UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ________)*
HARKEN ENERGY CORPORATION
(Name of Issuer)
COMMON STOCK, $.01 PAR VALUE PER SHARE
(Title of Class of Securities)
412 552 10 1
(CUSIP Number)
Michael J. Parsons
Momentum Operating Co., Inc.
232 South Main
Albany, Texas 76430
(915) 762-3331
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
JULY 11, 1996
(Date of Event which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [X]. (A fee is
not required only if the reporting person (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
CUSIP NO.: 412 552 10 1
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1 NAME OF REPORTING PERSON
S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSON
Momentum Operating Co., Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[ ]
N/A (b)[ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
N/A
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
7 SOLE VOTING POWER
5,150,000 shares of Common Stock, $.01
NUMBER OF par value per share, of Harken Energy
SHARES Corporation
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER
EACH -0-
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH 5,150,000 shares of Common Stock, $.01
par value per share, of Harken Energy
Corporation
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,150,000 shares of Common Stock, $.01 par value per share, of
Harken Energy Corporation
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
N/A
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.7% of the Common Stock of Harken Energy Corporation
14 TYPE OF REPORTING PERSON*
CO
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<PAGE>
Item 1. Security and Issuer.
This statement relates to the common stock, $0.01 par value per share
(the "Common Stock"), of Harken Energy Corporation, a Delaware corporation (the
"Issuer"). The address of the principal executive offices of the Issuer is 5605
N. MacArthur, Suite 400, Irving, Texas 75038.
Item 2. Identity and Background.
This statement is being filed by Momentum Operating Co., Inc., a Texas
corporation ("Momentum"), whose principal business is oil and gas production.
The address of the principal business and the principal office of Momentum is
232 South Main, Albany, Texas 76430. Schedule I attached hereto sets forth
certain additional information with respect to each director and each executive
officer of Momentum.
Neither Momentum nor to its knowledge any person listed on Schedule I
hereto has been, during the last five years (i) convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) a
party to a civil proceeding and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, U.S. federal or state securities
laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
On July 11, 1996, Momentum acquired 5,150,000 shares of Common Stock
(the "Shares") pursuant to an Exchange Agreement by and among Momentum, the
Issuer and Harken Exploration Company. Of these Shares, 185,000 Shares are being
held in escrow pending the fulfillment of certain conditions. Such acquisition
was made in consideration of the transfer by Momentum to the Issuer of a
promissory note in the principle amount of $13,000,000 issued to Momentum by
Harken Exploration Company on December 20, 1995 pursuant to a Purchase and Sale
Agreement dated December 15, 1995 by and among Momentum, the Issuer and Harken
Exploration Company.
Item 4. Purpose of Transaction.
The transactions described in Item 3 above occurred as a result of
negotiated transactions with the Issuer. The Shares were acquired by Momentum
for investment purposes. Momentum intends to review its investment in the Issuer
on a continuing basis and, depending upon the price of, and other market
conditions relating to, the Common Stock, subsequent developments affecting the
Issuer, the Issuer's business and prospects, other investment and business
opportunities available to Momentum, general stock market and economic
conditions, tax considerations and other factors deemed relevant, may decide to
increase or decrease the size of its investment in the Issuer.
<PAGE>
Other than as described above, neither Momentum nor to its knowledge
any person listed on Schedule I hereto has any plan or proposal that would
result in any of the consequences listed in paragraphs (a) - (j) of Item 4 of
Schedule 13D.
Item 5. Interest In Securities of the Issuer.
Momentum beneficially owns and has the power to vote and dispose of
shares of Common Stock, representing approximately 5.7% of the shares of Common
Stock outstanding.
Except as described herein, neither Momentum nor to its knowledge any
person named in Schedule I hereto has effected any transactions in any shares of
Common Stock since May 11, 1996.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
Certain registration rights granted to Momentum by the Issuer are set
forth in a Registration Rights Agreement dated as of June 30, 1996 between the
Issuer and Momentum.
