (other than the
tender or exchange offer requiring such computation) occurs on or after the
Commencement Date and on or prior to the date of the Expiration Time for the
tender or exchange offer requiring such computation, the Closing Price for each
Trading Day prior to the "ex" date for such Other Event shall be adjusted by
multiplying such Closing Price by the same fraction by which the Conversion
Price is so required to be adjusted as a result of such other event. For
purposes of this paragraph, the term "ex" date, (i) when used with respect to
any issuance or distribution, means the first date on which the Common Stock
trades regular way on the relevant exchange or in the relevant market from
which the Closing Price was obtained without the right to receive such issuance
or distribution, (ii) when used with respect to any subdivision or combination
of shares of Common Stock, means the first date on which the Common Stock
trades regular way on such exchange or in such market after the time at which
such subdivision or combination becomes effective, and (iii) when used with
respect to any tender or exchange offer means the first date on which the
Common Stock trades regular way on such exchange or in such market after the
Expiration Time of such tender or exchange offer.
(h) Further Reductions for Federal Income Tax. The Company
may make such reductions in the Conversion Price, in addition to those required
by paragraphs (a), (b), (c), (d), (e) and (f) of this Section 10, as it
considers to be advisable in order that any event treated for Federal income
tax purposes as a dividend of stock or stock rights shall not be taxable to the
recipients.
(i) Adjustments to be Carried Forward. No adjustment in
the Conversion Price shall be required unless such adjustment would require an
increase or decrease of at least 2% in the Conversion Price; provided, however,
that any adjustments which by reason of this paragraph (i) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment.
10.5. NOTICE OF ADJUSTMENTS OF CONVERSION PRICE.
Whenever the Conversion Price is adjusted as herein provided the
Company shall compute the adjusted Conversion Price in accordance with Section
10.4 and shall prepare a certificate signed by the chief financial officer of
the Company setting forth the adjusted Conversion Price and showing in
reasonable detail the
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facts upon which such adjustment is based, and such certificate shall forthwith
be delivered to the Paying Agent and the Conversion Agent.
10.6. NOTICE OF CERTAIN CORPORATE ACTION.
In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable (i) other-wise than
exclusively in cash or (ii) exclusively in cash in an amount that
would require a Conversion Price adjust-ment pursuant to paragraph
(c) of Section 10.4; or
(b) the Company shall authorize the granting to the
holders of its Common Stock of rights, warrants or options to
subscribe for or purchase any shares of capital stock of any class
or of any other rights (excluding employee stock options); or
(c) of any reclassification of the Common Stock of the
Company (other than a subdivision or combination of its outstanding
shares of Common Stock), or of any consolida-tion or merger to
which the Company is a party and for which approval of any
stockholders of the Company is required, or of the sale or transfer
of all or sub-stantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) the Company or any Subsidiary of the Company shall
commence a tender or exchange offer for all or a portion of the
Company's outstanding shares of Common Stock (or shall amend any
such tender or exchange offer);
then the Company shall cause to be mailed to the Placement Agent, the Paying
Agent, the Conversion Agent and all holders of Notes at their last addresses as
they shall appear in the records of the Paying Agent at least 20 days prior to
the applicable record, effective or expiration date hereinafter specified, a
notice stating (i) the date on which a record is to be taken for the purpose of
such dividend, distribution or granting of rights, warrants or options, or, if
a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution, rights, warrants or
options are to be determined, or (ii) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or
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winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property deliverable
upon such reclass-ification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up, or (iii) the date on which such tender
offer commenced, the date on which such tender offer is scheduled to expire
unless extended, the consideration offered and the other material terms thereof
(or the material terms of any amendment thereto).
10.7. COMPANY TO RESERVE COMMON STOCK.
The Company shall at all times reserve and keep available, free
from pre-emptive or similar rights, out of its authorized but unissued Common
Stock, solely for the purpose of effecting the conversion of Notes, the whole
number of shares of Common Stock then issuable upon the conversion in full of
all outstanding Notes.
10.8. TAXES ON CONVERSIONS.
The Company will pay any and all taxes that may be payable in
respect of the issue or delivery of shares of Common Stock on conversion of
Notes pursuant hereto. The Company shall not, however, be required to pay any
tax which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that of the holder of
the Notes to be converted, and no such issue or delivery shall be made unless
and until the Person requesting such issue has paid to the Company the amount
of any such tax, or has established to the satisfaction of the Company that
such tax has been paid.
