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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Harken Energy Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Harken Energy Corporation
- --------------------------------------------------------------------------------
(Name of Persons(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
_______________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_______________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
_______________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
_______________________________________________________________________
(5) Total fee paid:
_______________________________________________________________________
[x] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
___________________________________________________________
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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HARKEN ENERGY CORPORATION
5605 N. MACARTHUR BOULEVARD, SUITE 400
IRVING, TEXAS 75038
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 11, 1996
Notice is hereby given that the Annual Meeting of Stockholders (the
"Annual Meeting") of Harken Energy Corporation, a Delaware corporation
("Harken"), will be held at the Houston Marriott Westside, 13210 Katy Freeway,
Houston, Texas 77079, on Tuesday, June 11, 1996, at 5:00 p.m., local time, for
the following purposes:
(1) To approve an amendment to Harken's Certificate of
Incorporation increasing the number of authorized shares of
common stock, $.01 par value per share (the "Common Stock"),
from 100,000,000 to 125,000,000;
(2) To approve an amendment to the Harken Energy Corporation 1993
Stock Option and Restricted Stock Plan to increase the number
of shares of Common Stock authorized for issuance under the
plan from 3,000,000 to 4,000,000;
(3) To elect three Class C Directors of Harken to hold office in
accordance with Harken's Certificate of Incorporation until
the 1999 Annual Meeting of Stockholders and until their
respective successors shall be duly elected and qualified; and
(4) To transact such other business as may properly be brought
before the Annual Meeting or any adjournment or postponement
thereof.
The Board of Directors has fixed the close of business on April 22,
1996 as the date of record for determining the stockholders entitled to notice
of and to vote, either in person or by proxy, at the Annual Meeting and any
adjournment or postponement thereof.
Harken's Annual Report on Form 10-K/A, a Proxy Statement containing
information relating to the matters to be acted upon at the Annual Meeting and
a form of Proxy accompany this Notice.
You are cordially invited to attend the Annual Meeting. WHETHER OR
NOT YOU PLAN TO ATTEND, YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN YOUR
PROXY SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND IN
ORDER THAT THE PRESENCE OF A QUORUM MAY BE ASSURED. Your vote is important.
The giving of such proxy does not affect your right to revoke it later or vote
your shares in person if you should attend the Annual Meeting.
By Order of the Board of Directors
Larry E. Cummings
Secretary
Irving, Texas
April 25, 1996
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HARKEN ENERGY CORPORATION
5605 N. MACARTHUR BOULEVARD, SUITE 400
IRVING, TEXAS 75038
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 11, 1996
SOLICITATION OF PROXIES
The accompanying proxy is solicited on behalf of the Board of
Directors of Harken Energy Corporation, a Delaware corporation ("Harken"), in
connection with the Annual Meeting of Stockholders (the "Annual Meeting"),
which will be held at the Houston Marriott Westside, 13210 Katy Freeway,
Houston, Texas 77079 on Tuesday, June 11, 1996, at 5:00 p.m., local time, and
at any adjournments or postponements thereof, for the purposes set forth in the
accompanying notice. This Proxy Statement and the accompanying Proxy will
first be mailed to stockholders of record on or about April 25, 1996.
RECORD DATE AND VOTING SECURITIES
The Board of Directors has fixed the close of business on April 22,
1996 as the Record Date (herein so called) for determining the holders of
common stock, $.01 par value per share, of Harken ("Common Stock") entitled to
notice of and to vote, either in person or by proxy, at the Annual Meeting.
The shares of Common Stock are the only shares of capital stock entitled to
vote at the Annual Meeting. On April 22, 1996, Harken had 77,988,688 shares of
Common Stock outstanding.
QUORUM; VOTING
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Annual Meeting. Abstentions and broker non-votes
are counted for purposes of determining whether a quorum is present. If a
quorum is not present or represented by proxy, the stockholders entitled to
vote thereat, present in person or represented by proxy, have the power to
adjourn the meeting from time to time, without notice other than an
announcement at the meeting until a quorum is present or represented. At any
such adjourned meeting at which a quorum is presented or represented, any
business may be transacted that might have been transacted at the meeting as
originally called.
On all matters (other than the election of directors) submitted to a
vote of the stockholders at the Annual Meeting or any adjournment thereof, each
stockholder will be entitled to one vote for each share of Common Stock owned
of record by such stockholder at the close of business on April 22, 1996. In
the election of Directors, each holder of Common Stock will be entitled to
cumulate his or her votes by voting the total number of shares of Common Stock
held by such stockholder multiplied by the number of Directors to be elected,
as such stockholder may see fit. Any holder of Common Stock who intends to
cumulate his or her votes is required to give written notice of such intention
to the Secretary of Harken on or before the day preceding the election at which
such holder intends to cumulate his or her votes. Notice may be given on the
Proxy. All holders of Common Stock may cumulate their votes if any holder has
given such written notice. Discretionary authority to cumulate votes is not
being solicited.
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Abstentions and broker non-votes will be treated as a vote against the
proposed amendment to Harken's Certificate of Incorporation. Abstentions will
be treated as a vote against and broker non-votes will have no effect on the
amendment to the Harken Energy Corporation 1993 Stock Option and Restricted
Stock Plan. Abstentions and broker non- votes will have no effect on the
election of nominees to the Board of Directors.
ACTIONS TO BE TAKEN UNDER THE PROXY
Proxies which are properly executed and returned will be voted at the
meeting and any adjournment thereof in accordance with the instructions
thereon. Any proxy upon which no instructions have been indicated with respect
to a specified matter will be voted as follows with respect to such matters:
(1) FOR approval of an amendment to Harken's Certificate of
Incorporation increasing the authorized number of shares of
Common Stock from 100,000,000 to 125,000,000;
(2) FOR approval of an amendment to the Harken Energy Corporation
1993 Stock Option and Restricted Stock Plan to increase the
number of shares of Common Stock authorized for issuance under
the plan from 3,000,000 to 4,000,000; and
(3) FOR election of management's three Class C Directors to serve
until 1999.
Each of the nominees for election as directors has agreed to serve if
elected. Harken knows of no reason why any of the nominees for election as
directors would be unable to serve. Should any or all of the nominees be
unable to serve, all proxies returned to Harken will be voted in accordance
with the best judgement of the persons named as proxies except where a contrary
instruction is given.
Harken knows of no other matters, other than those stated above, to be
presented for consideration at the meeting. If, however, other matters
properly come before the meeting or any adjournments thereof, it is the
intention of the persons named in the accompanying proxy to vote such proxy in
accordance with their judgement on any such matters. The persons named in the
accompanying proxy may also, if it is deemed advisable, vote such proxy to
adjourn the meeting from time to time.
PROXY SOLICITATION
The expense of the solicitation of proxies will be borne by Harken.
Solicitation of proxies may be made in person or by mail, telephone or
telegraph by directors, executive officers and other employees of Harken.
Harken will request banking institutions, brokerage firms, custodians, nominees
and fiduciaries to forward solicitation material to the beneficial owners of
Common Stock held of record by such persons, and Harken will reimburse such
entities for their reasonable out-of-pocket expenses. Harken has retained the
services of Georgeson & Company, Inc. to solicit proxies by mail, telephone,
telegraph or personal contact. The estimated cost of the professional
solicitation will be approximately $8,500 plus out-of-pocket expenses.
REVOCATION OF PROXY
Any stockholder returning the accompanying proxy may revoke such proxy
at any time prior to its exercise (a) by giving written notice to the Secretary
of Harken of such revocation; (b) by voting in person at the meeting; or (c) by
executing and delivering to the Secretary of Harken a later dated proxy.
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PROPOSAL ONE: INCREASE IN AUTHORIZED CAPITAL STOCK
Harken's Certificate of Incorporation provides for 100,000,000 shares
of Common Stock. The proposed amendment to Harken's Certificate of
Incorporation would amend the first paragraph of Article Four of the
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 100,000,000 shares to 125,000,000 shares. The text of this
amended first paragraph of Article Four is set forth below:
"The aggregate number of shares which the Corporation shall
have the authority to issue is one hundred thirty-five million
(135,000,000), of which one hundred twenty-five million (125,000,000)
shall be designated as Common Stock of the par value of One Cent
($.01) per share and ten million (10,000,000) shall be designated as
Preferred Stock of the par value of One Dollar ($1.00) per share."
At April 22, 1996, 77,988,688 shares of Common Stock were issued and
outstanding and an additional 21,479,171 shares of Common Stock were reserved
for future issuance, including issuance in connection with Harken's outstanding
stock options, outstanding warrants and Harken's 8% Senior Convertible Notes
which are convertible into Common Stock, leaving a balance of 532,141 shares of
Common Stock available for other purposes. The Board of Directors believes
that it is in the best interest of Harken to increase the authorized number of
shares of Common Stock at this time. If the amendment to Harken's Certificate
of Incorporation is adopted by the stockholders at the Annual Meeting, Harken
will have 25,532,141 shares of Common Stock available for issuance in addition
to the shares of Common Stock currently reserved for future issuance. Although
Harken has not made any decision respecting the issuance of additional shares
of Common Stock except as described below under "Conversion of Momentum
Promissory Note," the Board of Directors believes that the proposed amendment
to the Certificate of Incorporation will provide Harken with the additional
flexibility for possible future financing transactions, acquisitions, employee
benefit plans, and other corporate purposes.