Item 7. Material to be Filed as Exhibits.
Exhibit 1 - Registration Rights Agreement dated as of June 30, 1996
between the Issuer and Momentum.
Signature.
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
July 17, 1996 MOMENTUM OPERATING CO., INC.
By: /s/ MICHAEL J. PARSONS
Michael J. Parsons
President
<PAGE>
SCHEDULE I
Directors and Executive Officers of
Momentum Operating Co., Inc.
NAME AND BUSINESS ADDRESS CITIZENSHIP POSITION AND OCCUPATION
Michael J. Parsons U.S. President
232 S. Main
Albany, Texas 76430
Robert C. Tidwell U.S. Secretary
232 S. Main
Albany, Texas 76430
Lynn Tidwell Neff U.S. Treasurer
232 S. Main
Albany, Texas 76430
Donald R. Tidwell U.S. Vice President
232 S. Main
Albany, Texas 76430
<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE
Exhibit 1 - Registration Rights Agreement dated as of June 30, 1996
between the Issuer and Momentum...........................
EXHIBIT 1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of June
30, 1996, by and between Harken Energy Corporation, a Delaware corporation
("HARKEN") and Momentum Operating Co., Inc., a Texas corporation ("MOMENTUM").
RECITALS:
A. On December 15, 1995, Harken and Momentum entered into a
Registration Rights Agreement relating to certain shares of Common Stock to be
issued to Momentum (the "First Registration Rights Agreement").
B. Reference is hereby made to that certain Exchange Agreement dated as
of even date herewith (the "EXCHANGE AGREEMENT"), by and among Harken, Momentum
and Harken Exploration Company.
C. In order to induce Momentum to enter into the Exchange Agreement
(and recognizing that Momentum would not be willing to enter into the Exchange
Agreement in the absence of this Agreement), Harken has agreed to provide
Momentum with the registration rights set forth herein, and the parties have
agreed that, unless the Exchange Agreement is terminated, the First Registration
Rights Agreement shall be terminated and that this Agreement shall supersede the
First Registration Rights Agreement in all respects.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the foregoing Recitals and
the mutual agreements contained herein, the sufficiency of which is hereby
acknowledged and confirmed, the parties hereto, intending to be legally bound,
agree as follows:
SECTION 1. DEFINITIONS AND REFERENCES.
(a) When used in this Agreement, the following terms shall have the
respective meanings assigned to them in this Section 1 or in the sections,
subsections or other subdivisions or other documents referred to below:
"AGREEMENT" shall mean this Registration Rights Agreement, as hereafter
amended or modified in accordance with the terms hereof.
"COMMISSION" shall mean the Securities and Exchange Commission (or any
successor body thereto).
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"COMMON STOCK" shall mean the shares of common stock, $.01 par value
per share, of Harken.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations under such Act.
"EXCHANGE AGREEMENT" shall have the meaning assigned to it in Paragraph
A of the Recitals hereto.
"REGISTRABLE SECURITIES" shall mean the shares of Common Stock issued
to Momentum pursuant to the Exchange Agreement.
"REGISTRATION EXPENSES" shall mean all expenses incident to Harken's
performance of or compliance with the registration rights granted hereunder,
including (without limitation) all registration and filing fees, fees and
expenses of compliance with securities and blue sky laws, printing and engraving
expenses, messenger, telephone and delivery expenses, and fees and disbursements
of counsel for Harken, all independent certified public accountants and
underwriters (excluding discounts and commissions); provided, that Registration
Expenses shall not include any Selling Expenses and shall not include any
expenses incurred by or on behalf of Momentum, including without limitation,
expenses or disbursements of any counsel retained by Momentum.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
all rules and regulations under such Act.
"SELLING EXPENSES" shall mean underwriting discounts or commissions and
any selling commissions attributable to sales of Registrable Securities.