10.9. CANCELLATION OF CONVERTED DEFINITIVE NOTES.
All Definitive Notes delivered for conversion to the Conversion
Agent shall be canceled by the Company, and shall not under any circumstances
be reissued.
10.10. PROVISIONS IN CASE OF RECLASSIFICATION CONSOLIDATION, MERGER OR
SALE OF ASSETS.
In the event that the Company shall be a party to any transaction
(including without limitation any (i) recapitalization or reclassification of
the Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination of the Common Stock), (ii) any consolidation of the Company with,
or
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merger of the Company into, any other person, any merger of another person into
the Company (other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company), (iii) any sale or transfer of all or substantially all of the
assets of the Company, or (iv) any compulsory share exchange) pursuant to which
the Common Stock is converted into the right to receive other securities, cash
or other property, then lawful provision shall be made as part of the terms of
such transaction whereby the holder of each Note then outstanding shall have
the right thereafter to convert such Note only into the kind of common stock
receivable upon such transaction by a holder of Common Stock (at an adjusted
Conversion Price equal to (a) the Conversion Price determined pursuant to
Section 10.4 as though all such securities, cash or property (other than common
stock) had been distributed in a dividend covered by paragraph (d) of Section
10.4 with an "ex" date on the date of such transaction divided by (b) the
number of shares (or fraction thereof) of common stock receivable upon such
transaction in respect of each share of Common Stock). The Person formed by
such consolidation or resulting from such merger or which acquired such assets
or which acquired the Company's shares, as the case may be, shall execute and
deliver to each of the holders an amendment to this Agreement. Such amendment
shall provide for adjustments which, for events subsequent to the effective
date of such amendment, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section 10 and shall provide for the
assumption by such other Person, if any, of the Company's obligations under
this Agreement and the Notes. The above provisions of this Section 10.10 shall
similarly apply to successive transactions of the foregoing type.
10.11. REQUIRED CONVERSION.
At the option of the Company, if for any period of 30 consecutive
days the Closing Price for each Trading Day during such period shall have
equalled or exceeded 140% of the Conversion Price, the Company, by notice to
the holders of all of the Definitive Notes may at any time after the second
semi-annual interest payment has been made by the Company require such holders
to convert all of such Notes otherwise pursuant to the terms of this Section
10. In such case, the Company shall (i) deliver to the Paying Agent for the
benefit of the holders and to the Conversion Agent a notice in the form of
Exhibit H hereto and (ii) provide notice by publication as provided in the
paragraph below, each of which notices will set forth a date by which holders
of Definitive Notes are required to surrender such Notes for conversion. After
such date, the Notes will no longer
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represent Indebtedness of the Company and will no longer accrue interest or
require the Company to make any payment of principal; and the Company's
obligations to make any further payments with respect to the Notes will
terminate (except for this Section 10.11 and the penultimate paragraph of
Section 10.2); and the only rights of a holder of a Note not surrendered for
conversion pursuant to the preceding sentence will be to (i) receive the number
of Conversion Shares such holder would have received had the holder's Note or
Notes been surrendered for conversion as required hereby, (ii) the payment
referred to in the penultimate paragraph of Section 10.2 and (iii) the payment
referred to in Section 10.3.
If the Definitive Notes are to be converted pursuant to the
paragraph above, at least 30 but not more than 60 days before the date by which
holders of such Notes are required to surrender such Notes for conversion, the
Company shall cause to be published once in the Authorized Newspapers a notice
of required conversion. Any notice which is published in the manner herein
provided shall be conclusively presumed to be given and any defect in such
notice to the holder of any Definitive Note designated for required conversion
shall not affect the validity of the proceedings for the required conversion of
any other Definitive Note.
SECTION 11. MISCELLANEOUS.
11.1. NOTICES; PAYMENTS.
(a) All notices and other communications under this
Agreement or under the Notes shall be given or made in writing and telecopied
or mailed by registered airmail, return receipt requested, postage prepaid, air
courier, or delivered personally to the intended recipient,
(1) if to you, at your address and in the
manner provided for notices in Schedule I to this Agreement, marked
for attention as there indicated, or at such other address as you
or any subsequent holder of the Notes may have furnished the
Company or the Paying Agent from time to time in writing,
(2) if to the Company, to the Company,
attention of its President, in care of Coutts & (Cayman) Company
Limited, P.O. Box 707 West Bay Road, Grand Cayman, B.W.I., and in
care of the Paying Agent at the address set forth below, or at such
other address as it may have furnished in writing to the Paying
Agent; or
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(3) if to the Paying Agent or the Conversion
Agent, at Viale S. Franscini 8, CH-6900 Lugano, Switzerland, or at
such other address as any Paying Agent or Conversion Agent shall
furnish to the Company and the holders of the Notes at the time
outstanding.