A principal strategy of Harken is to pursue opportunities for
expansion through acquisitions. The Board of Directors believes that it is
desirable to have additional authorized shares of Common Stock available for
issuance in connection with possible future acquisitions. Although Harken
continues to review numerous acquisition opportunities, Harken does not
currently have any agreements or understandings regarding any possible future
acquisitions which would require Harken to issue any shares of Common Stock.
Having additional authorized shares of Common Stock available for issuance,
however, provides Harken with greater flexibility should opportunities arise
that require prompt action and may allow such shares to be issued without the
delay and expense of seeking stockholder approval each time. Further
authorization for the issuance of such Common Stock by a vote of the
stockholders would not be solicited prior to such issuance unless required by
law or regulation of applicable authority. In the event that shares of such
Common Stock were issued, other than pursuant to a stock spilt or stock
dividend, the percentage ownership of Harken of each stockholder would be
proportionately reduced. No other rights of stockholders would be affected.
Stockholders have no preemptive right to subscribe for or purchase any
additional shares of Common Stock issued by Harken.
CONVERSION OF MOMENTUM PROMISSORY NOTE
If the proposed amendment to the Certificate of Incorporation is
approved by the stockholders at the Annual Meeting, Harken intends to use a
portion of the increased number of authorized shares of Common Stock to convert
an outstanding promissory note of Harken Exploration Company, a wholly owned
subsidiary of Harken ("Harken Exploration"), in the principal amount of
$13,000,000 (the "Momentum Note") held by Momentum Operating Co., Inc.
("Momentum) into shares of Common Stock. The Momentum Note was issued to
Momentum pursuant to a Purchase and Sale Agreement (the "Purchase and Sale
Agreement"), dated December 15, 1995, between Harken, Momentum and Harken
Exploration. The transactions contemplated by the Purchase and Sale Agreement
were consummated on December 21, 1995. Pursuant to the Purchase and Sale
Agreement, Harken Exploration acquired all of Momentum's working interests in
certain producing oil and gas leases located on approximately 6,800 acres in
Hutchinson County, Texas, a gas gathering system located thereon, property and
equipment related thereto and the surface rights to a 161 acre tract of land
(the "Properties"), in exchange for, among other consideration, 2,500,000
shares of Common Stock
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of Harken (the "Purchase Shares"), $2,500,000 in cash and the Momentum Note.
The consideration for the acquisition of the Properties was determined through
arms-length negotiations between the parties. Harken stockholder approval was
not required for this transaction. As a result of the acquisition of the
Properties, the total assets of Harken increased by 40%, and the net present
value of Harken's oil and gas reserves increased by over 250% to approximately
$59 million.
The Momentum Note, which was issued by Harken Exploration, bears
interest at 5% per annum as to $8,000,000 in principal amount only, is secured
by Harken Exploration's interest in the Properties (but is otherwise a
non-recourse note) and has not been guaranteed by Harken. The Momentum Note
matures and becomes payable in two stages. On November 7, 1996, $8,000,000 in
principal amount of the Momentum Note, subject to adjustment as described
below, will mature and become payable ("Maturity I"). The remaining $5,000,000
in principal amount of the Momentum Note, subject to adjustment as described
below, is non-interest bearing and 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 as described below, such principal amount
will mature and become payable on the earlier of (i) the expiration of 270 days
following the date upon which the Securities and Exchange Commission declares
effective a registration statement covering the resale of the shares of Common
Stock issued at Maturity I or (ii) November 15, 1997.
Pursuant to the Purchase and Sale Agreement, Harken Exploration (with
the consent of Harken) may elect to convert the amounts due at either or both
of Maturity I and Maturity II into shares of Common Stock, with the number of
shares to be issued at Maturity I to be determined by dividing the amount due
at Maturity I by the average of the closing prices of the Common Stock on the
American Stock Exchange during the period beginning on January 22, 1996 and
ending ten (10) trading days prior to Maturity I (the "Maturity I Average
Trading Price") and the number of shares to be issued at Maturity II to be
determined by dividing the amount due at Maturity II by the average of the
closing prices of the Common Stock on the American Stock Exchange during the
period beginning upon the date which a registration statement covering the
resale of the shares of Common Stock issued at Maturity I is declared effective
and ending ten (10) trading days prior to Maturity II (the "Maturity II Average
Trading Price").
The principal amount due at Maturity I is subject to adjustment as
follows: (i) the principal amount due will be reduced by an amount equal to (x)
the value of any title, mechanical or environmental defects with respect to the
Properties discovered by Harken Exploration after closing and (y) the amount of
costs, expenses, or losses suffered by Harken Exploration as a result of a
breach of Momentum's representations and warranties contained in the Purchase
and Sale Agreement, up to a maximum of $800,000; (ii) the principal amount will
be adjusted in an amount equal to the difference between $500,000 and the net
revenue which was received by Momentum with respect to sales of oil and gas
from the Properties between July 1, 1995 and December 21, 1995; (iii) the
principal amount will be adjusted in an amount equal to the difference between
(x) the greater of the amount realized by Momentum upon the sale of the
Purchase Shares or the amount which could have been realized by Momentum if the
Purchase Shares were sold at the Maturity I Average Trading Price and (y) $2.00
per share multiplied by the number of shares of Common Stock sold by Momentum
between December 21, 1995 and Maturity I; (iv) the principal amount will be
increased by a factor equal to 10% per annum of the weighted average of the
daily differences between $5,000,000 and the aggregate proceeds received by
Momentum upon the sale of the Purchase Shares; and (v) the principal amount
will be increased by $200,000.
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 greater of the amount realized by Momentum upon the
sale of the shares of Common Stock issued to Momentum at Maturity I or the
amount which could have been realized by Momentum if such shares were sold at
the Maturity II Average Trading Price and (y) Maturity I Average Trading Price
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 10% per annum of the weighted average of the daily
differences 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.
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Pro forma financial statements reflecting the acquisition of the
Momentum Properties and audited statements of revenues and direct operating
expenses of the Momentum Properties for the fiscal years ended July 31, 1993,
1994 and 1995 contained in Harken's Current Report on Form 8-K/A dated December
21, 1995, and the audited financial statements of Harken for the fiscal years
ended December 31, 1993, 1994 and 1995 and Management's Discussion and Analysis
of Financial Condition and Results of Operations contained in Harken's Annual
Report on Form 10-K/A for the fiscal year ended December 31, 1995 (a copy of
which is being distributed with this Proxy Statement) are hereby incorporated
herein by reference. In addition, copies of the Purchase and Sale Agreement
and the Momentum Note have been filed with the Securities and Exchange
Commission as exhibits to Harken's Current Report on Form 8-K/A dated December
21, 1995 and are available free of charge upon written request directed to:
Harken Energy Corporation, 5605 N. MacArthur, Suite 400, Irving, Texas 75038,
Attention: Gregory S. Porter.
If the proposed amendment to the Certificate of Incorporation is
approved by the stockholders at the Annual Meeting, Harken currently intends to
use a portion of the increased number of authorized shares of Common Stock to
convert the amount due at Maturity I under the Momentum Note into shares of
Common Stock. Harken is not able at this time to determine the exact number of
shares of Common Stock which Harken may issue at Maturity I. However, as
described above, the number of shares of Common Stock to be issued will be
based upon the total amount, including aggregate adjustments and accrued
interest, due under the Momentum Note at Maturity I and upon the Maturity I
Average Trading Price. The trading range of the Common Stock during 1996 has
been between $1.50 and $2.25. Without considering the effect of any
adjustments to the amount which will be due at Maturity I, and if the Maturity
I Average Trading Price were equal to $1.88, the midpoint of the recent trading
range of the Common Stock, Harken would be required to issue approximately
4,250,000 shares of Common Stock if Harken elects to convert the amount due at
Maturity I into shares of Common Stock. The number of shares which may
actually be issued at Maturity I, however, could be significantly more or less
than 4,250,000. In addition, Harken currently plans to elect to convert the
amount due at Maturity II into shares of Common Stock.
Harken does not currently have a sufficient number of authorized and
unissued shares of Common Stock which have not previously been reserved for
other purposes to be able to convert the amounts due under the Momentum Note at
Maturity I or Maturity II into shares of Common Stock. Harken believes,
however, that it will have a sufficient number of shares available to convert
the amount due at Maturity I as certain shares currently reserved for future
issuance are not expected to be used for their intended purpose. If the
proposed amendment to Harken's Certificate of Incorporation is not approved by
the stockholders at the Annual Meeting and if the shares previously reserved do
not become available, Harken Exploration will not be able to exercise its
option to convert the amounts due at Maturity I into shares of Common Stock.