(b) All references in this Agreement to sections, subsections and other
subdivisions refer to corresponding sections, subsections and other subdivisions
of this Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any of such subdivisions are for convenience only and shall not
constitute part of such subdivisions and shall be disregarded in construing the
language contained herein. The words "this Agreement," "this instrument,"
"herein," "hereof," "hereby," "hereunder" and words of similar import refer to
this Agreement as a whole and not to any particular subdivision unless expressly
so limited. Words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires.
SECTION 2. DEMAND REGISTRATION.
(a) Subject to the terms and provisions hereof, Momentum may by written
notice to Harken request that Harken effect up to two registrations under the
Securities Act of the Registrable Securities (a "Demand Registration"). Each
Demand Registration shall relate to such portion of the Registrable Securities
as Momentum shall request. Momentum's right to make a Demand Registration shall
be subject to the following:
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(i) Harken shall not be required to file a registration
statement covering more than 2,800,000 Registrable Securities;
(ii) Momentum's first request for a Demand Registration (the
"Initial Demand Registration") shall not be made prior to the earlier of August
15, 1996 or the expiration of 10 days following the public announcement by
Harken of the information described on Schedule 1 hereto; and
(iii) Except for the Initial Demand Registration, Momentum
shall not make any request for a Demand Registration prior to the earlier of
November 15, 1996 or the expiration of 90 days following the public announcement
by Harken of the information described on Schedule 1 hereto.
(b) Notwithstanding subsection (a) above or anything else herein to the
contrary, Harken shall not be obligated to effect more than two registrations
pursuant to this Section 2; provided, however, that any registration requested
pursuant to this Section 2 will not be deemed to have been effected (and no
Demand Registration shall be deemed to have been made) unless it has become
effective and remained effective no less than 270 days; provided, further, that
any such registration which does not become effective after Harken has filed a
registration statement in accordance with the provisions of this Section 2
solely by reason of Momentum's refusal to proceed, including failure to comply
with its obligations under Sections 3, 5 and 8(a) hereof (other than any refusal
to proceed based upon the advise of counsel to Momentum that the registration
statement, or the prospectus contained therein, contains an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, or that such registration statement or such
prospectus, or the distribution contemplated thereby, otherwise violates or
would, if such distribution using such prospectus took place, violate any
applicable state or federal securities law) shall be deemed to have been
effected by Harken at the request of Momentum.
(c) Harken shall be entitled to postpone, for a period not to exceed 90
days, the filing of any registration statement pursuant to this Section 2,
except for the Initial Demand Registration, if the board of directors of Harken
determines, in the good faith exercise of its reasonable business judgment, that
such registration and offering could materially interfere with bona fide
financing, acquisition, or other material business plans of Harken or would
require disclosure of non-public information, the premature disclosure of which
could materially adversely affect Harken; provided, however, that Harken shall
not be required to disclose to Momentum any such transaction, plan or non-public
information. If Harken postpones the filing of any registration statement, it
shall promptly notify Momentum in writing when the events or circumstances
permitting such postponement have ended and at such time shall proceed with the
filing of such registration statement.
(d) Upon receipt of a Demand Registration, Harken shall use its
reasonable best efforts to prepare and file a registration statement with the
Securities and Exchange Commission as soon
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as reasonably practicable but in any event within 10 days of receipt of the
Initial Demand Registration and within 30 days of receipt of any Demand
Registration other than the Initial Demand Registration.