(b) All such notices and other communications shall be
deemed to have been duly given when transmitted by telecopy, subject to
telephone confirmation of receipt, or when personally delivered or, in the case
of a mailed notice, ten days after being duly deposited in the mails, in each
case given or addressed as aforesaid.
(c) All payments of principal and interest due on any Note
or any other amount due under this Agreement shall be made in strict compliance
with the written payment instructions as such Purchaser or any subsequent
holder of such Note may provide to the Paying Agent in accordance with this
Section 11.1.
11.2. SURVIVAL.
All representations, warranties and covenants made by the Company
herein or in any certificate or other instrument delivered by it or on its
behalf under this Agreement shall be considered to have been relied upon by the
Purchaser and shall survive the delivery of the Notes and the Conversion Shares
regardless of any investigation made by the Purchaser or on the Purchaser's
behalf. All statements in any such certificate or other instrument shall
constitute warranties and representations by the Company hereunder.
11.3. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties and holders of
the Notes. The provisions of this Agreement are for the benefit of, and shall
be binding upon, each successive holder, from time to time, of any of the Notes
issued under this Agree-ment, and shall be enforceable by and against any such
holder, whether or not an express assignment to such holder of rights, or
delegation and assumption or acceptance by a subsequent holder of the Notes or
obligations and limitations, under this Agreement has been made by you or your
successor or assign or any holder of Note(s).
(b) The Company shall not consolidate with or merge into,
or transfer or lease all or substantially all of its Properties or assets to,
any Person unless:
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(i) the Person is a corporation;
(ii) the Person assumes by supplemental
agreement(s) all of the obligations of the Company under the Global
Note, any Definitive Notes and the coupons appertaining thereto,
the conversion right of each holder of Notes and the Note Purchase
Agreements; and
(iii) immediately after the transaction, no Event
of Default exists and is continuing. The surviving, transferee or
lessee corporation shall be the successor Company, but the
predecessor Company in the case of a transfer or lease shall not be
released from the obligation to pay the principal of and interest
on the Notes. The Company shall provide to the Paying Agent a
legal opinion from the Company's counsel as conclusive evidence
that any such consolidation, merger, transfer or lease complies
with the applicable provisions of this Agreement.
11.4. AMENDMENT.
(a) This Agreement may be amended, and the observance of
any term of this Agreement may be waived, with (and only with) the written
consent of the Company and all of the holders of the Notes.
(b) So long as any Notes are outstanding, the Company will
not solicit, request or negotiate for or with respect to any proposed waiver or
amendment of any of the provisions of this Agreement or the Notes unless each
holder of the Notes (irrespective of the amount of Notes then owned by it)
shall be informed thereof by the Company and shall be afforded the opportunity
of considering the same and shall be supplied by the Company with sufficient
information to enable it to make an informed decision with respect thereto.
Executed or true and correct copies of any waiver or consent effected pursuant
to the provisions of this Section 11.4 shall be delivered by the Company to
each holder of outstanding Notes forthwith following the date on which the same
shall have been executed and delivered by the holder or holders of the
outstanding Notes. The Company will not, directly or indirectly, pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any holder of the Notes as consideration for or
as an inducement to the entering into by any holder of the Notes of any waiver
or amendment of any of the terms and provisions of this Agreement unless such
remuneration is concurrently paid on the same terms, ratably to the holders of
all of the Notes the outstanding.
52
<PAGE> 57
(c) Any such amendment or waiver shall apply equally to all
the holders of the Notes and shall be binding upon them and upon each future
holder of any Note and upon the Company whether or not such Note shall have
been marked to indicate such amendment or waiver. No such amendment or waiver
shall extend to or affect any obligation not expressly amended or waived or
impair any right consequent thereon.
11.5. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each
executed counterpart constituting an original but all together only one
Agreement.
11.6. HEADINGS AND TABLE OF CONTENTS.
The headings of the sections of this Agreement and the Table of
Contents are inserted for purposes of convenience only and shall not be
construed to affect the meaning or construction of any of the provisions
hereof.
The execution by you shall constitute a contract between us for the
uses and purposes hereinabove set forth.