Harken and Harken Exploration do not currently have sufficient cash reserves,
nor do they anticipate that they will generate sufficient cash flow from
operations to be able to repay the amount anticipated to be due at Maturity I.
In the event that Harken Exploration is unable to convert the amount due at
Maturity I into shares of Common Stock, Harken anticipates that it would be
required to seek additional sources of financing in order to repay such amount.
There can be no assurance such financing could be secured on terms acceptable
to Harken. If Harken Exploration were unable to timely pay the amount due at
Maturity I, Momentum would be entitled to assume operations of the Properties
and to receive a substantial portion of the proceeds therefrom until such
amount were repaid, which could have a material adverse effect on the financial
condition of Harken.
VOTE REQUIRED TO APPROVE AMENDMENT TO HARKEN'S CERTIFICATE OF INCORPORATION
The adoption of the proposal to amend Harken's Certificate of
Incorporation to increase the authorized number of shares of Common Stock
requires the affirmative vote of the holders of a majority of the issued and
outstanding shares of Common Stock entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF AN
AMENDMENT TO HARKEN'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK.
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PROPOSAL TWO: AMENDMENT TO 1993 STOCK OPTION AND RESTRICTED STOCK PLAN
The Board of Directors and the Compensation Committee (the
"Committee") have determined that it is in the best interest of Harken and its
stockholders to amend the Harken Energy Corporation 1993 Stock Option and
Restricted Stock Plan (the "Plan") to increase the number of shares of Common
Stock authorized for issuance under the Plan from 3,000,000 to 4,000,000.
Harken has historically used stock options to attract, retain and
motivate key employees and directors, by providing them incentives to enhance
the growth and profitability of Harken. The Plan furthers these objectives by
providing incentives to persons with experience and ability to remain in the
employ of Harken or its subsidiaries, by allowing Harken to attract new
employees and consultants whose services are considered valuable to Harken or
its subsidiaries and by encouraging a proprietary interest by such persons in
the development and financial success of Harken.
As of April 22, 1996, there were only 170,000 shares of Common Stock
available for the grant of options under the Plan. The Board of Directors
believes that this is not a sufficient number of shares of Common Stock to
accomplish the objectives described above. The inclusion of 1,000,000
additional shares of Common Stock subject to the Plan will enable Harken to
further promote these objectives.
The Plan was initially approved by the Board of Directors in 1993.
The Plan provides for the grant to selected employees and consultants of Harken
of (i) options to purchase shares of Common Stock and (ii) shares of restricted
stock. The stockholders approved the Plan in June 1993, at the Annual Meeting
of the Stockholders. The options granted under the Plan are intended to be
either incentive stock options ("Incentive Stock Options") within the meaning
of Section 422 of the Internal Revenue Code or options that do not meet the
requirements for Incentive Stock Options ("Nonstatutory Options").
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PRIOR GRANTS OF PLAN AWARDS
As of April 22, 1996, options exercisable for 2,830,000 shares of
Common Stock had been previously granted pursuant to the Plan.
AMOUNT OF STOCK SUBJECT TO THE PLAN
Under the terms of the Plan as it currently exists, Harken may grant
(i) options ("Options") to purchase shares of Common Stock, and (ii) awards of
shares of Common Stock containing certain restrictions ("Restricted Stock")
(collectively, grants of Options and Restricted Stock are referred to in this
Proxy Statement as "Plan Awards") with respect to an aggregate of 3,000,000
shares of Common Stock. If the proposal to amend the Plan is adopted by the
stockholders at the Annual Meeting, the number of shares of Common Stock
available for issuance under the Plan will be increased from 3,000,000 to
4,000,000.
ADMINISTRATION OF THE PLAN
The Committee shall administer the Plan. The Committee shall consist
of at least two persons and all Committee members shall be "disinterested
persons" within the meaning of Rule 16b-3 (or any successor rule or regulation)
promulgated under the Security Exchange Act of 1934, as amended.
ELIGIBILITY OF PLAN AWARDS
Plan Awards may be granted to selected employees and consultants of
Harken or its subsidiaries (the "Participants") in consideration for services
provided to Harken or its subsidiaries; provided, however, that no Incentive
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Stock Option may be granted to any individual who is not an employee of Harken
or one of its subsidiaries on the date of grant. Harken currently has two
persons serving as directors who are also employees of Harken. Any
employee-director is eligible to receive Plan Awards, unless such person serves
on the Committee.
Participation in the Plan will be determined in the sole discretion of
the Committee. The committee has not made any determinations as to the
recipient of any future Plan Awards, including any Plan Awards with respect to
the additional shares of Common Stock which will be subject to the Plan if this
proposal is adopted by the stockholders at the Annual Meeting. Therefore, the
number of Participants participating in the Plan in the next fiscal year and
the benefits or amounts that will be received by or allocated to each of the
Participants cannot be determined precisely. Similarly, the benefits which
will be allocated to the executive officers cannot be determined at this time.
OPTIONS UNDER THE PLAN
The exercise price for any Incentive Stock Option granted under the
Plan shall be not less than 100% of the fair market value per share on the date
of grant of such Option. In the event that an Incentive Stock Option is
granted to any person who, at the time such Incentive Stock Option is granted,
owns more than ten percent of the total combined voting power of all classes of
shares of Harken or of any subsidiary corporation of Harken (a "Ten Percent
Shareholder"), then the exercise price of the shares shall be not less than
110% of the fair market value of the shares on the date the Option is granted.
The exercise price under any Nonstatutory Option granted under the Plan shall
be such amount as the Committee may deem appropriate. If there is a public
market for the Common Stock and it is listed on a stock exchange, fair market
value means the closing sales price of the Common Stock per share as reported
in the Wall Street Journal as of the date of grant.
Any Option granted under the Plan is exercisable at such times, under
such conditions (including, without limitation, performance criteria with
respect to Harken and/or the optionee), in such amounts and during such period
or periods as the Committee determines on the date of the grant of such Option
is granted. Such Options, however, shall not be exercisable after the
expiration of ten years from the date such Option is granted. In the case of
an Incentive Stock Option granted to a Ten Percent Shareholder, the Options
shall not be exercisable after the expiration of five years from the date such
Option is granted.
Payment for the shares upon exercise of an Option shall be made in
cash, by certified check or, if authorized by the Committee, by delivery of
other shares of Common Stock having a fair market value on the date of delivery
equal to the aggregate exercise price of the shares as to which Option is being
exercised, or by any combination of such methods or by any other method of
payment as may be permitted by applicable law.
To the extent that the aggregate fair market value (determined on the
date of grant) of the shares with respect to which an Incentive Stock Option is
exercisable for the first time by an individual during any calendar year under
the Plan and all other plans maintained by Harken exceeds $100,000, the Option
will not be treated as an Incentive Stock Option.
The Committee may establish procedures under the Plan for an Optionee:
(a) to pay the exercise price for the shares by withholding from the total
number of shares to be acquired upon exercise of an Option that number of
shares having a fair market value equal to the exercise price; (b) to have
withheld from the total number of shares to be acquired, in the same manner as
(a) above, the withholding obligation for federal and state income and other
taxes; and (c) to exercise a portion of the Option by delivering already-owned
shares in payment of the exercise price.
In general, if an Optionee ceases to be an employee or consultant of
Harken, as the case may be, for reasons other than Permanent and Total
Disability or Death, he will have until the earlier of (i) 90 days in the case
of an Incentive Stock Option, and six months in the case of a Non-statutory
Option or (ii) the date the Option expires to exercise the Option, to the
extent the Optionee was entitled to exercise the Option on the date of
termination.
7
<PAGE> 10
If an Optionee is unable to continue to perform services for Harken or
any of its subsidiaries as a result of Permanent and Total Disability he will
have until the earlier of 12 months from the date of such disability or the
date the Option expires to exercise the Option, in whole or in part, to the
extent the Optionee was entitled to exercise the Option on the date of such
disability. In the case of an Incentive Stock Option, the Optionee must have
been an employee since the date of grant and must be an employee on the date of
Permanent and Total Disability, to take advantage of this provision.
In the case of death of an Optionee, the same rule applies as in the
case of Permanent and Total Disability, above.
An Option granted under the Plan may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of ERISA, or the rules
thereunder, and is not assignable by operation of law or subject to execution,
attachment or similar process.
RESTRICTED STOCK UNDER THE PLAN
The Committee may grant awards of Restricted Stock under the Plan in
accordance with the terms and conditions set forth in an agreement between
Harken and the Participant. Restricted Stock may be granted by the Committee
either separately or in combination with Options. Each grant of Restricted
Stock shall require a Participant to remain an employee or consultant of Harken
or its subsidiaries for at least six months from the date of grant. Restricted
Stock shall be granted to Participants for services rendered to Harken, and at
no additional cost to the Participant; provided, however, that the value of
such services must equal or exceed the par value of the Restricted Stock
granted to the Participant.
