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As filed with the Securities and Exchange Commission on December 22, 1995
Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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HARKEN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
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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)
--------------------
GREGORY S. PORTER
VICE PRESIDENT - LEGAL
HARKEN ENERGY CORPORATION
5605 NORTH MACARTHUR BLVD., SUITE 400
IRVING, TEXAS 75038
(214) 753-6900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement.
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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: [ ]
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If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================================
Proposed Maximum Proposed Maximum
Title of each Class of Amount to be Offering Price Per Aggregate Offering Amount of
Securities to be Registered Registered Unit(1) Price(1) Registration Fee
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.01 1,460,000 $1.625 $2,372,500 $818.10
per share
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</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 sales
prices of the common stock as reported by the American Stock Exchange on
December 18, 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.
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<PAGE> 2
PROSPECTUS
1,460,000 Shares
HARKEN ENERGY CORPORATION
Common Stock
----------------------
The 1,460,000 shares (the "Shares") of common stock, par value $0.01 per
share ("Common Stock"), of Harken Energy Corporation, a Delaware corporation
("Harken" or the "Company"), offered hereby are being offered by the
stockholders of the Company named herein (the "Selling Stockholders"). The
Company will not receive any of the proceeds from the sale of the Shares, but
the Company has agreed to bear certain expenses of registration of the Shares
under the federal and state securities laws (currently estimated to be $7,500),
and of any offering and sale hereunder, not including certain expenses such as
commissions and discounts of underwriters, dealers or agents. See "Selling
Stockholders" and "Use of Proceeds."
The Common Stock is traded on the American Stock Exchange, under the symbol
"HEC." On December , 1995, the closing sales price of the Common Stock as
reported on the American Stock Exchange was $ per share.
The Shares may be offered and sold from time to time by the Selling
Stockholders directly or through broker-dealers or underwriters who may act
solely as agents, or who may acquire the Shares as principals. The
distribution of the Shares may be effected in one or more transactions that may
take place through the American Stock Exchange or any other national securities
exchange on which the Common Stock is approved for listing in the future,
including block trades or ordinary broker's transactions, or through privately
negotiated transactions, or through an underwritten public offering, or through
a combination of any such methods of sale, at such prices as may be obtainable.
Usual and customary or specially negotiated brokerage fees or commissions may
be paid by the Selling Stockholders in connection with such sales. See "Plan
of Distribution."
To the extent required, the specific shares of Common Stock to be sold, the
purchase price, public offering price, names of any agent, dealer or
underwriter, and any applicable commission or discount with respect to a
particular offering will be set forth in an accompanying Prospectus Supplement.
The aggregate proceeds to the Selling Stockholders from the sale of the Shares
will be the purchase price thereof less the aggregate agents' commissions and
underwriters' discounts, if any, and other expenses of distribution not borne
by the Company.
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.
PROSPECTIVE INVESTORS SHOULD CONSIDER AND REVIEW THE INFORMATION UNDER THE
CAPTION "RISK FACTORS" BEGINNING ON PAGE 4 PRIOR TO AN INVESTMENT IN THE SHARES
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 December , 1995.
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied, at prescribed rates, at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, Room 1024, as
well as at the regional offices of the Commission at Seven World Trade Center,
13th Floor, New York, New York 10048, and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60601. Copies of such material
may also be obtained at prescribed rates by writing to the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Common Stock is listed on the American Stock Exchange. Reports, proxy
statements and other information described above may also be inspected and
copied at the offices of the American Stock Exchange at 86 Trinity Place, New
York, New York 10006.
The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement") under the Securities Act, with respect to
the Shares offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement and the exhibits thereto. For further information with
respect to the Company and the Common Stock, reference is hereby made to such
Registration Statement and exhibits. Statements contained herein concerning
the provisions of any documents are necessarily summaries of those documents,
and each statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission. The Registration Statement and
any amendments thereto, including exhibits filed as a part thereof, are
available for inspection and copying as set forth above.