Dated as of the day and year first above written.
<TABLE>
<S> <C>
HARKEN ENERGY CORPORATION PURCHASER'S NAME AND ADDRESS
By:
----------------------------------- -----------------------------------------------
Name:
----------------------------------- -----------------------------------------------
Title:
----------------------------------- -----------------------------------------------
Duly Executed By:
-----------------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Amount of Notes Purchased:
U.S.$
------------------------------------------
</TABLE>
53
<PAGE> 1
EXHIBIT 99.3
PRIVATE PLACEMENT
SUBSCRIPTION AGREEMENT
THIS PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT (the "Agreement"), dated
as of the date of acceptance set forth below, by and between Harken Energy
Corporation, a Delaware corporation, with headquarters located at 5605 North
MacArthur, Suite 400, Irving, Texas 75038 (the "Company"), and the undersigned
(the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act"); and
WHEREAS, the Buyer wishes to subscribe for and purchase shares of
Common Stock, $.01 par value (the "Common Stock"), of the Company upon the
terms and subject to the conditions of this Agreement, subject to acceptance of
this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
a. SUBSCRIPTION. The undersigned hereby subscribes
for and agrees to purchase the number of shares of Common Stock set forth on
the signature page of this Agreement. (the "Shares") at the price per Share set
forth on the signature page of this Agreement. The aggregate purchase price
for the Shares shall be as set forth on the signature page hereto and shall be
payable in United States Dollars.
b. SUBSCRIPTION PRICE. The subscription price (the
"Subscription Price") per share of the Common Stock shall be based upon the
average closing market price (the "Average Price") for the Common Stock as
listed on the American Stock Exchange for the twenty (20) trading days
immediately prior to the date on which they Buyer shall execute and submit to
the Company this Subscription Agreement. The Subscription Price per share
shall be determined as the Average Price less a twenty five percent (25%)
discount.
c. FORM OF PAYMENT. The Buyer shall pay the
Subscription Price for the Shares by delivering good funds in United States
Dollars to the escrow agent ("Escrow Agent") identified in the Joint Escrow
Instructions attached hereto as ANNEX I (the "Escrow Agreement"). Such
delivery of funds shall be made against delivery by the Company to the Escrow
Agent of a
<PAGE> 2
Private Placement Subscription Agreement
June 26, 1995
Page 2
certificate for the Shares. Promptly following payment by the Buyer to the
Escrow Agent of the Subscription Price for the Shares, the Company shall
deliver a certificate for the Shares to the Escrow Agent. By signing this
Agreement, the Buyer and the Company each agrees to all of the terms ad
conditions of, and becomes a party to, the Joint Escrow Instructions attached
hereto as ANNEX II, all of the provisions of which are incorporated herein by
this reference as if set forth in full.
d. METHOD OF PAYMENT. Payment of the purchase price
for the Shares shall be made by wire transfer of funds to:
<TABLE>
<S> <C>
Company: Phillip A. Gustlin Clients Trust Account
Bank: City National Bank
Account No.: 009421726
ABA No.: 122-016066
Telephone No.: 1-800-575-5502
</TABLE>
Not later than 4:00 p.m., Dallas, Texas time, on the date which is three
business days after the date on which the Company shall have accepted this
Agreement and returned a signed counterpart of this Agreement to the Buyer, the
Buyer shall deposit with the Escrow Agent the aggregate subscription price for
the Shares.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
a. The Buyer is purchasing the Shares for its own
account for investment only and not with a view towards the public sale or
distribution thereof;
b. The Buyer is an "Accredited Investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(5) or (6);
c. The Buyer has experience in investments of this
nature or has engaged its own advisors for advice and counsel concerning
Buyer's purchase of the Shares.