Harken shall establish a Restricted Stock Account for each
Participant, to which Restricted Stock granted to the Participant shall be
credited. Every credit of Restricted Stock shall be merely a bookkeeping entry
and every grant of Restricted Stock shall be considered contingent and unfunded
until the restrictions lapse. During the period of restriction such accounts
shall be subject to the claims of Harken's creditors. No Participants shall
have any rights in his Restricted Stock Account other than those of an
unsecured general creditor of Harken. On the date the restrictions lapse, the
Restricted Stock shall vest in the Participant.
The terms, conditions and restrictions of the Restricted Stock shall
be determined by the Committee on the date of grant. The restrictions shall
lapse based upon performance measures, targets, holding period requirements and
other criteria established by the Committee. Such criteria may vary among the
grants of Restricted Stock; provided, however, that once the Restricted Stock
has been granted and the criteria are established, such criteria may not be
further modified with respect to such grant. The Restricted Stock may not be
sold, assigned, transferred, redeemed, pledged or otherwise encumbered during
the period that the restrictions apply.
The Committee, in its sole discretion, may establish procedures by
which a Participant may defer the transfer of Restricted Stock to the
Participant.
The Committee may provide from time to time that amounts equivalent to
dividends paid with respect to Common Stock be payable with respect to the
Restricted Stock held in the Restricted Stock Account. Such amounts shall be
credited to the Restricted Stock Account but shall be payable to the
Participant only when the restrictions lapse.
If a Participant, with the consent of the Committee, ceases to be an
employee or ceases to provide services to Harken or any of its subsidiaries, or
suffers a Permanent and Total Disability or dies, the vesting or forfeiture of
a Participant's Restricted Stock shall be determined by the Committee, in its
sole discretion. A Participant who ceases to be an employee or to perform
services for Harken or any of its subsidiaries for any other reason shall
forfeit all of his grants of Restricted Stock which are still under
restriction.
8
<PAGE> 11
CAPITALIZATION ADJUSTMENTS; MERGER; CHANGE IN CONTROL
Subject to any required action by the stockholders of Harken, the
number of shares covered by each outstanding Option (as well as the exercise
price covered by any outstanding Option), the number of shares of Restricted
Stock granted (but still subject to restrictions) and the aggregate number of
shares that have been authorized for issuance under the Plan, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by Harken.
Unless otherwise provided by the Committee, any Options and grants of
Restricted Stock shall terminate immediately prior to the consummation of a
proposed dissolution or liquidation of Harken, a proposed sale of all or
substantially all of the assets of Harken, or the proposed merger or
consolidation of Harken with or into another corporation. The Committee may,
in the exercise of its sole discretion, in such instances declare that any
Option shall terminate as of a date fixed by the Committee and give each
Optionee the right to exercise his Option as to all or any part of the shares
covered by such Option, including shares as to which the Option would not
otherwise be exercisable.
Subject to the above paragraph, upon a Change in Control (as defined
below) of Harken, (i) all the outstanding Options shall immediately become
fully exercisable, and (ii) any restrictions on the Restricted Stock will lapse
and such Restricted Stock shall immediately vest in the Participant. For these
purposes, a "Change in Control" shall have occurred if: (i) any person other
than Harken or its subsidiaries, or an employee benefit plan of Harken or its
subsidiaries, is or becomes the beneficial owner of 50% or more of the Common
Stock; or (ii) a majority of the present members of Harken's Board of Directors
cease to be members of the Board of Directors.
AMENDMENT OF THE PLAN
The Committee in its sole discretion may, from time to time, amend the
Plan; provided that no amendment will be made without the requisite approval of
the stockholders of Harken, that will (i) change the aggregate number of shares
that may be issued under the Plan, other than any increase or decrease in the
number of issued shares effected without receipt of consideration by Harken,
(ii) change the designation of the Participants eligible to be granted Plan
Awards, or (iii) change the Plan so as to materially increase the benefits
accruing to the Participants under the Plan.
TERM AND TERMINATION OF THE PLAN
The Plan will continue in effect for a term of ten years from the date
initially adopted by Board of Directors, unless sooner terminated. The
Committee may terminate the Plan at any time in its sole discretion. Neither
Restricted Stock nor Options may be granted after the Plan is terminated. The
termination of the Plan, or any amendment thereto, shall not affect any shares
previously issued to a Participant, any Option previously granted under this
Plan or any shares of Restricted Stock previously granted to a Participant.
MISCELLANEOUS
The Plan is not qualified under the provision of Section 401(a) of the
Internal Revenue Code, and is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974, as amended.
FEDERAL INCOME TAX CONSEQUENCES
The following general summary is based upon the Internal Revenue Code
and does not include a discussion of any state or local tax consequences.
Incentive Stock Options.
An optionee does not realize taxable income upon the grant or exercise
of an Incentive Stock Option.
The income tax treatment of any gain or loss realized upon an
Optionee's disposition of shares received upon exercise of an Incentive Stock
Option depends on the timing of the disposition. If the Optionee holds the
shares received
9
<PAGE> 12
upon exercise of an Incentive Stock Option for at least two years from the date
such Incentive Stock Option was granted, or one year from the date of exercise,
the difference (if any) between the amount realized from the sale of such
shares and the Optionee's tax basis will be taxed as long-term capital gain or
loss.
If an Optionee disposes of the shares before the end of the applicable
holding periods described above (i.e., he makes a "disqualifying disposition"),
such Optionee may be deemed to be in receipt of taxable income in the year of
the disqualifying disposition, depending on the selling price. If the selling
price exceeds the fair market value of the Incentive Stock Option on the date
of exercise, the excess of the fair market value over the exercise price is
taxable to the Optionee as ordinary income, and the excess of the selling price
over the fair market value is taxable to the Optionee as capital gain. If the
selling price exceeds the exercise price but not the fair market value on the
date of exercise, the excess of the selling price over the exercise price is
taxable to the Optionee as ordinary income. If the selling price is less than
the exercise price, the difference is treated as capital loss.
Harken is not entitled to a deduction for federal income tax purposes
with respect to the grant or exercise of an Incentive Stock Option or the
disposition of shares acquired upon exercise (if the applicable holding periods
have been met). In the event of a disqualifying disposition, however, Harken
is entitled to a federal income tax deduction in an amount equal to the
ordinary income recognized by the Optionee.
Certain Optionees may be subject to the alternative minimum tax which
in individual cases could reduce or eliminate any tax benefits to them under
the Plan.
Nonstatutory Stock Options.
An Optionee will not recognize any taxable income upon the grant of a
Nonstatutory Option. However, upon exercise of a Nonstatutory Option, an
Optionee must recognize ordinary income in an amount equal to the excess of the
fair market value of the shares at the time of exercise over the exercise
price. Upon the subsequent disposition of the shares, the Optionee will
realize a capital gain or loss, depending on whether the selling price exceeds
the fair market value of the shares on the date of exercise. The Optionee's
holding period in the shares, for capital gains and losses purposes, begins on
the date of exercise.
Different rules may apply with respect to exercises by Optionees
subject to the short-swing profit recapture provisions of Section 16(b) of the
Exchange Act (in general, officers, directors and Ten Percent Shareholders who
have not held their options for at least six months). Section 83 of the
Internal Revenue Code provides that such an Optionee will not recognize
ordinary income upon exercise (and the capital gains holding period will not
begin) if the sale of shares acquired by such Optionee pursuant to an Option
could subject the Optionee to suit under Section 16(b). Such an Optionee would
then recognize ordinary income (and the capital gains holding period would
begin) when the Optionee is no longer subject to suit under Section 16(b).
Persons acquiring shares subject to such a restriction, however, may elect
(within 30 days of exercise of the Option) under Section 83(b) of the Internal
Revenue Code, to be taxed as of the date of exercise, thereby fixing the
ordinary income recognized from the exercise to the spread between the fair
market value on the date of exercise and the exercise price paid for the
shares. Any change in the value of the shares after the date of exercise would
be recognized as capital gain or loss only if and when the shares are disposed
of by the Optionee. If the Section 83(b) election is made, the Optionee's
capital gains holding period begins on the date of exercise.
An Optionee's tax basis in the shares received on exercise of a
Nonstatutory Option will be equal to the amount of consideration paid by the
Optionee on exercise, plus the amount of ordinary income recognized as a result
of the receipt of such shares. Harken will be entitled to a deduction for
federal income tax purposes at the same time and in the same amount as the
Optionee recognizes taxable income, provided that Harken satisfies its
withholding tax obligation with respect to such income.
If an Optionee exercises a Nonstatutory Option by delivering other
shares of Harken, the Optionee will not recognize gain or loss with respect to
the shares delivered by the Optionee, even if the then fair market value of
such shares is different from the Optionee's tax basis therein. The Optionee,
however, will be taxed as described above with respect to the exercise of the
Nonstatutory Option as if he had paid the exercise price in cash, and Harken
likewise
10
<PAGE> 13
generally will be entitled to an equivalent tax deduction. The Optionee's tax
basis in the shares received on such exercise will be equal to his basis in the
number of shares surrendered on such exercise plus the fair market value of the
number of shares received in excess of the number of shares surrendered and the
holding period for such number of shares received will include the holding
period of the shares surrendered.