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY OTHER PERSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR
ANY OFFER TO OR SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed with the Commission are
incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994;
(2) The Company's Quarterly Report on Form 10-Q, for the quarterly
period ended March 31, 1995;
(3) The Company's Quarterly Report on Form 10-Q, for the quarterly
period ended June 30, 1995;
(4) The Company's Quarterly Report on Form 10-Q, for the quarterly
period ended September 30, 1995;
(5) The Company's Proxy Statement for the Annual Meeting of Stockholders
of Harken held on June 16, 1995;
(6) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A, as amended, including all
amendments and reports filed for the purpose of updating such
description;
(7) The Company's Current Report on Form 8-K dated November 4, 1994, as
amended by the Company's Current Report
on Form 8-K/A filed on January 3, 1995;
(8) The Company's Current Report on Form 8-K dated April 27, 1995;
(9) The Company's Current Report on Form 8-K dated May 16, 1995;
(10) The Company's Current Report on Form 8-K dated June 2, 1995, as
amended by the Company's Current Report on Form 8-K/A filed on
August 3, 1995;
(11) The Company's Current Report on Form 8-K dated October 5, 1995, as
amended by the Company's Current Report on Form 8-K/A filed on
December 1,1995;
(12) The Company's Current Report on Form 8-K dated October 12, 1995;
(13) The Company's Current Report on Form 8-K dated December 15, 1995;
and
(14) The Company's Current Report on Form 8-K dated December 21, 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.
The Company will furnish without charge to each person to whom a copy of
this Prospectus has been delivered, upon written or oral request, a copy of any
or all documents incorporated by reference in this Prospectus, 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 Gregory S. Porter, Harken Energy Corporation, 5605 North
MacArthur Blvd., Suite 400, Irving, Texas 75038 (Telephone: (214) 753-6900).
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THE COMPANY
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 include oil and gas exploration and production operations in the
Aneth Field and Blanding Sub-Basin portions of the Paradox Basin in Utah,
Arizona and New Mexico, in the Western Paradox Basin in Utah, and the on-shore
Gulf Coast of Texas. Harken's international operations include four 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.
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.
RISK FACTORS
Prior to making an investment decision, prospective investors should
consider carefully all of the information set forth in this Prospectus and, in
particular, should evaluate the following risk factors.
LOSSES FROM CONTINUING OPERATIONS
Harken reported losses from continuing operations for the fiscal years
ended December 31, 1993 and 1994 and the nine months ended September 30, 1995,
in the amounts of $1,797,000, $8,211,000 and $579,000, respectively. There can
be no assurance that Harken will not continue to report losses.
EFFECT OF SALES OF COMMON STOCK ON MARKET PRICE
As of December 21, 1995, there were 74,473,936 shares of Common Stock
outstanding. Harken has previously registered with the Commission an aggregate
of 4,786,308 shares of Common Stock for resale by certain stockholders of the
Company, in addition to the 1,460,000 shares of Common Stock registered for
resale pursuant to the Registration Statement of which this Prospectus forms a
part. In addition, Harken has reserved a significant number of shares of
Common Stock for future issuance as described below. There can be no assurance
that the sale of the 4,786,308 shares of Common Stock previously registered for
resale or the issuance of the shares of Common Stock which have been reserved
for future issuance will not have a material adverse effect on the then
prevailing market price of the Common Stock.
Pursuant to a Purchase and Sale Agreement (the "Momentum Agreement")
by and among Harken, Harken Exploration Company, a wholly owned subsidiary of
the Company ("Exploration"), and Momentum Operating Co., Inc. ("Momentum"),
among other consideration, Exploration issued a promissory note (the "Note") to
Momentum in the principal amount of $13,000,000, which principal amount is
subject to adjustment as described below under "--Momentum Promissory Note."
Exploration and the Company have the right to convert all amounts due at each
maturity date of the Note into shares of Common Stock of the Company. The
number of shares of Common Stock to be issued at maturity will be based upon
the average market price of the Common Stock determined during a defined
trading period prior to each maturity date. As a result, the number of shares
of Common Stock which the Company may elect to issue to Momentum can not
presently be determined. However, if the Company elects to convert the amounts
due under the Note into shares of Common Stock, the number of shares of Common
Stock issued to Momentum could result in significant dilution to the
stockholders of the Company.
Pursuant to the terms of an Agreement and Plan of Merger among Harken,
Search Exploration, Inc. ("Search") and a wholly-owned subsidiary of Harken
(the "Search Acquisition"), Harken may be required to issue up to approximately
8.8 million shares of Common Stock, in addition to the approximately 2.2
million shares of Common Stock that were issued upon the consummation of the
Search Acquisition in May 1995. Of the approximately 8.8 million shares of
Common Stock which may be required to be issued in connection with the Search
Acquisition, (i) approximately 730,000 shares of Common Stock may be issued
upon the exercise of certain warrants issued by
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Harken, and (ii) up to 8.1 million shares of Common Stock may be issued on or
about September 30, 1996, to the holders of record at the effective time of the
merger of certain securities of 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.