SECTION 3. REGISTRATION PROCEDURES. In connection with any registration
statement filed pursuant to Section 2, Harken will use its reasonable best
efforts to effect the registration of the Registrable Securities in accordance
with the intended method of disposition thereof, and pursuant thereto Harken
will as expeditiously as possible:
(a) prepare and file with the Commission a registration statement on
the appropriate form with respect to such Registrable Securities and use its
reasonable best efforts to cause such registration statement to become effective
(provided, that before filing a registration statement or prospectus or any
amendments or supplements thereto, Harken will furnish copies of all such
documents proposed to be filed to Momentum);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of not less than 270 days or such shorter period which will terminate
when Registrable Securities covered by such registration statement have been
sold (but not before the expiration of the applicable prospectus delivery
period) and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by Momentum set
forth in such registration statement;
(c) furnish to Momentum such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included in
such registration statement (including, without limitation, each preliminary
prospectus) and such other documents as Momentum may reasonably request in order
to facilitate the disposition of the Registrable Securities;
(d) use its reasonable best efforts to register or qualify such
Registrable Securities for sale under such other securities or blue sky laws of
such jurisdictions within the United States as Momentum may reasonably request
and do any and all other acts and things which may be reasonably necessary or
advisable to enable Momentum to consummate the disposition in such jurisdictions
of the Registrable Securities (provided that Harken will not be required to
qualify generally to do business or subject itself to any general service of
process in any jurisdiction where it is otherwise not then so subject);
(e) notify Momentum, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
which requires the making of any change in the prospectus included in such
registration statement so that such document will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and,
at the request of
4
Momentum, Harken will prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading;
(f) use its reasonable best efforts to cause all such Registrable
Securities to be listed on each securities exchange or exchanges, automated
quotation system or over-the-counter market upon which securities of Harken of
the same class are then listed;
(g) enter into such customary agreements (including, without
limitation, underwriting agreements in customary form, substance, and scope) and
take all such other actions as Momentum or the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of the Registrable
Securities;
(h) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make generally available
to its security holders an earnings statement no later than 90 days after the
end of the 12 month period beginning with the first day of Harken's first full
calendar quarter after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(i) advise Momentum after Harken shall receive notice of the issuance
of any stop order by the Commission suspending the effectiveness of a
registration statement, or of any order suspending or preventing the use of any
related prospectus or suspending the qualification of any shares of Common Stock
included in such registration statement for sale in any jurisdiction, or the
initiation or threatening of any proceeding for any such purposes and, Harken
will use its reasonable best efforts promptly to prevent the issuance of any
stop order or obtain the withdrawal of any such order if issued; and
(j) use its reasonable best efforts to cause such Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable Momentum to consummate the disposition of the Registrable Securities.
Momentum agrees that, upon receipt of any notice from Harken of the
happening of any event of the kind described in Section 3(e) hereof, Momentum
will forthwith discontinue disposition of any Registrable Securities until
Momentum's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(e) hereof, or until it is advised in writing by Harken
that the use of the applicable prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such prospectus.
5
Momentum shall furnish to Harken such information regarding Momentum,
the Registrable Securities held by Momentum and the intended method of
disposition thereof as Harken shall reasonably request and as shall be required
in connection with the preparation of the applicable registration statement and
other actions to be taken by Harken under this Agreement.
SECTION 4. EXPENSES. Harken shall pay all Registration Expenses in
connection with each registration effected pursuant to Section 2 and, in any
event, shall pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal and
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the securities to be registered on
each securities exchange on which similar securities issued by Harken are then
listed. All Selling Expenses and all expenses incurred by or on behalf of
Momentum, including without limitation, expenses of counsel to Momentum,
incurred in connection with a registration effected pursuant to the terms hereof
shall be borne by Momentum.
SECTION 5. INDEMNIFICATION.