Restricted Stock.
The Participant will not recognize taxable income upon the grant of
Restricted Stock because the Restricted Stock will be nontransferable and
subject to a substantial risk of forfeiture. The Participant will recognize
ordinary income at the time at which the restrictions that impose a substantial
risk of forfeiture of such shares (the "Restrictions") lapse, in an amount
equal to the fair market value of such shares at such time. The ordinary
income recognized by a Participant with respect to shares awarded pursuant to
the Plan will be deemed compensation income subject to applicable wage
withholding.
A Participant may elect, pursuant to Section 83(b) of the Internal
Revenue Code, to include in gross income the fair market value of the
Restricted Stock, notwithstanding that the Restricted Stock would otherwise not
be included in gross income at that time. If such election is made within 30
days of the date of grant, then the Participant would include in gross income
the fair market value of the Restricted Stock on the date of grant, and any
change in the value of the shares after the date of grant would be capital gain
or capital loss only if and when the shares are disposed of by the Participant.
If the Section 83(b) election is made, the Participant's capital gains holding
period begins on the date of the grant.
If a Section 83(b) election is made and the Participant then forfeits
the Restricted Stock, the Participant may not deduct as an ordinary loss the
amount previously included in gross income.
Dividends received on the shares when the Restrictions on such shares
lapse will be treated as additional compensation, and not dividend income, for
federal income tax purposes and will be subject to applicable wage withholding.
A Participant's tax basis in shares of Restricted Stock received
pursuant to the Plan will be equal to the ordinary income recognized by such
Participant. Unless a Section 83(b) election is made, the Participant's
holding period for such shares for purposes of determining gain or loss on a
subsequent sale will begin on the date the Restrictions on such shares lapse.
In general, Harken will be entitled to a deduction for federal income
tax purposes in an amount equal to the ordinary income recognized by a
Participant with respect to shares of Restricted Stock awarded pursuant to the
Plan, provided that Harken satisfies its withholding obligation with respect to
such income.
If, subsequent to the lapse of Restrictions on his or her shares, the
Participant sells such shares, the difference, if any, between the amount
realized from such sale and the tax basis of such shares to the Participant
will be taxed as long-term or short-term capital gain or loss, depending on
whether the Participant's holding period for such shares exceeds the applicable
holding period at the time of sale.
VOTE REQUIRED TO APPROVE AMENDMENT TO THE PLAN
The adoption of the proposal to amend the Plan to increase the number
of shares of Common Stock subject to the Plan requires the affirmative vote of
the holders of a majority of the total number of shares of Common Stock
present, in person or by proxy, and entitled to vote at the Annual Meeting or
any adjournment thereof.
11
<PAGE> 14
PROPOSAL THREE: ELECTION OF DIRECTORS
The number of directors constituting the full Board of Directors of
Harken has been established as eight (8) in accordance with Harken's Bylaws.
The Certificate of Incorporation provides that the number of Directors be
divided into Classes A, B and C, with staggered terms of three (3) years each.
Three Class C Directors will be elected at the Annual Meeting to hold office
until the 1999 Annual Meeting of Stockholders and until their respective
successors are duly elected and qualified.
NOMINEES FOR ELECTION AS CLASS C DIRECTORS:
<TABLE>
<CAPTION>
Director
Name, Age and Business Experience Since
--------------------------------- ------------------
<S> <C>
DONALD W. RAYMOND (Age - 58) - Consultant to Harken from February 1993
1993 to August 1995; Chairman, CFO and Treasurer of Chuska
Resources Corporation from 1988 to February 1993; Chairman of
Sireen Oil, Inc. from 1984 to present
RICHARD H. SCHROEDER (Age - 51) - President of Harken from March 1994
11, 1994 to present; President and owner of RHS Management, a
consulting firm, from November 1990 to March 1994; President of
Rosewood Resources, Inc. from January 1983 to November 1990.
GARY B. WOOD, PH.D. (Age - 46) - Founder and Chief Executive 1995
Officer of Concorde Financial Corporation, a registered
investment advisor from 1981 to the present; Founder and Chairman
of OmniMed Corporation, a health care and medical technology
investment and management company from 1982 to the present;
Chairman of Positron Corporation, Alpha Holdings and
International Hospital Corporation, and Director of the Baylor
Research Institute, the American British Cowdray Hospital
Foundation in Mexico City, The Health Industry Council and
Concorde Funds, Inc.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RE-ELECTION OF
MESSRS. RAYMOND, SCHROEDER AND WOOD TO THE BOARD OF DIRECTORS.
DIRECTORS CONTINUING IN OFFICE:
<TABLE>
<CAPTION>
Director Term
Name, Age and Business Experience Since Expires
--------------------------------- ----------- -----------
<S> <C> <C>
MICHAEL M. AMEEN, JR. (Age - 72) - From 1989 to present Mr. Ameen 1994 1998
has served as a part time consultant to Harken with regard to
Middle Eastern exploration projects; Independent Consultant on
Middle East Affairs for the past five years; Director of Anera (a
charitable organization); Director of Amideast (a charitable
organization); Director of Middle East Institute.
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
Director Term
Name, Age and Business Experience Since Expires
--------------------------------- ----------- -----------
<S> <C> <C>
MICHAEL R. EISENSON (Age - 40) - Director of ImmunoGen, Inc., a 1987 1998
biopharmaceutical company; Director of Somatix Therapy
Corporation, a biopharmaceutical company; Director of NHP, Inc.;
President and Chief Executive Officer of Harvard Private Capital
Group, Inc., a wholly-owned subsidiary of Harvard Management
Company, Inc., from 1986 to present, which manages the private
equity portfolio of the Harvard University endowment fund.
MIKEL D. FAULKNER (Age - 46) - Chairman of the Board of Harken 1982 1997
since February 1991; CEO of Harken since 1982, and President of
Harken from 1982 until February 1993.
EDWIN C. KETTENBRINK, JR. (Age - 51) - Founder and sole 1993 1997
shareholder of Landmark Environmental, Inc., an environmental
consulting firm since 1989; Vice President of Harken and certain
of its subsidiaries from 1984 to 1989.
TALAT M. OTHMAN (Age - 59) - Director of Hartmarx Corporation; 1987 1998
Chairman and CEO of Grove Financial, Inc.; Chairman of Optimus
Global; Chairman and CEO of Dearborn Financial, Inc., an
investment company, from 1983 to 1995.
</TABLE>
VOTE REQUIRED TO BE ELECTED AS A DIRECTOR
To be elected a Director, each nominee must receive the affirmative
vote of a plurality of the votes duly cast at the Annual Meeting.
DIRECTORS' MEETINGS AND COMMITTEES
During 1995, the Board of Directors held four meetings, which included
two regularly scheduled meetings and two special meetings. The Board of
Directors also acted by written consent twice. The Board of Directors has
standing Audit and Compensation Committees. During 1995, the Audit Committee,
comprised of Messrs. Othman and Kettenbrink held two meetings and reviewed the
financial statements of Harken and received reports and other communications
from Harken's independent auditors. During 1995, the Compensation Committee,
comprised of Messrs. Eisenson and Raymond, held no meetings, but acted by
written consent twice. The Compensation Committee is responsible for selecting
parties eligible for grants of stock options, for making and setting terms for
such grants and for setting compensation for the executive officers of Harken
and its subsidiaries.
Harken does not have a Nominating Committee. Nominations for
directors of Harken are considered by the entire Board. Stockholders wishing
to recommend a candidate for consideration by the Board can do so in writing to
the Secretary of Harken at its corporate offices in Irving, Texas, giving the
candidate's name, biographical data and qualifications. Any such
recommendation must be accompanied by a written statement from the individual
of his or her consent to be named as a candidate and, if nominated and elected,
to serve as a director.
During 1995, each current member of the Board of Directors attended or
acted upon at least seventy-five percent (75%) of (i) the meetings of the Board
of Directors (held during the period during which he was a Director), and (ii)
the meetings of the committees on which he served (held during the periods that
he served on such committees).
13
<PAGE> 16
COMPENSATION OF DIRECTORS
During 1995, each Director who was not also an officer, employee or
full-time consultant of Harken received a director's fee for each meeting of
the Board of Directors or one of its committees which he attended in person in
the amount of $2,000. The aggregate amount paid to each Director during 1995
pursuant to such arrangement was $4,000, except for Messrs. Raymond and Wood
who received $2,000 each, and Mr. Eisenson, who is unable to accept personally
such Director compensation in accordance with the internal policies of Harvard
Management Company. Mr. Eisenson's director fee was paid directly to Harvard
Management Company. Directors who were also officers, employees or full-time
consultants of Harken received no separate compensation for service as
Directors.
CERTAIN MATTERS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
In September 1992, Harken entered into a Consulting Agreement with Mr.