Harken has reserved additional shares of Common Stock for issuance as
follows: (i) Harken has $12,550,000 in principal amount of 8% Senior
Convertible Notes outstanding which are presently convertible by the holders
thereof into 8,366,673 shares of Common Stock; (ii) 2,306,000 shares of Common
Stock have been reserved for issuance upon exercise of outstanding warrants, in
addition to the warrants issued pursuant to the Search Acquisition; (iii)
3,960,915 shares of Common Stock have been reserved for issuance upon exercise
of outstanding stock options; and (iv) 400,000 shares of Common Stock have been
reserved for issuance upon conversion of the outstanding shares of the
Company's Series C Cumulative Convertible Preferred Stock.
MOMENTUM PROMISSORY NOTE
As described above, pursuant to the Momentum Agreement, Exploration
issued to Momentum the Note in the principal amount of $13,000,000. The Note
matures and becomes payable in two stages. On _______________, 1996 [270 days
from the date the Registration Statement is declared effective by the
Securities and Exchange Commission (the "Commission")], $8,000,000 in principal
amount of the Note, subject to adjustment as described below, will mature, and
become payable ("Maturity I"). The remaining $5,000,000 in principal amount of
the Note, subject to adjustment as described below, will mature and become
payable ("Maturity II") on July 15, 1997; provided, however, that if the amount
due at Maturity I is paid in shares of Common Stock, such principal amount will
mature and become payable on the earlier of (i) the expiration of 270 days
following the date upon which the Commission declares effective a registration
statement covering the resale of the shares of Common Stock issued to Momentum
at Maturity I or (ii) November 15, 1997. The Company is unable to estimate the
amount of the potential adjustments to the Note; however, such adjustments
could result in a material increase in the principal amount of the note.
The principal amount due at Maturity I is subject, among other
adjustments, to adjustment as follows: (i) the principal amount will be
adjusted by an amount equal to the difference between (x) the amount realized
by Momentum or which could have been realized by Momentum upon the sale of
2,500,000 shares of Common Stock issued to Momentum upon consummation of the
Momentum Agreement and (y) $2.00 per share multiplied by the number of such
shares of Common Stock sold by Momentum between December 21, 1995 and Maturity
I; and (ii) the principal amount will be increased by a factor equal to 10% per
annum from December 21, 1995 on the weighted average daily differences between
$5,000,000 and the aggregate proceeds received by Momentum upon the sale of the
2,500,000 shares of Common Stock issued to Momentum at the closing of the
Momentum Agreement.
The principal amount due at Maturity II is subject to adjustment as
follows: (i) the principal amount will be adjusted by an amount equal to the
difference between (x) the amount realized by Momentum or which could have been
realized by Momentum upon the sale of the shares of Common Stock issued to
Momentum at Maturity I and (y) average trading price of the Common Stock during
the period between December 21, 1995 and _____________, 1996 multiplied by the
number of shares of Common Stock sold by Momentum between Maturity I and
Maturity II; and (ii) the principal amount will be increased by a factor equal
to interest calculated at 10% per annum from Maturity I of the weighted average
daily difference between $8,000,000 and the aggregate proceeds received by
Momentum upon the sale of the shares of Common Stock issued to Momentum at
Maturity I.
The Company does not currently have sufficient cash reserves to repay
the Note, and the Company does not anticipate that the Company's cash flow from
operations will be sufficient to repay the Note. If the Company does not elect
to convert the amounts due under the Note into shares of Common Stock, the
Company anticipates that it will be required to seek additional sources of
financing. There can be no assurance that such financing will be available to
the Company. In addition, the Company does not currently have a sufficient
number of authorized but unissued shares of Common Stock available to allow the
Company to convert the amount due at Maturity I into shares of Common Stock.
An amendment to the Company's Certificate of Incorporation would be required to
increase the number of authorized shares of Common Stock, which would require
approval of the Company's stockholders. There can be no assurance that such
approval can be secured. Upon a default in payment of the Note, Momentum is
entitled to assume operation of the properties acquired by Exploration under
the Momentum Agreement, and to receive a substantial portion of the proceeds
therefrom until the Note is repaid.
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VOLATILITY OF HARKEN COMMON STOCK TRADING PRICE
The daily closing prices of the Common Stock as reported by the
American Stock Exchange has fluctuated significantly over the past 12 months,
ranging from a high of $2 1/2 per share to a low of $1 3/8 per share.