d. All subsequent offers and sales of the Shares by the
Buyer shall be made pursuant to registration of the Shares under the 1933 Act
or pursuant to a valid exemption from registration;
<PAGE> 3
Private Placement Subscription Agreement
June 26, 1995
Page 3
e. The Buyer understands that the Shares are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representation, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Shares:
f. The Buyer and/or its advisors have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Shares which have
been requested by the Buyer. The Buyer and its advisors have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality of
the foregoing, the Buyer has had the opportunity to obtain and to review the
Company's (1) Annual Report on Form 10-K for the year ended December 31, 1994,
(2) quarterly Reports on Form 10-Q for the quarters ended March 31, June 30,
and September 30, 1994 and March 31, 1995, (3) Proxy Statement dated April 26,
1995 for the Company's 1995 Annual Meeting and (4) Current Reports on Form 8-K,
dated November 4, 1994 as amended on January 3, 1995 and dated April 27, 1995,
in each case as filed with the SEC. The Buyer understands that its investment
in the Shares involves a high degree of risk and Buyer is relying solely upon
its own knowledge and experience in making its decision to purchase the Shares;
g. The Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Shares; and
h. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
a. ORGANIZATION AND GOOD STANDING. The Company 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 in the State of
Texas. The Company has full power and authority to enter into this Agreement
and consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by the Company and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the
<PAGE> 4
Private Placement Subscription Agreement
June 26, 1995
Page 4
Company, and this Agreement is a valid and binding obligation of the Company
enforceable in accordance with its terms.
b. FINANCIAL CONDITION. That since the March 31, 1995
10-Q, there has been no material adverse change in the financial condition of
the Company.
c. CONCERNING THE SHARES. The Shares, when issued,
delivered and paid for in accordance with this Agreement, will be duly and
validly authorized and issued, fully paid and non-accessible and will not
subject the holder thereof to personal liability by reason of being such
holder. There are no preemptive rights of any stockholder of the Company, as
such, to acquire the Shares.
d. SUBSCRIPTION AGREEMENT. This Agreement, when
accepted by the Company, shall have been duly and validly authorized ,
executed and delivered on behalf of the Company and shall be a valid and
binding agreement of the Company enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to bankruptcy
or other laws affecting the enforcement of creditors' rights generally.
e. NON-CONTRAVENTION. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
issuance of the Shares and the other transactions contemplated by this
Agreement do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under,
the certificate of incorporation or by-laws of the Company, or any indenture,
mortgage, deed of trust or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound,
or any existing applicable law, rule or regulation or any applicable decree,
judgment or order of any court, United States federal or state regulatory body,
administrative agency or other governmental body having jurisdiction over the
Company or any of its properties or assets.
f. APPROVALS. The Company is not aware of any
authorization, approval or consent of any governmental body which is required
to be obtained by the Company for the issuance and sale of the Shares to the
Buyer as contemplated by this Agreement other than the filing of a listing
application covering the Shares with the American Stock Exchange, Inc.
4. CERTAIN COVENANTS AND ACKNOWLEDGEMENTS.
a. TRANSFER RESTRICTIONS. The Buyer acknowledges that
(1) the Shares to be issued to it hereunder have not been and are not being
registered under the provisions of the 1933 Act (except as provided in the
Registration Procedures set forth in Section 5 of this Agreement), and may not
be transferred unless (A) the Shares are subsequently registered under the 1933
Act or (B) the Buyer shall have delivered to the Company an opinion of counsel,
reasonably satisfactory in form, scope and substance to the Company, to the
effect that the Shares may be sold or transferred
<PAGE> 5
Private Placement Subscription Agreement
June 26, 1995
Page 5
pursuant to a valid exemption from such registration; (2) any sale of the
Shares made in reliance on Rule 144 promulgated under the 1933 Act may be made
only in accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Shares under circumstances in which the seller,
or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company or any other person is under any
obligation to register the Shares (other than pursuant to the Registration
Procedure referred to in Section 5 of this Agreement) under the 1933 Act or any
state securities regulations or to comply with the terms and conditions of any
exemption thereunder.
b. RESTRICTIVE LEGEND. The Buyer acknowledges and
agrees that the certificates for the Shares may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for the Shares):
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The shares have been
acquired for investment and may not be sold, transferred or assigned
in the absence of an effective registration statement for these shares
under the Securities Act of 1933, as amended, or an opinion of counsel
acceptable to the Company that registration is not required under said
Act.
c. FORM D. The Company agrees to file a Form D with
respect to the Shares as required under Regulation D.