Raymond, a Director of Harken. The Consulting Agreement was entered into as a
result of the negotiations between Harken and Chuska Resources Corporation
("Chuska") regarding the acquisition of Chuska by Harken. At the time of the
execution of the Consulting Agreement, Mr. Raymond was the Chairman of the
Board of Directors and Chief Financial Officer of Chuska. Upon consummation of
the acquisition of Chuska, Mr. Raymond began serving as full-time consultant to
Harken. Mr. Raymond has advised and consulted with management on all phases of
Harken's oil and gas operations, and particularly with respect to Harken's
domestic oil and gas operations and Harken's relationship with the Navaho Tribe
of Indians. The agreement provided that for a period of two years beginning on
February 16, 1993, Mr. Raymond would receive $200,000 per year as compensation
for the consulting services rendered thereunder, an amount equal to his
previous salary received from Chuska, and provided that Mr. Raymond would be
entitled to benefits under Harken's group health, disability and life insurance
for its employees, be eligible to participate in Harken's 401(k) Savings Plan
and 125 Cafeteria Plan and be nominated by Harken to its Board of Directors.
Harken further provided, under the terms of such agreement, an office and
certain office support for Mr. Raymond's use in Walnut Creek, California.
Subsequently, Mr. Raymond agreed to reduce the monthly amount payable under the
consulting agreement and to extend the term of the Consulting Agreement until
such time as Mr. Raymond had received aggregate payments of $400,000 pursuant
to the Consulting Agreement. In 1995, Mr. Raymond received payments of $85,000
under the Consulting Agreement. The Consulting Agreement expired pursuant to
the terms thereof on August 15, 1995 and was not extended. Harken believes
that the compensation paid to Mr. Raymond was reasonable in light of the
services provided and Harken believes that the terms of the Consulting
Agreement were no less favorable to Harken than those which could have been
obtained from an unaffiliated party.
Mr. Kettenbrink provided occasional services to Harken during 1995
through his environmental consulting firm, Landmark Environmental, Inc.
("Landmark"). The total of such fees paid during 1995 to Mr. Kettenbrink
and/or Landmark pursuant to such services rendered was $6,375. Harken has no
contract or agreement with Landmark to utilize its services in preference to
any other firm rendering similar services. Harken believes that the fees
charged by Mr. Kettenbrink's firm are equivalent to those charged by such
firm to unaffiliated parties and are no less favorable to Harken than could
have been obtained by Harken from unaffiliated parties.
Mr. Ameen has served as a part-time consultant to Harken under a
Consulting Agreement since 1989. The Consulting Agreement was entered into
prior to Mr. Ameen becoming a Director of Harken and was the result of
arms-length negotiations. Mr. Ameen primarily consults with Harken concerning
Harken's operations in Bahrain and/ or other Middle East projects and related
matters. During 1995 Mr. Ameen was paid a total of $15,000 in consulting fees
pursuant to such arrangement. This agreement may be terminated by either party
by giving notice to the other prior to the annual renewal date for such
agreement being December 31 each year. Unless so terminated the agreement will
automatically renew for a subsequent one year term under the prior year terms.
Pursuant to an Amended and Restated Agreement and Plan of Merger dated
March 27, 1995, between Harken and Search Exploration, Inc. ("Search"), Harken
agreed to nominate and elect Gary B. Wood, a director of Search at the time, to
Harken's Board of Directors to serve in such position through the 1996 Annual
Meeting. Upon the
14
<PAGE> 17
consummation of the acquisition of Search by Harken, Dr. Wood was elected to
Harken's Board of Directors. Dr. Wood has been renominated by Harken to serve
as a Class C Director for a term expiring in 1999.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
compensation paid during fiscal years 1995, 1994 and 1993 to Harken's Chief
Executive Officer and Harken's four most highly compensated executive officers
other than the Chief Executive Officer (the "named executive officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------------------------------------- ---------------------------------
Securities
Name and Fiscal Other Annual Underlying All Other
Principal Position Year Salary Bonus Compensation Options/SAR's (#) Compensation
------------------ ---- ------ ----- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mikel D. Faulkner 1995 $150,000 -- $ 182,239 (1) 325,000 --
Chairman and Chief 1994 $155,938 -- $ 179,899 325,000 --
Executive Officer 1993 $165,688 $65,000 $ 11,264 91,686 --
Richard H. Schroeder 1995 $150,000 -- $ 9,598 (2) 275,000 --
President and Chief 1994 $120,581(6) -- $ 4,400 400,000 --
Operating Officer 1993 -- -- -- -- --
Bruce N. Huff 1995 $135,000 -- $ 2,596 (3) 100,000 --
Sr. Vice President and 1994 $135,000 -- $ 2,596 225,000 --
Chief Financial 1993 $139,145 $ 89 $ 11,111 -- --
Larry E. Cummings 1995 $105,000 -- $ 2,310 (4) 20,000 --
Vice President, 1994 $105,000 -- $ 2,310 75,000 --
Secretary and 1993 $101,062 $ 89 -- 42,845 --
General Counsel
Stephen C. Voss 1995 $102,000 -- $ 3,276 (5) 100,000 --
Sr. Vice President 1994 $102,000 -- $ 2,984 225,000 --
1993 $ 99,961 $25,089 $ 20,942 -- --
</TABLE>
__________________________
(1) Includes $6,656 relating to use of a company car, $2,250 of 401(k)
matching and $173,333 of debt forgiveness.
(2) Includes $6,000 related to the use of a company car, $1,288 for unused
sick leave and vacation and $2,310 of 401(k) matching.
(3) Unused sick leave and vacation.
(4) 401(k) matching.
(5) Includes 401(k) matching of $2,310 and $966 relating to the use of a
company car.
(6) Represents compensation received during 1994 beginning on Mr.
Schroeder's date of hire on March 11, 1994.
15
<PAGE> 18
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SAR's Grant
Underlying Granted to Exercise Basis Date
Options/SAR's Employees in Price Expiration Present
Name Granted Fiscal Year ($/sh) Date Value(1)
---- ---------------- ---------------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Mikel D. Faulkner 325,000 24.6% $2,000 03/29/05 $436,748
Richard H. Schroeder 275,000 20.8% $2.000 03/29/05 $369,556
Bruce N. Huff 100,000 7.6% $2.000 03/29/05 $134,384
Stephen C. Voss 100,000 7.6% $2.000 03/29/05 $134,384
Larry E. Cummings 20,000 1.5% $2.000 03/29/05 $ 26,876
</TABLE>
__________________________
(1) The grant date present value of these options was calculated based
upon the Black-Scholes valuation method which calculated such present
value as $1.34 per option. This analysis took into consideration the
grant date market price of the Common Stock of $1.875 per share, an
assumed six (6) year life of such options and a risk free rate of
return of 7%.
<TABLE>
<S> <C>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Number of Options/SAR's at Option/SAR's at
Shares/SAR's Fiscal Year End Fiscal Year End (1)
Acquired on Value --------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mikel D. Faulkner --- --- 397,492 568,750 $221,807 $ 91,406
Richard H. Schroeder --- --- 100,000 575,000 $ 37,500 $112,500
Bruce N. Huff --- --- 106,250 268,750 $ 21,094 $ 63,281
Stephen C. Voss --- --- 96,250 268,750 $ 21,094 $ 63,281
Larry E. Cummings --- --- 128,814 76,250 $ 68,157 $ 21,094
</TABLE>
__________________________
(1) The closing price for the Common Stock as reported on the American
Stock Exchange as of December 31, 1995 was $1.75. Value was
calculated on the basis of the difference between the option exercise
price and such closing price multiplied by the number of shares of
Common Stock underlying the option.
16
<PAGE> 19
CERTAIN TRANSACTIONS
Loan to Executive Officer. In September 1989, Harken's Board of
Directors approved a loan to Mikel D. Faulkner, Chief Executive Officer and a
director of Harken, in the amount of $520,000. The loan bears interest at the
Broker Loan Rate (5% at December 31, 1994 and 1995) plus 1/2% and is due
October 2, 1999. The loan is secured by vested stock options to purchase
266,790 shares of Common Stock at an exercise price of $1.00 per share. During
1994, an agreement was reached with Mr. Faulkner whereby the loan, together
with accrued interest, was scheduled to be forgiven equally over three equal
installments in April 1994, July 1995 and December 1996 contingent upon Mr.
Faulkner remaining employed with Harken through the date of each such
installment. In addition, the expiration date of the stock options held as
security for such loan was extended until March 11, 2001. During 1995, the
largest amount of indebtedness under this loan was $346,666, and the amount of
current indebtedness is $173,333.