Management believes that the price fluctuations and trading activity in the
Common Stock during the past 12 months are attributable to a number of factors,
including Harken's international exploration activities. In the event that
Harken's international exploration activities are unsuccessful, there can be no
assurance that such results will not have a substantial adverse effect on the
then prevailing market price of the 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
these liabilities, including the following:
Harken Southwest Corporation ("HSW") owns an interest in the Aneth Gas
Plant. The Aneth Gas Plant facility was in operation for many years prior to
HSW becoming an owner. The operations at the Aneth Gas Plant previously used
open, unlined drip pits for storage of various waste products. The current
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 21, 1991 and a subsequent letter dated
June 8, 1992, in which the EPA requested certain information in order to
determine if hazardous substances had been released into the environment at the
Aneth Gas Plant. 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 jointly taken by the EPA and Texaco. The EPA has
responded to the initial sampling of the drip pits, and Texaco is now
completing a Phase II environmental 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 a portion of this remediation work. Texaco and
the other current plant owners, including HSW, are presently negotiating a
formal agreement with the prior owner to allocate the costs of the remediation
work. At this time, however, it is impossible for HSW to estimate the costs of
the cleanup at the Aneth Gas Plant facility or the amount of indemnification
the prior owner will provide to the present owners, including HSW, for the
costs of the remediation work.
PREFERRED STOCK AUTHORIZED FOR ISSUANCE
Harken has ten million shares of preferred stock available for
issuance. The Board of Directors is authorized to issue such preferred stock
in one or more series and to set the designations, preferences, powers and
relative rights and restrictions thereof without further approval by the
stockholders of the Company. Presently, Harken has four series of preferred
stock authorized, and a total of 186,760 shares of preferred stock currently
outstanding. Such shares have certain preferences over the shares of Common
Stock with respect to the payment of dividends and upon liquidation,
dissolution, winding-up and in certain instances, voting. The Board of
Directors of Harken also may authorize additional series of preferred stock in
the future that have similar or additional preferences over the shares of
Common Stock.
RISKS RELATED TO INTERNATIONAL OPERATIONS
Harken presently conducts international operations 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
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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.
Harken anticipates that full development of reserves in the Alcaravan
area of the Llanos Basin and the Bocachico and Cambulos areas of the Middle
Magdalena Basin of Colombia 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, production payments, operating cash
flows and potentially from industry partners; however, there can be no
assurances that Harken will have adequate funds available to it to fund its
international activities without participation from industry partners or that
industry partners can be obtained to fund such international activities.
INDUSTRY RISKS
Oil and Gas 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.
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. Harken's domestic activities 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.
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
7
<PAGE> 9
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.
Competition. 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.
Extensive Regulation. 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 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 laws, rules and regulations
are subject to change. Any such change in any law, rule or regulation could
have the effect of increasing the Company's cost of exploration or production
or may limit the Company's revenues by regulating the level of oil and gas
production, either of which could have a material adverse effect on the
financial condition of the Company.
USE OF PROCEEDS
Harken will not receive any part of the proceeds from the sale of
Shares by the Selling Stockholders.
8
<PAGE> 10
SELLING STOCKHOLDERS
This Prospectus covers the offer and sale of the Shares by the Selling
Stockholders. Set forth below is the names of Selling Stockholders, the nature
of any position, office or other material relationship that the Selling
Stockholders have had within the last three years with the Company or any of
its predecessors or affiliates, the number of shares of Common Stock owned by
the Selling Stockholders as of the date of this Prospectus, the number of
shares of Common Stock which may be offered by the Selling Stockholders
pursuant to this Prospectus, and the number of shares of Common Stock and the
percentage of the outstanding shares of Common Stock to be owned by the Selling
Stockholders upon completion of the offering if all of the Shares held by the
Selling Stockholders are sold. Any or all of the Shares listed below may be
offered for sale by the Selling Stockholders from time to time.
<TABLE>
<CAPTION>
Percent of
Shares Owned Shares Shares Common Stock
Prior to the Offered Owned After Owned After
Selling Stockholders Offering Hereby the Offering(1) the Offering(1)
-------------------- ------------ ------- --------------- ---------------
<S> <C> <C> <C> <C>
Coldell Holdings, 480,000 480,000 -0- 0.0%
Ltd.
MCM Partners, L.P. 200,000 200,000 -0- 0.0%
Gail Daly Forster & 180,000 100,000 80,000 0.0%
John Marshall Forster
TTEE u/a 8/20/78 by
William H. Forster
Pinnacle Group, Ltd. 100,000 100,000 -0- 0.0%
Philippe Boutboul 100,000 100,000 -0- 0.0%
Sandra J. Kessler 172,000 172,000 -0- 0.0%
Nicholas C. Kessler 44,000 44,000 -0- 0.0%
Uniform Gift to Minor
David Rudich 100,000 100,000 -0- 0.0%
Kenneth Friedman 40,000 40,000 -0- 0.0%
Keslin Corporation 24,000 24,000 -0- 0.0%
Money Purchase
Pension Plan Dated
10/1/95
BSR Investments, Ltd. 100,000 100,000 -0- 0.0%
</TABLE>
- --------------------
(1) Assumes no other disposition or acquisition of Common Stock and all
Shares included herein are sold.