5. REGISTRATION PROCEDURES.
a. Within 60 days from the date of Closing the Company
shall prepare and file or cause to be filed with the Securities and Exchange
Commission ("SEC") a registration statement (the "Registration Statement") with
respect to all of the Shares (such Shares being registered are referred to as
"Registrable Shares"). The Company shall thereafter use diligence in
attempting to cause the Registration Statement to be declared effective by the
SEC and shall thereafter use diligence to maintain the effectiveness of the
Registration Statement for the shorter of (i) one year from the date of
effectiveness; or (ii) the date on which all of the Registerable Shares have
been sold by Buyer.
b. Following effectiveness, the Company shall furnish to
each Buyer a prospectus as well as such other documents as the Buyer may
reasonably request.
c. The Company shall use diligent efforts to (i)
register and qualify the Registrable Shares covered by the Registration
Statement under such other securities or blue sky
<PAGE> 6
Private Placement Subscription Agreement
June 26, 1995
Page 6
laws of such jurisdictions as the Buyer may reasonably request (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements, (iii) take such other actions as may be necessary
to maintain such registrations and qualifications in effect at all times while
the Registration Statement is likewise maintained effective, (iv) take all
other actions reasonably necessary or advisable to qualify the Registerable
Shares for sale in such jurisdictions; provided however, that the Company
shall not be required in connection therewith or as a condition thereto (I)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 5(c), (II) subject itself to general
taxation in any such jurisdiction, (III) file a general consent to service of
process in any such jurisdiction, (IV) provide any undertakings that cause more
than nominal expense or burden to the Company or (V) make any change in its
charter or bylaws, which in each case the Board of Directors of the Company
determines to be contrary to the best interests of the Company and its
stockholders;
d. The Company shall, following effectiveness of the
Registration Statement, as promptly as practicable after becoming aware of such
event, notify the Buyer of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact
or omits to state material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, and use its best efforts promptly to prepare a
supplement or amendment to the Registration Statement to correct such untrue
statement or omission, and deliver a number of copies of such supplement or
amendment to each Buyer or as Buyer may reasonably request;
e. Following effectiveness of the Registration
Statement, the Company, as promptly as practicable after becoming aware of such
event, will notify the Buyer of the issuance by the SEC of any stop order or
other suspension of effectiveness of the Registration Statement at the earliest
possible time;
f. Following effectiveness the Company will use
diligence either to (i) cause all the Registrable Shares covered by the
Registration Statement to be listed on a national securities exchange and on
each additional national securities exchange on which similar securities issued
by the Company are then listed, if any, if the listing of such Shares is then
permitted under the rules of such exchange or (ii) secure designation of all
the Registerable Shares covered by the Registration Statement as a National
Association of Securities Dealers Automated Quotations System ("NASDAQ")
"national market system security" within the meaning of Rule 11Aa2-1 of the SEC
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the quotation of the Registerable Shares on the NASDAQ National Market System
or, if, despite the Company's best efforts to satisfy the preceding clause (i)
or (ii), the Company is unsuccessful in satisfying the preceding clause (i) or
(ii), to secure listing on a national securities exchange or NASDAQ
authorization and quotation for such Registerable Securities and, without
limiting the generality of
<PAGE> 7
Private Placement Subscription Agreement
June 26, 1995
Page 7
the foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such Registerable Securities;
g. Provide a transfer agent and registrar, which may be
a single entity, for the Shares not later than the effective date of the
Registration Statement;
h. Take all other reasonable actions necessary to
expedite and facilitate disposition by the Buyer of the Registerable Shares
pursuant to the Registration Statement;
i. In the event that the Company shall have failed to
prepare and file the Registration Statement with the SEC within the time period
set forth under Section 5(a) above, then the Buyer may engage independent legal
counsel to prepare and file a registration statement covering the Shares and
the Company shall bear the reasonable costs and expenses of such independent
counsel in connection therewith.
j. It shall be a condition precedent to the obligations
of the Company to take any action pursuant to this Section 5 that the Buyer
shall furnish to the Company such information regarding itself, the Shares held
by it and the intended method of disposition of the Registerable Shares held by
it as shall be reasonably required to the effect the registration of the Shares
and shall execute such documents in connection with such registration as the
Company may reasonably request.
k. The Buyer agrees to cooperate with the Company in any
manner reasonably requested by the Company in connection with the preparation
and filing of the Registration Statement hereunder unless such Buyer shall
elect in writing to the Company to exclude all of such Buyer's Shares from the
Registration Statement;
l. The Buyer agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
5(d) or 5(e), Buyer will immediately discontinue disposition of Registerable
Shares pursuant to the Registration Statement covering such Registrable Shares
until such Buyer's receipt of the copies of the supplemented or amended
prospectus and, if so directed by the Company, shall deliver to the Company (at
the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in Buyer's possession of the prospectus
covering such Shares current at the time of receipt of such notice; and
m. All expenses, including fees of investment bankers
engaged by the Company, incurred in connection with registrations, filings or
qualifications pursuant to this Section 5, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees and
the fees and disbursements of counsel to the Company, shall be borne by the
Company, including in the event of the applicability of Section 5(i) the costs
of Buyer's independent legal
<PAGE> 8
Private Placement Subscription Agreement
June 26, 1995
Page 8
counsel, except for any costs, fees or expenses related to Buyers sale of the
Shares including but not limited to any brokerage commissions and underwriting
discounts and commissions.