Sale of Investment Securities. On February 27, 1995, Harken entered
into a Stock Purchase Agreement (the "Sale Agreement") with Phemus Corporation
("Phemus"), an affiliate of a major stockholder of Harken (see "Ownership of
Common Stock - Security Ownership of Certain Beneficial Owners") pursuant to
which Sale Agreement Harken sold to Phemus 74,502 shares of the Series C
Preferred Stock of E-Z Serve Corporation, a former subsidiary, for an aggregate
sales proceeds of $2,744,728. In connection with this transaction, an
affiliate of Quadrant Management Co., Inc., also a major stockholder of Harken,
also purchased from Harken 817 shares of Series C Preferred Stock of E-Z Serve
Corporation for an aggregate sales proceeds of $35,000. The purchase price of
the shares was determined by calculating the value of the shares of common
stock of E-Z Serve Corporation into which the shares of Series C Preferred
Stock were convertible, with an approximately 30% reduction due to the illiquid
nature of the E-Z Corporation common stock and the status of such shares as
"restricted securities" under the Securities Act of 1933. Harken believes that
the terms were no less favorable to Harken than those which could have been
obtained from an unaffiliated party. This transaction as a whole was
considered by Harken's Board of Directors at a special meeting held on February
17, 1995. Harken's Board of Directors unanimously approved this transaction at
such meeting, with Mr. Eisenson abstaining from the vote and consideration of
the matter due to a potential conflict of interest.
Redemption of Preferred Stock. In December 1995, Harken entered
into a Purchase, Sale and Exchange Agreement with Tejas Power Corporation.
Pursuant to such agreement, Harken transferred 1,000 shares of Series B
Preferred Stock of Tejas Power Corporation (the "Tejas Preferred") which it
held along with $56,250 in cash and a promissory note of Harken bearing
interest at 10% in the principal amount of $393,750 in exchange for 186,750
shares of Series C Cumulative Convertible Preferred Stock of Harken (the
"Harken Preferred") held by Tejas Power Corporation. The terms of the exchange
were determined by calculating the present value of the difference between the
redemption value of the Tejas Preferred and the redemption value of the Harken
Preferred. Phemus Corporation and NAR Group Limited, both of which are
significant stockholders of Harken, together own approximately 14.5% of the
common stock of Tejas Power Corporation. Harken believes that the terms of
this transaction were no less favorable to Harken than those which could have
been obtained from an unaffiliated party.
General. Directors of Harken who had a direct or indirect interest in
any such transaction other than as a director of Harken did not participate in,
and were not consulted in connection with, the meetings or deliberations of the
Board of Directors approving such transactions.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the
"Committee"), which is composed of two independent non-employee directors,
develops and oversees Harken's executive compensation strategy. The strategy
is implemented through policies and programs designed to support the
achievement of Harken's business objectives and the enhancement of stockholder
value. The Committee reviews on an ongoing basis all aspects of executive
compensation. The Committee regularly reports to the Board of Directors on all
items of compensation.
The Committee's executive compensation policies and programs support
the following objectives:
17
<PAGE> 20
o To offer compensation opportunities that attract high quality
individuals to Harken, motivates them to perform at their
highest levels and rewards them for outstanding achievement.
o To align management's compensation with the annual and
long-term performance of Harken.
o To maintain a significant portion of management's total
compensation at risk, tied primarily to the creation of
stockholder value.
The basic elements of Harken's executive compensation strategy are:
Base salary. The Committee annually reviews each executive's base
salary. In establishing annual compensation for executive officers, the
Compensation Committee takes into consideration many factors in making a
determination of aggregate compensation. Such factors during 1995 included:
(i) the financial results of Harken during the prior year; (ii) the performance
of the Common Stock in the public market; (iii) prior compensation paid to such
executives over the past five years; (iv) compensation of executive officers
employed by companies comparable to Harken; (v) the achievements of management
in completing significant projects during the year; and (vi) management's
dedication and commitment in support of Harken. Although the Committee
compares the compensation paid to Harken's executive officers with compensation
paid by comparable companies, the Committee uses such comparison only as one
factor in determining compensation levels for Harken's executive officers and
the Committee does not set a target compensation level in comparison to the
range of compensation paid by comparable companies. The Committee believes,
however, that the compensation paid to Harken's executive officers is below
average as compared to compensation at comparable companies. The Committee
exercises its judgement based upon the above criteria and does not apply a
specific formula or assign a weight to each factor considered. Upon review of
the factors described above, the Committee concluded that the management
exhibited great dedication and commitment in support of Harken and made
significant achievements in 1994 including the acquisition of oil and gas
interest which increased the Company's domestic oil and gas reserve base and
the significant progress toward Harken's Colombian exploration efforts. Such
efforts were offset, however, by the losses incurred in 1994 and the poor
performance of the Common Stock in 1994 relative to the stock market as a
whole. After reviewing the above described factors and taking into account the
recommendations of the Chief Executive Officer and Chief Operating Officer, the
Committee set salary levels for 1995. Cash compensation for 1995 was set at
1994 levels without increase.
Cash bonuses. The Committee annually determines cash bonus levels
based upon the same factors considered when setting each executive's base
salary. In 1995, no cash bonuses were granted.
Long-term incentive compensation. Harken's long-term incentive
compensation consists of Harken Stock Option Plans.
The Committee views the granting of stock options and restricted stock
awards as a significant method of aligning management's long-term interests
with those of the stockholders. The Committee encourages executives,
individually and collectively, to maintain a long-term ownership position in
Harken's Common Stock. The Committee determines awards to executives based on
its evaluation of criteria that include responsibilities, compensation, past
and expected contributions to the achievement of Harken's long-term performance
goals, and current practices of comparable companies. The exercise price of
all stock options granted in 1995 was at or above the closing price of Common
Stock on the date of grant and all stock options vest incrementally over a four
year period. Restricted stock grants are used selectively to attract and
retain executives and to recognize outstanding performance, however, no
restricted stock awards were made in 1995.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Mikel D. Faulkner is the Chief Executive Officer and Chairman of
the Board of Harken. The Committee considered Harken's strong performance in
1994 in its annual review of Mr. Faulkner's compensation.
The Committee took note of the fact that Harken made significant
progress in 1994 towards implementing its overall business strategy.
Specifically, Harken completed an acquisition of oil and gas interest in 1994
which increased
18
<PAGE> 21
Harken's domestic oil and gas reserve base and made significant progress in its
Colombian exploration efforts including the execution of two Association
Contracts with the Colombian state-owned oil company.
The Committee set Mr. Faulkner's base salary for 1995 at the same
level as 1994 with no increase, and no cash bonus was granted to Mr. Faulkner.
The Committee did determine to grant Mr. Faulkner options to purchase 325,000
shares of Common Stock, which vest in equal increments over a four year period.
In granting options to Mr. Faulkner, the Committee took into consideration the
amount and terms of the options already held by Mr. Faulkner.
FEDERAL INCOME TAX CONSIDERATIONS
In 1993, the Internal Revenue Code was amended to place a $1 million
cap on the deductibility on compensation paid to individual executives of
publicly held corporations. The Committee took this change into account,
however upon review of the available regulations and interpretations, decided
that it would not make the deductibility of Harken's compensation for federal
income tax purposes a criterion to be used in establishing compensation of the
named executives during the present review cycle. The Committee took into
consideration the belief that the current compensation levels of these
executives would not be subject to the cap. The Committee continues to
recognize that compensation should meet standards of reasonableness and
necessity, which have been part of the Internal Revenue Code for many years.
By: Michael R. Eisenson
Donald W. Raymond
This foregoing report of the Compensation Committee shall not be
deemed incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of 1933
or under the Securities Exchange Act of 1934, except to the extent it shall be
specifically incorporated by reference; and shall not otherwise be deemed filed
under such Acts.
19
<PAGE> 22
PERFORMANCE OF THE COMMON STOCK
The following performance graph shall not be deemed incorporated by
reference by any general statement incorporating by reference the proxy
statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that Harken specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
The graph below compares the cumulative total stockholder return on
the Common Stock for the last five fiscal years with the cumulative total
return on the S&P 500 Index and the Value Line Petroleum Producing Companies
Index over the same period (assuming the investment of $100 in the Common
Stock, the S&P 500 Index and the S&P High Technology Composite Index on
December 31, 1990 and reinvestment of all dividends).
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Harken Energy Corp $100 $400 $255 $ 90 $170 $140
S&P 500 Index 100 126 132 141 139 185
Value Line Petroleum Producing Co. Index 100 90 95 105 90 104
</TABLE>
20
<PAGE> 23
OWNERSHIP OF COMMON STOCK
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding each person who
is known by Harken to beneficially own five percent (5%) or more of the
outstanding shares of Common Stock as of April 22, 1996. Unless otherwise
indicated, such persons have sole voting and investment power with respect to
such shares and all such shares are owned beneficially and of record by the
person indicated.
<TABLE>
<CAPTION>
Amount of Beneficial
--------------------
Name and Address of Beneficial Owner Ownership Percent of Class
------------------------------------ --------- ----------------
<S> <C> <C>
Aeneas Venture Corporation 9,085,723 (1) 11.64%
Phemus Corporation
Harvard Master Trust
Harvard Yenching Institute
c/o Harvard Management Company, Inc.