9
<PAGE> 11
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the sale of Common
Stock owned by the Selling Stockholders. It is anticipated that the Selling
Stockholders will offer the Shares in the manner set forth on the cover page of
this Prospectus, from time to time, directly or through broker-dealers or
underwriters who may act solely as agents or may acquire the Shares as
principals, in all cases as designated by the Selling Stockholders. Such
underwriters or broker-dealers acting either as principal or as agent, may
receive compensation in the form of usual and customary or specifically
negotiated underwriting discounts, concessions or commissions from the Selling
Stockholders or the purchasers of the securities offered hereby for whom they
may act as agent.
The net proceeds to the Selling Stockholders from the sale of Common
Stock so offered will be the purchase price of the Common Stock sold less the
aggregate agents' commissions and underwriters' discounts, if any, and other
expenses of issuance and distribution not borne by the Company. The Selling
Stockholders and any dealers or agents that participate in the distribution of
Common Stock may be deemed to be "underwriters" within the meaning of the
Securities Act.
At any time a particular offer of Common Stock is made, to the extent
required, the specific shares of Common Stock to be sold, the purchase price,
public offering price, the names of any such agent, dealer or underwriter and
any applicable commission or discount with respect to a particular offering
will be set forth in an accompanying Prospectus Supplement. Such Prospectus
Supplement may, if necessary, be in the form of a post-effective amendment to
the Registration Statement of which this Prospectus is a part, and will be
filed with the Commission to reflect the disclosure of additional information
with respect to the distribution of such securities.
Pursuant to the terms of separate Private Placement Subscription
Agreements between the Company and each Selling Stockholder, the Company has
agreed to file a "shelf" registration statement pursuant to Rule 415 under the
Securities Act covering the sale of an aggregate of 1,460,000 shares of Common
Stock held by the Selling Stockholders, and to use diligent efforts to maintain
the effectiveness of such registration statement for the shorter of (i) one
year from the date of effectiveness of the registration statement, or (ii) the
date on which all of the shares of Common Stock covered by the registration
statement have been sold by the Selling Stockholders.
The Company has agreed to bear certain expenses of registration of the
Shares under the federal and state securities laws (currently estimated to be
$7,500) and of any offering and sale hereunder not including certain expenses
such as commissions or discounts of underwriters, dealers or agents
attributable to the sale of such Common Stock.
The Company has agreed to indemnify the Selling Stockholders against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments the Selling Stockholders may be required to make in
respect thereof.
To comply with the securities laws of certain jurisdictions, the
securities offered hereby may be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the securities offered hereby may not be offered or sold unless
they have been registered or qualified for sale in such jurisdictions or an
exemption from registration or qualification is available and is complied with.
The Selling Stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Rules
10b-2, 10b-6 and 10b-7, which provisions may limit the timing of purchases and
sales by each Selling Stockholder and any other such person. Furthermore,
under Rule 10b-6 under the Exchange Act, any person engaged in a distribution
of the Common Stock may not simultaneously engage in market making activities
with respect to such securities for a period of two business days prior to the
commencement of such distribution. All of the foregoing may affect the
marketability of the securities offered hereby.
LEGAL MATTERS
The validity of the Shares will be passed upon for Harken by Gregory
S. Porter, Esq., Vice President - Legal of Harken.
10
<PAGE> 12
EXPERTS
The (i) consolidated financial statements and schedules of the Company
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, (ii) financial statements of the CHAP Venture as of December
31, 1993, included in the Company's Current Report on Form 8-K dated November
4, 1994, as amended by the Company's Current Report on Form 8-K/A filed on
January 3, 1995, (iii) the statements of revenue and direct operating expenses
of the Yellowhouse Properties for the years ended December 31, 1992, 1993 and
1994, included in the Company's Current Report on Form 8-K dated October 5,
1995, as amended by the Company's Current Report on Form 8-K-A filed on
December 1, 1995, and (iv) the statements of revenue and direct operating
expenses of the Momentum Properties for the years ended December 31, 1992, 1993
and 1994, included in the Company's Current Report on Form 8-K dated December
21, 1995, each of which are incorporated by reference herein, 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 of Search for the year ended
December 31, 1994, included in the Company's Current Report on Form 8-K dated
June 2, 1995, as amended by the Company's Current Report on Form 8-K/A filed on
August 3, 1995, which is incorporated by reference herein, 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.