(a) Harken shall indemnify and hold harmless, with respect to any
registration statement filed by it, to the full extent permitted by law,
Momentum, and each other person, if any, who controls Momentum within the
meaning of Section 15 of the Securities Act and each of their respective
officers, directors, agents and employees (collectively, "MOMENTUM INDEMNIFIED
PARTIES") against all losses, claims, damages, fines, liabilities and expenses,
joint or several to which any such Momentum Indemnified Party may become subject
under the Securities Act, the Exchange Act, at common law or otherwise, insofar
as such losses, claims, damages, fines, liabilities or expenses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement in which such Registrable
Securities were included as contemplated hereby or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary, final or summary prospectus, together with the documents
incorporated by reference therein (as amended or supplemented if Harken shall
have filed with the Commission any amendment thereof or supplement thereto), or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or (iii)
any violation or alleged violation by Harken of any federal, state or common law
rule or regulation applicable to Harken and relating to action of or inaction by
Harken in connection with any such registration; and in each such case, Harken
shall reimburse each such Momentum Indemnified Party for any reasonable legal or
other expenses incurred by any of them in connection with investigating or
defending any such loss, claim, damage, fine, liability, expense, action or
proceeding; provided, however, that Harken shall not be liable to any such
Momentum Indemnified Party in any such case to the extent that any such loss,
claim, damage, fine, liability or expense (or action or proceeding, whether
commenced or threatened, in respect thereof) arises out of or is based upon any
untrue statement
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or alleged untrue statement or omission or alleged omission made in such
registration statement or amendment thereof or supplement thereto or in any such
preliminary, final or summary prospectus in reliance upon and in conformity with
written information furnished to Harken by or on behalf of any such Momentum
Indemnified Party for use in the preparation thereof. Such indemnity and
reimbursement of expenses and other obligations shall remain in full force and
effect regardless of any investigation made by or on behalf of the Momentum
Indemnified Parties and shall survive the transfer of any Registrable Securities
by such Momentum Indemnified Parties.
(b) Momentum shall indemnify and hold harmless, to the fullest extent
permitted by law, Harken, its directors, officers, employees and agents, and
each person who controls Harken (within the meaning of Section 15 of the
Securities Act) (collectively, "HARKEN INDEMNIFIED PARTIES") against all losses,
claims, damages, fines, liabilities and expenses to which any Harken Indemnified
Party may become subject under the Securities Act, the Exchange Act, at common
law or otherwise, insofar as such losses, claims, damages, fines, liabilities or
expenses (or actions or proceedings, whether commenced or threatened, in respect
thereof) are caused by (i) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement in which Registrable
Securities were included or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue statement of
a material fact contained in any preliminary, final or summary prospectus,
together with the documents incorporated by reference therein (as amended or
supplemented if Harken shall have filed with the Commission any amendment
thereof or supplement thereto), or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading to the extent in the cases described in clauses (i)
and (ii), that such untrue statement or omission was furnished in writing by
Momentum for use in the preparation thereof, or (iii) any violation by Momentum
of any federal, state or common law rule or regulation applicable to Momentum
and relating to action of or inaction by such holder in connection with any such
registration. Such indemnity obligation shall remain in full force and effect
regardless of any investigation made by or on behalf of the Harken Indemnified
Parties (except as provided above) and shall survive the transfer of any
Registrable Securities by Momentum.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) of written notice of the commencement of any action, suit, proceeding,
investigation or written threat thereof with respect to which a claim for
indemnification may be made pursuant to this Section 5, such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the indemnifying party of the threat or
commencement thereof; provided, however, that the failure to so notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. If any such claim or action
referred to under subsection (a) or (b) is brought against any indemnified party
and it then notifies the indemnifying party of the threat or commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other indemnifying party similarly
7
notified, to assume the defense thereof with counsel reasonably satisfactory to
such indemnified party. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense of any such claim or
action, the indemnifying party shall not be liable to such indemnified party
under this Section 5 for any legal expenses of counsel or any other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation unless (i) the indemnifying
party has failed to assume the defense of such claim or action or to employ
counsel reasonably satisfactory to such indemnified party or (ii) in the
reasonable judgment of the indemnified party, based upon written advice of such
indemnified party's counsel, representation of both parties by the same counsel
would be inappropriate due to an actual or potential conflict of interests.