n. To the extent permitted by law, the Company will
indemnify and hold harmless each Buyer who holds such Registerable Shares, the
directors, if any, of such Buyer, the officers, if any, of such Buyer, each
person, if any, who controls any Buyer within the meaning of the Securities Act
or the Exchange Act, any underwriter (as defined in the 1933 Act) for the
Buyer, the directors, if any, of such underwriter and the officers, if any , of
such underwriter, and each person, if any, who controls any such underwriter
within the meaning of the 1933 Act or the Exchange Act (each, an "Indemnified
Person"), against any losses, claims, damages, expenses or liabilities (joint
or several) (collectively, "Claims") to which any of them may become subject
under the 1933 Act, the Exchange Act or otherwise, insofar a such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein; (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any post effective amendment thereof or the omission or alleged
omission to state their a material facts required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary
to make the statements made therein, in light of the circumstances under which
the statements therein were made, not misleading or (iii) any violation or
alleged violation by the Company of the Securities Act, any state securities
law or any rule or regulation by the Company of the 1933 Act the Exchange Act
or any state securities law (the matters in the foregoing clauses (i) through
(iv) being, collectively, "Violations"). Subject to the restrictions set
forth in Section 5(p) with respect to the number of legal counsel, the Company
shall reimburse the Buyer and each such underwriter or controlling person,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 5(n) (I) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person or underwriter
for such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the
Company; (II) with respect to any preliminary prospectus shall not inure to
the benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then
<PAGE> 9
Private Placement Subscription Agreement
June 26, 1995
Page 9
amended or supplemented, if such prospectus was timely made available by the
Company; and (III) shall not apply to amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of the
Company, which consent shall not be reasonably withheld. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Shares by the Buyers.
o. In connection with any Registration Statement in
which Buyer is participating, such Buyer agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section 5(n),
the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within
the meaning of the 1933 Act or the Exchange Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the Exchange Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the 1933 Act,
the Exchange Act or otherwise, insofar as such Claim arises out of or is based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Buyer expressly for use in
connection with such Registration Statement; and such Buyer will reimburse any
legal or other expenses reasonable incurred by them in connection with
investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 5(o) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the
prior written consent of such Buyer, which consent shall not be unreasonably
withheld; provided, further, however, that the Buyer shall be liable under
this Section 5(o) for only that amount of a Claim as does not exceed the net
proceeds to such Buyer as a result of the sale of Registrable Shares pursuant
to such Registration Statement. Such investigation made by or on behalf of
such Indemnified Party and shall survive the transfer of the Registrable Shares
by the Buyers. Notwithstanding anything to the contrary contained herein the
indemnification agreement contained in this Section 5(o) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
p. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 5(n) and 5(o) of notice of the
commencement of any action (including any governmental action), such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is
made against any indemnifying party under this Section 5, deliver t the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying parties; provided, however, that an
Indemnified Person or Indemnified Party shall
<PAGE> 10
Private Placement Subscription Agreement
June 26, 1995
Page 10
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if, in the reasonable opinion of counsel retained by
the indemnifying party, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay for only one separate legal counsel for the
Buyer(s); such legal counsel shall be selected by the Buyer(s) holding a
majority in interest of the Registrable Securities. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
5, except to the extent that the indemnifying party is prejudiced in its
ability to defend such action. The indemnification required by this Section 5
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
6. TRANSFER AGENT INSTRUCTIONS.
Promptly following the delivery by the Buyer of the aggregate
subscription price for the Shares in accordance with Section 1(c) hereof, the
Company's transfer agent will be instructed by the Company to issue one or more
certificates representing in total the Shares, bearing the restrictive legend
specified in Section 4(b) of this Agreement, registered in the name of the
Buyer or its nominee and in such denominations as shall be specified by the
Buyer prior to the closing. The Company warrants that no instruction other
than such instructions referred to in this Section 6 and stop transfer
instructions to give effect to Section 4(a) hereof will be given by the Company
to the transfer agent and that the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement. Nothing in this Section shall affect in any way
the Buyer's obligations and agreement to comply with all applicable securities
laws upon resale of the Shares. If the Buyer provides the Company with an
opinion of counsel reasonably satisfactory in form, scope and substance to the
Company that registration of a resale by the Buyer of any of the Shares in
accordance with Section 4(a) is not required under the 1933 Act, the Company
shall permit the transfer agent to issue one or more share certificates in such
name and in such denominations as specified by the Buyer.