11
<PAGE> 13
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses to be paid by the Company in connection with the offering
described in this Registration Statement are estimated as follows:
<TABLE>
<S> <C>
Commission Registration Fee . . . . . $ 818.00
Printing and Engraving Expenses . . . 2,000.00
Accounting Fees and Expenses . . . . 2,500.00
Blue Sky Fees and Expenses . . . . . 1,000.00
Miscellaneous . . . . . . . . . . . . 1,182.00
-----------
Total . . . . . . . . . $ 7,500.00
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the General Corporation Law of the State of
Delaware ("Delaware Law"), a Delaware corporation may indemnify its directors,
officers, employees and agents against expenses (including attorneys fees),
judgments, fines and settlements in nonderivative suits, actually and
reasonably incurred by them in connection with the defense of any action, suit
or proceeding in which they or any of them were or are made parties or are
threatened to be made parties by reason of their serving or having served in
such capacity. Delaware law, however provides that such person must have 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 the case of a criminal action,
such person must have had no reasonable cause to believe his or her conduct was
unlawful. Section 145 further provides that in connection with the defense or
settlement of any action by or in the right of the corporation, a Delaware
corporation may indemnify its directors and officers against expenses actually
and reasonably incurred by them if, in connection with the matters in issue,
they acted in good faith, in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation, except that no
indemnification may be made with respect to any claim, issue or matter as to
which such person has been adjudged liable for negligence or misconduct unless
the Court of Chancery or the court in which such action or suit is brought
approves such indemnification. Section 145 further permits a Delaware
corporation to grant its directors and officers additional rights of
indemnification through bylaw provisions and otherwise, and to purchase
indemnity insurance on behalf of its directors and officers. Indemnification
is mandatory to the extent a claim, issue or matter has been successfully
defended.
Article Ten of the Company's Certificate of Incorporation and Article
VII of the Company's bylaws provide, in general, that the Company shall
indemnify its directors and officers under certain of the circumstances defined
in Section 145. The Company 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
Company's Certificate of Incorporation and bylaws.
ITEM 16. EXHIBITS.
<TABLE>
<S> <C> <C>
4.1 - Form of certificate representing shares of Harken common stock, par value $.01 per share (filed as
Exhibit 1 to Harken's Registration Statement on Form 8-A, File No. 0-9207, and incorporated by
reference herein).
4.2 - Certificate of the Designations, Powers, Preferences and Rights of Series C Cumulative Convertible
Preferred Stock, $1.00 par value of Harken Energy Corporation (filed as Exhibit 4.3 to Harken's
Annual Report on Form 10-K for fiscal year ended December 31, 1989, File No. 0-9207, and incorporated
by reference herein).
</TABLE>
II-1
<PAGE> 14
<TABLE>
<S> <C> <C>
4.3 - Certificate of the Designations of Series D Preferred Stock, $1.00 par value of Harken Energy
Corporation (filed as Exhibit 4.3 to Harken's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1995, File No. 0-9207, and incorporated by reference herein).
*5.1 - Opinion of Gregory S. Porter, Esq.
*23.1 - Consent of Arthur Andersen LLP.
*23.2 - Consent of Hein + Associates LLP.
*23.3 - Consent of Gregory S. Porter, Esq. (included in opinion filed as Exhibit 5.1).
*24.1 - Powers of Attorney.
*99.1 - Form of Private Placement Subscription Agreement dated as of November 1, 1995.
</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 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
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained
in periodic reports filed by the Registrant pursuant to Section 13 or Section
15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(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.
II-2
<PAGE> 15
(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-3
<PAGE> 16
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 December 22, 1995.
HARKEN ENERGY CORPORATION
*
----------------------------------------
Mikel D. Faulkner, Chairman
of the Board and Chief 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.
Signature Title Date
- ------------------------- ------------------------------- -----------------
* Chairman of the Board and Chief December 22, 1995
- ------------------------- Executive Officer (Principal
Mikel D. Faulkner Executive Officer)
* President and Chief Operating December 22, 1995
- ------------------------- Officer and Director
Richard H. Schroeder
* Senior Vice President and Chief December 22, 1995
- ------------------------- Financial Officer (Principal
Bruce N. Huff Accounting Officer and Principal
Financial Officer)
* Director December 22, 1995
- -------------------------
Michael M. Ameen, Jr.
* Director December 22, 1995
- -------------------------
Michael R. Eisenson
* Director December 22, 1995
- -------------------------
Edwin C. Kettenbrink, Jr.