600 Atlantic Ave., 26th Floor
Boston, Massachusetts 02210-2203
Abdullah Taha Bakhsh 6,735,364 (2) 8.63%
% Traco International, N.V.
P. O. Box 459
Jeddah, Saudi Arabia
</TABLE>
__________________________
(1) All shares of Common Stock beneficially owned by Aeneas Venture
Corporation ("Aeneas"), Phemus Corporation ("Phemus"), Harvard Master
Trust and Harvard Yenching Institute have been aggregated together as
such entities may be considered a group for purposes of Rule 13d-5
promulgated under the Securities and Exchange Act of 1934. Such amount
also includes 25,000 shares of Common Stock issuable upon the exercise
of options at an exercise price of $5.625 per share, which options were
transferred to Aeneas from Michael R. Eisenson, a director of Harken,
effective April 1, 1991. Aeneas and Phemus are wholly-owned
subsidiaries of the President and Fellows of Harvard College
("Harvard") which assist in the management of the Harvard University
endowment fund. Michael Eisenson is the President and Chief Executive
officer of Harvard Private Capital Group, Inc. ("HPC") which is a
wholly-owned subsidiary of Harvard Management Company, Inc. ("HMC") and
the investment advisor for Aeneas and Phemus. Although Mr. Eisenson has
primary investment responsibility for the Aeneas and Phemus shares, he
does not possess either sole investment or sole voting power over the
shares. Instead, Mr. Eisenson shares such authority with Jack Meyer,
President and Chief Executive Officer of HMC. Investment and voting
power over the Harvard Master Trust and Harvard-Yenching Institute
shares is shared by Jane Mendillo, Jack Meyer and Verne Sedlacek.
(2) Includes shares of Common Stock owned of record by Traco
International, NV ("Traco") and Atherstone Corporation NV
("Atherstone"). Traco is wholly-owned by Mr. Bakhsh, and Atherstone
is indirectly owned by Mr. Bakhsh. The basis for certain of this
information is Amendment 8 to Schedule 13D filed with the Securities
and Exchange Commission (the "Commission") on August 7, 1992 by
Abdullah Taha Bakhsh.
21
<PAGE> 24
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the number of
shares of Common Stock beneficially owned by each Director, each named
executive officer, and all of Harken's Directors and executive officers as a
group as of April 22, 1996.
<TABLE>
<CAPTION>
Amount of Shares
Beneficial Subject to Percent
Name Ownership (1) Options (2) of Class
---- ------------- ----------- ---------
<S> <C> <C> <C>
Michael M. Ameen, Jr. 11,000 5,000 (5)
Larry E. Cummings 172,239 152,564 (5)
Michael R. Eisenson 8,383,152 (3) 25,000 10.74%
Mikel D. Faulkner 562,329 559,992 (5)
Bruce N. Huff 187,500 187,500 (5)
Edwin C. Kettenbrink, Jr. 0 0 (5)
Talat M. Othman 25,000 0 (5)
Donald W. Raymond 242,500 0 (5)
Richard H. Schroeder 268,750 268,750 (5)
Stephen C. Voss 177,500 177,500 (5)
Gary B. Wood 106,535 (4) 0 (5)
All Directors and Executive 10,136,005 1,376,306 12.76%
Officers as a Group (11 Persons)
</TABLE>
__________________________
(1) Includes shares that may be acquired through the exercise of certain
options.
(2) Includes shares issuable upon exercise of currently exercisable
options and options exercisable within 60 days of April 22, 1996.
(3) Includes 8,036,473 shares of Common Stock held of record by Aeneas and
321,679 shares of Common Stock held of record by Phemus.
(4) Includes 57,947 shares issuable upon exercise of warrants held by Dr.
Wood and 47,858 shares owned by Concorde Financial Corporation and 730
shares issuable upon exercise of a warrant held by Concorde Financial
Corporation, which is 90% owned by Dr. Wood.
(5) Less than one percent (1%)
22
<PAGE> 25
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has served as independent public accountants for
Harken since fiscal year 1979. A representative of Arthur Andersen LLP will be
invited to attend the Annual Meeting and given the opportunity to make a
statement if such representative desires to do so, and, if in attendance will
be available to respond to appropriate questions.
Harken has not selected independent public accountants for fiscal year
1996. Selection of independent public accountants for fiscal year 1996 will be
made by the Board of Directors, based upon the recommendations of the Audit
Committee.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Harken's Directors and executive officers, and
persons who own more than ten percent of a registered class of Harken's equity
securities, to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of Harken. Directors, executive officers and
greater than ten-percent stockholders are required by SEC regulations to
furnish Harken with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms and written
representations from certain reporting persons, Harken believes that all filing
requirements applicable to its Directors, executive officers and persons who
own more than 10% of a registered class of Harken's equity securities have been
complied with during 1995.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any stockholder desiring to present a proposal to the stockholders at
the 1997 Annual Meeting of Stockholders, which currently is expected to be
scheduled in June 1997, must transmit such proposal to Harken so that it is
received by Harken at its principal executive offices to the attention of the
Secretary of Harken on or before December 24, 1996. All such proposals should
be in compliance with applicable Securities and Exchange Commission
regulations.
23
<PAGE> 26
DOCUMENTS INCORPORATED BY REFERENCE
Harken's Annual Report on Form 10-K/A for the year ended December 31,
1995, a copy of which accompanies this Proxy Statement, is hereby incorporated
herein by reference. In addition, the following document, filed with the
Commission by Harken, is incorporated by reference into this Proxy Statement:
Harken's Current Report on Form 8-K/A dated December 21, 1995. Any statement
contained herein or in a document incorporated or deemed to be incorporated
herein by reference shall be deemed to be modified or superseded for purposes
of this Proxy Statement to the extent that a statement contained herein or in
any subsequently filed document which also is deemed to be incorporated herein
by reference modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Proxy Statement.
With respect to any document incorporated herein by reference but not
delivered to the stockholders, the Company will provide, without charge, to
each person to whom this Proxy Statement has been delivered, upon written or
oral request of such person and by first class mail or other equally prompt
means within one business day of receipt of such request, a copy of any and all
of the information that has been incorporated by reference in this Proxy
Statement (not including exhibits to the information that is incorporated by
reference unless such exhibits are specifically incorporated by reference into
the information that this Proxy Statement incorporates). Such requests should
be directed to: Harken Energy Corporation, 5605 N. MacArthur Blvd., Suite 400,
Irving, Texas 75038, Attention: Gregory S. Porter, Telephone Number (214)
753-6900.
By Order of the Board of Directors
Larry E. Cummings,
Secretary
Irving, Texas
April 25, 1996
24
<PAGE> 27
HARKEN ENERGY CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 11, 1996
The undersigned hereby (1) acknowledges receipt of the Notice of
Annual Meeting of Stockholders of Harken Energy Corporation ("Harken") to be
held June 11, 1996, and (2) constitutes and appoints Mikel D. Faulkner, Bruce
N. Huff and Larry E. Cummings, and each of them, attorneys and proxies of the
undersigned, with full power of substitution to each, for and in the name,
place, and stead of the undersigned, to vote, and to act in accordance with the
instructions set forth below with respect to, all of the shares of Common Stock
of Harken standing in the name of the undersigned or with respect to which the
undersigned is entitled to vote and act at that meeting and at any meetings to
which that meeting is adjourned. In their discretion, the proxies may vote
upon such other matters as may properly come before the meeting.
1. Approval of an amendment to Harken's Certificate of Incorporation
increasing the authorized number of shares of Common Stock from
100,000,000 to 125,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Approval of an amendment to the Harken Energy Corporation 1993 Stock
Option and Restricted Stock Plan to increase the number of shares of
Common Stock authorized for issuance under the plan from 3,000,000 to
4,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. ELECTION OF DIRECTORS. Election of three Class C directors of Harken,
to hold office in accordance with Harken's Certificate of
Incorporation and Bylaws until the 1999 Annual Meeting of
Stockholders: Donald W. Raymond, Richard H. Schroeder and Gary B.
Wood, Ph.D.
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY to
listed above, except vote for all nominees
marked to the contrary listed above.
below.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY ONE OR MORE
INDIVIDUAL NOMINEES, WRITE THE NAME OF EACH SUCH NOMINEE IN THE SPACE
PROVIDED BELOW.)
_______________________________________________________________________
You are encouraged to specify your choices by marking the appropriate
boxes (SEE REVERSE SIDE), but you need not mark any boxes if you wish to vote
in accordance with the Board of Directors' recommendations. This Proxy will be
voted as specified. If no specification is made this Proxy will be voted FOR
proposals 1, 2, and 3. Your shares cannot be voted unless you sign and return
this card.
(Change of Address)
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
DATED: ,1996
----------------------------
----------------------------------------
(Signature)
----------------------------------------
(Signature)
NOTE: PLEASE SIGN EXACTLY AS NAME
APPEARS HEREON, JOINT OWNERS SHOULD
EACH SIGN. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE AS
SUCH.