Under no circumstances will the indemnifying party be obligated to pay the fees
and expenses of more than one law firm for all indemnified parties. The
indemnifying party shall not be required to indemnify the indemnified party with
respect to any amounts paid in settlement of any action, proceeding or
investigation entered into without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld or delayed. No
indemnifying party shall consent to the entry of any judgment or enter into any
settlement without the consent of the indemnified party unless (i) such judgment
or settlement does not impose any obligation or liability upon the indemnified
party other than the execution, delivery or approval thereof, and (ii) such
judgment or settlement includes as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a full release and
discharge (in form and substance reasonably satisfactory to such indemnified
party) from all liability in respect of such claim for all persons that may be
entitled to or obligated to provide indemnification or contribution under this
Section 5.
(d) Indemnification similar to that specified in the preceding
subsections of this Section 5 (with appropriate modifications) shall be given by
Harken and Momentum with respect to any required registration or qualification
of securities under any state securities or blue sky laws.
(e) If the indemnification provided for in this Section 5 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b), then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages, fines, liabilities or expenses (or actions or proceedings in
respect thereof) referred to in subsection (a) or (b) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the indemnified party on the other in connection with the statements,
omissions, actions or inactions which resulted in such losses, claims, damages,
fines, liabilities or expenses as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and the indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or the indemnified party, any action or inaction by any such
party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement, omission, action or inaction.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, fines, liabilities or expenses (or actions or proceedings in
respect thereof) pursuant to this subsection (e) shall be deemed to include,
without limitation, any reasonable legal
8
or other expenses incurred by such indemnified party in connection with
investigating or defending any such action or claim (which shall be limited as
provided in subsection (c) if the indemnifying party has assumed the defense of
any such action in accordance with the provisions thereof) which is the subject
of this subsection (e). No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Promptly after receipt by an indemnified party under this
subsection (e) of written notice of the commencement of any action, suit,
proceeding, investigation or threat thereof made in writing with respect to
which a claim for contribution may be made against an indemnifying party under
this subsection (e), such indemnified party shall, if a claim for contribution
in respect thereof is to be made against an indemnifying party, give written
notice to the indemnifying party in writing of the commencement thereof (if the
notice specified in subsection (c) has not been given with respect to such
action); provided, however, that the failure to so notify the indemnifying party
shall not relieve it from any obligation to provide contribution which it may
have to any indemnified party under this subsection (e) except to the extent
that the indemnifying party is actually prejudiced by the failure to give
notice.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this paragraph were determined by pro rata allocation
or by any other method of allocation which does not take account the equitable
considerations referred to in the immediately preceding paragraph.
If indemnification is available under this Section 5, the indemnifying
parties shall indemnify each indemnified party to the fullest extent provided in
subsections (a) and (b), without regard to the relative fault of said
indemnifying party or any other equitable consideration provided for in this
paragraph. The provisions of this paragraph shall be in addition to any other
rights to indemnification or contribution which any indemnified party may have
pursuant to law or contract, shall remain in full force and effect regardless of
any investigation made by or on behalf of any indemnified party, and shall
survive the transfer of any Registrable Securities by any such party.
(f) In connection with any underwritten offering contemplated by this
Agreement which includes Registrable Securities, Harken and Momentum shall agree
to customary provisions for indemnification and contribution (consistent with
the other provisions of this Section 5) in respect of losses, claims, damages,
fines, liabilities and expenses of the underwriters of such offering.
SECTION 6. SELECTION OF UNDERWRITERS.
(a) If any registration effected pursuant to Section 2 is an
underwritten offering, or a reasonable best efforts underwritten offering, the
investment banker or investment bankers and manager or managers that will
administer the offering shall be selected by Harken; provided, however, that any
such investment banker or manager shall be reasonably satisfactory to Momentum.