II-4
<PAGE> 17
* Director December 22, 1995
- -------------------------
Talat M. Othman
* Director December 22, 1995
- -------------------------
Donald W. Raymond
* Director December 22, 1995
- -------------------------
Gary B. Wood
*Gregory S. Porter, 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 and each officer and director.
/s/ Gregory S. Porter
- ---------------------
Gregory S. Porter,
Attorney-in-Fact
II-5
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Exhibit Numbered Page
----------- -------------------------------------------------------------- -------------
<S> <C>
4.1 Form of certificate representing shares of Harken common
stock, par value $.01 per share (filed as Exhibit 1 to
Harken's Registration Statement on Form 8-A, File No. 0-
9207, and incorporated by reference herein).
4.2 Certificate of the Designations, Powers, Preferences and
Rights of Series C Cumulative Convertible Preferred Stock,
$1.00 par value of Harken Energy Corporation (filed as
Exhibit 4.3 to Harken's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989, File No. 0-9207, and
incorporated by reference herein).
4.3 Certificate of the Designations of Series D Preferred
Stock, $1.00 par value of Harken Energy Corporation (filed
as Exhibit 4.3 to Harken's Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 1995, File No.
0-9207, and incorporated by reference herein).
*5.1 Opinion of Gregory S. Porter, Esq.
*23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Hein + Associates LLP.
*23.3 Consent of Gregory S. Porter, Esq. (included in opinion
filed as Exhibit 5.1).
*24.1 Powers of Attorney.
*99.1 Form of Private Placement Subscription Agreement dated as
of November 1, 1995.
</TABLE>
_________________
* Filed herewith
<PAGE> 1
December 22, 1995
Harken Energy Corporation
5605 N. MacArthur Blvd
Suite 400
Irving, TX 75038
Re: Registration Statement on Form S-3
Gentlemen:
I have acted as counsel to Harken Energy Corporation, a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of the offer and sale of an
aggregate of 1,460,000 shares (the "Shares") of common stock, $.01 par value
per share, of the Company ("Common Stock") pursuant to a Registration Statement
on Form S-3 of the Company (the "Registration Statement") to which this opinion
letter is an exhibit.
In reaching the opinion set forth herein, I have reviewed (a) the
Registration Statement, (b) the Certificate of Incorporation of the Company, as
amended, (c) the Bylaws of the Company, (d) records of proceedings of the Board
of Directors and the stockholders of the Company and (e) except as set forth
below, such other agreements, certificates of public officials and officers of
the Company, records, documents and matters of law that I deemed relevant.
Based on and subject to the foregoing and subject further to the
assumptions, exceptions and qualifications hereinafter stated, I am of the
opinion that, subject to compliance with federal and state securities laws (as
to which I express no opinion), the Shares were duly authorized and validly
issued and are fully paid and nonassessable.
The opinion expressed above is subject in all respects to the
following assumptions, exceptions and qualifications:
a. I have assumed that (i) all signatures on all documents
examined by me are genuine, (ii) all documents submitted to me
as originals are accurate and complete, (iii) all documents
submitted to me as copies are true and correct copies of the
originals thereof, (iv) all information submitted to me is
accurate and complete as of the date hereof, (v) all persons
executing and delivering documents reviewed by me were
competent to execute and to deliver such documents and (vi)
that all persons signing, in a representative capacity,
documents reviewed by me had authority to sign in such
capacity.
b. I have assumed that there are no agreements, indentures,
mortgages, deeds of trust or instruments that affect the
ability of the Company to issue the Shares.
The opinions expressed above are limited to the laws of the State of
Texas, the General Corporation Law of the State of Delaware and the federal
laws of the United States of America. You should be aware that I am not
admitted to the practice of law in the State of Delaware and my opinion herein
as to the General Corporation Law of the State of Delaware is based solely upon
the unofficial compilation thereof contained in Prentice Hall Information
Services Corporation Statutes.
This opinion letter may be filed as an exhibit to the Registration
Statement. In giving this consent, I do not thereby admit that I come into the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
<PAGE> 2
Harken Energy Corporation
December 22, 1995
Page 2
I disclaim any duty to advise you regarding any changes in, or to
otherwise communicate with you with respect to, the matters addressed herein.
Very truly yours,
/s/ Gregory S. Porter
Gregory S. Porter, Esq.