7. STOCK DELIVERY INSTRUCTIONS.
The certificate for the Shares shall be delivered by the Company to
the Escrow Agent pursuant to Section 1(c) hereof upon receipt of which the
Escrow Agent will immediately transfer the aggregate Subscription Price by wire
transfer to the Company pursuant to the terms of the Escrow Agreement.
<PAGE> 11
Private Placement Subscription Agreement
June 26, 1995
Page 11
8. CLOSING DATE.
The effective date and time of the issuance and sale of the Shares
(the "Closing Date") shall be 9:00 a.m. , Dallas time, on the first business
day following the date on which the Buyer has paid the aggregate subscription
price for the Shares in accordance with Section 1(c) hereof, to the Escrow
Agent and the Company shall have delivered the Shares to the Escrow Agent in
accordance with Section 1(d) hereof.
9. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the
Registerable Shares to the Buyer pursuant to this Agreement is conditioned
upon:
a. The receipt and acceptance in its sole and absolute discretion
by the Company of this Subscription Agreement from the Buyer for the
Registrable Shares as evidenced solely by the execution and delivery to Buyer
of this Agreement by the Company;
b. Timely delivery by the Buyer to the Escrow Agent of good funds
as payment in full of an amount equal to the aggregate subscription price for
the Registrable Shares in accordance with Section 1(d) hereof, and
c. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement and the performance by the
Buyer on or before the Closing Date of all covenants and agreements of the
Buyer required to be performed on or before such Closing Date.
10. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Registerable Shares is conditioned upon:
a. Delivery by the Company to the Escrow Agent of this Agreement
duly executed by the Company in acceptance thereof; and
b. The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement and the performance by
the Company on or before the Closing Date of all covenants and agreements of
the Company required to be performed on or before such Closing Date; and
c. On the Closing Date, the Escrow Agent shall have received an
opinion of counsel from the Company, in the form as set forth in Annex III
attached hereto.
<PAGE> 12
Private Placement Subscription Agreement
June 26, 1995
Page 12
11. GOVERNING LAW; MISCELLANEOUS. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of Texas.
A facsimile transmission of this signed agreement shall be legal and binding on
all parties hereto. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by mail or delivered personally or by
courier and shall be effective five (5) days after being placed in the mail, if
mailed, or upon receipt, if delivered personally or by courier, in each case
addressed to a party at such party's address shown in the introductory
paragraph or on the signature page of this Agreement or such other address as a
party in accordance with this provision.
12. NO OFFER TO SELL. This Agreement shall not be construed nor
interpreted as any offer by the Company to sell the Shares. The Company shall
have no obligation to accept this Subscription Agreement if offered by the
Buyer and may in the Company's sole discretion elect to reject this
Subscription Agreement. The Company shall have no obligation nor liability to
the Buyer nor any other party should the Company in its sole and absolute
discretion not accept this Subscription Agreement.
13. ENTIRE UNDERSTANDING. This Agreement (including the
attachments hereto) constitutes the entire understanding of the parties hereto
with respect to the subject matter hereof and supersedes any and all prior
agreements, whether written or oral. This Agreement may be amended only in a
written document duly executed by both parties hereto.
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer or one
of its officers thereunto duly authorized as of the date set forth below.
NUMBER OF SHARES: ___________________
PRICE PER SHARE: $ __________________1
AGGREGATE SUBSCRIPTION PRICE: $____________________
NAME OF BUYER: ____________________________________
<PAGE> 13
Private Placement Subscription Agreement
June 26, 1995
Page 13
SIGNATURE: _______________________________________________
Title: _______________________________________________
Date: _______________________________________________
Address: ________________________________
________________________________
________________________________
IRS TAXPAYER NO.: __________________________
This Agreement has been accepted by the Company as of the date set
forth below (the "Acceptance Date").
HARKEN ENERGY CORPORATION
By: __________________________________________
Title: ________________________________________
Date: ________________________________________
____________________________
1. The Average Price as defined in Section 1(b) was $____________.