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SECTION 7. RULE 144. Harken covenants to Momentum that, Harken shall
(a) timely file the reports required to be filed by it under the Exchange Act or
the Securities Act (including, but not limited to, the reports under Section 13
and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144
adopted by the Commission under the Securities Act), and (b) take such further
action as Momentum may reasonably request, all to the extent required from time
to time to enable Momentum to sell Registrable Securities without registration
under the Securities Act within the limitations of the exemption provided by
Rule 144 under the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the Commission.
Upon the request of Momentum, Harken shall deliver to Momentum a written
statement as to whether it has complied with such requirements.
SECTION 8. MISCELLANEOUS.
(a) Momentum agrees as follows:
(i) If any Registrable Securities are being registered in any
registration pursuant to this Agreement, Momentum will comply with all
anti-stabilization, manipulation and similar provisions of Section 10 of the
Exchange Act, as amended, and any rules promulgated thereunder by the Commission
and, at the request of Harken, will execute and deliver to Harken and to any
underwriter participating in such offering, an appropriate agreement to such
effect.
(ii) At the end of any period during which Harken is obligated
to keep a registration statement current and effective as described herein,
Momentum shall discontinue sales thereof pursuant to such registration
statement.
(b) All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by the internal law, and not
the law of conflicts, of the State of Texas.
(c) Momentum shall not assign its rights or obligations under this
Agreement, nor delegate any of or all of its obligations under this Agreement,
to any person or entity (including without limitation any transferee of any
Registrable Securities); and, except as required under the laws of descent and
distribution, no transferee of any Registrable Securities shall have any rights
granted under this Agreement as a result of the transfer of any Registrable
Securities to such transferee; provided, however, that Momentum may assign its
rights to any affiliated entity to which it transfers all or a part of the
Registrable Securities. This Agreement shall be binding upon and shall inure to
the benefit of the Company and Momentum and to their respective heirs, legal
representatives, and with respect to Harken, its assignees.
(d) All covenants and agreements in this Agreement by or on behalf of
any of the parties hereto will bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not.
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(e) Except as may be provided in the Exchange Agreement, (i) this
Agreement is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter herein
contained, (ii) there are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein, with respect to the
registration rights granted by Harken to Momentum, and (iii) this Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(f) All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given (i) upon receipt, when delivered
personally or sent by reputable express courier service (charges prepaid), (ii)
two business days after mailing if mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid, or (iii) upon
receipt if sent by telefax, in each case to the parties at the following address
(or to such other address or to the attention of such other person as the
recipient party has specified by prior like notice to the sending party):
If to Harken:
Harken Energy Corporation
5605 N. MacArthur, Suite 400
Irving, Texas 75038
Telecopier No.: (214)753-6955
Attention: Mikel D. Faulkner, Chairman
with a copy to:
Larry E. Cummings, General Counsel
If to Momentum:
Momentum Operating Co., Inc.
232 South Main
P.O. Box 578
Albany, Texas 76340
Telecopier No.: (915) 762-3332
Attention: Michael J. Parsons, President
(g) If any provision of this Agreement is held to be unenforceable,
this Agreement shall be considered divisible and such provision shall be deemed
inoperative to the extent it is deemed unenforceable, and in all other respects
this Agreement shall remain in full force and effect; provided, however, that if
any such provision may be made enforceable by limitation thereof, then such
provision shall be deemed to be so limited and shall be enforceable to the
maximum extent permitted by applicable law.
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(h) This Agreement may be executed by the parties hereto in any number
of counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same agreement.
(i) The First Registration Rights Agreement shall, unless the Exchange
Agreement shall be terminated in accordance with Section 1 thereof, be
terminated and of no further force or effect and this Agreement shall supersede
the First Registration Rights Agreement in all respects.
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IN WITNESS WHEREOF, the parties have executed this Agreement this
11th day of July, 1996.
HARKEN ENERGY CORPORATION
/s/ GREGORY S. PORTER
Gregory S. Porter
Vice President - Legal
MOMENTUM OPERATING CO., INC.
By: /s/ MICHAEL J. PARSONS
Name: Michael J. Parsons
Title: President
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