<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, 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, of our report dated November 6, 1995, on the statements of revenue and
direct operating expenses of the Yellowhouse Properties for the three years in
the period ended December 31, 1994, included in Harken Energy Corporation's Form
8-K/A dated December 1, 1995, and of our report dated November 13, 1995, on the
statements of revenue and direct operating expenses of the Momentum Properties
for the three years in the period ended July 31, 1995, included in Harken Energy
Corporation's Form 8-K dated December 21, 1995 and to all references to our Firm
included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Dallas, Texas
December 21, 1995
<PAGE> 1
EXHIBIT 23.2
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
December 22, 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, Larry E. Cummings and Gregory S.
Porter, or any of them (with full power of each of them to act alone), his true
and lawful attorney-in-fact and agent, with full power of substitution, for him
and on his behalf and in his name, place and stead, in any and all capacities,
to sign, execute and file a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended, and any or all amendments (including
without limitation, post-effective amendments and any amendment or amendments
increasing the amount of securities for which registration is being sought),
with all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission and/or any regulatory
authority relating to the registration of 1,460,000 shares of Common Stock,
$0.01 par value, of Harken Energy Corporation, 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 of 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 as of the 13th day of December, 1995.
NAME CAPACITIES
/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, Chief Operating Officer
---------------------------------- and Director
Richard H. Schroeder
<PAGE> 2
POWER OF ATTORNEY
December 13, 1995
Page 2
/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
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Gary B. Wood
<PAGE> 1
Exhibit 99.1
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 five (5) 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. In
the event that the Company should sell additional shares of its Common Stock
after the date of this Agreement, except pursuant to the exercise of
outstanding stock options, warrants or other derivative securities, and prior
to the effective date of the Registration Statement as required under Section 5
hereof, at a price lower than the Subscription Price, then the Company will
issue additional shares of Common Stock to the Buyer hereunder, so
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Private Placement Subscription Agreement
October 23, 1995
Page 2
that the average price of the Common Stock purchased hereunder will be equal to
the lowest price paid for the Company's Common Stock by others.
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 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. Each party, by
signing this Agreement, the Buyer and the Company, agrees to all of the terms
and conditions hereof, 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:
Company: Phillip A. Gustlin Clients Trust Account
Bank: City National Bank
Account No.: 009421726
ABA No.: 122-016066
Telephone No.: 1-800-575-5502
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)(6);
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Private Placement Subscription Agreement
October 23, 1995
Page 3
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;
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, March 31, and June 30, 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, dated April
27, 1995, dated October 5,1995, and dated October 16, 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.
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Private Placement Subscription Agreement
October 23, 1995
Page 4
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 Company, and this Agreement is a valid and
binding obligation of the Company enforceable in accordance with its terms.
b. FINANCIAL CONDITION. That since June 30, 1995 10-Q,
there has been no material adverse change in the financial condition of the
Company, except to the possible extent referenced in the subsequently filed
Current Reports on Form 8-K referenced in 2(f) above.
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
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Private Placement Subscription Agreement
October 23, 1995
Page 5
and sale of the Shares to the Buyer as contemplated by this Agreement other
than the possible filing of a listing application covering the Shares with the
American Stock Exchange, Inc. if required.
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 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 Procedures 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 if and as required under Regulation D.
5. REGISTRATION PROCEDURES.
a. Within 90 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
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Private Placement Subscription Agreement
October 23, 1995
Page 6
(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 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 he 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;
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Private Placement Subscription Agreement
October 23, 1995
Page 7
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 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, 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
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Private Placement Subscription Agreement
October 23, 1995
Page 8
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, other than underwriting discounts and
commissions and other fees and expenses of investment bankers and other than
brokerage commissions, incurred in connection with registrations, filings or
qualifications pursuant to 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, and in the event of the applicability of Section 5(i) the costs of
Buyer's independent legal counsel.
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 1933 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 therein 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 1933 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
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Private Placement Subscription Agreement
October 23, 1995
Page 9
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 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
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable 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 reasonably 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
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Private Placement Subscription Agreement
October 23, 1995
Page 10
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 to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying parties; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel, with the fees and expenses to 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 Date. 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)and (b) 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
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Private Placement Subscription Agreement
October 23, 1995
Page 11
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(s) 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.
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 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 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 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.
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Private Placement Subscription Agreement
October 23, 1995
Page 12
10. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Shares is conditioned upon:
a. Delivery by the Company to the Escrow Agent of 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.
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. 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 may be provided by 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
<PAGE> 13
Private Placement Subscription Agreement
October 23, 1995
Page 13
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:
------------------------------------------
SIGNATURE:
------------------------------------------
Title:
------------------------------------------
Date: October 23, 1995
------------------------------------------
Address:
------------------------------------------
------------------------------------------
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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 $1.6875.
