<PAGE> 1
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):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
---------------------------------------------------------------------------
[ ] 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.:
---------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------
<PAGE> 2
HARKEN ENERGY CORPORATION
5605 N. MACARTHUR BOULEVARD, SUITE 400
IRVING, TEXAS 75038
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 9, 1997
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 Omni Dallas Hotel, 1590 LBJ Freeway, Dallas,
Texas 75234, on Monday, June 9, 1997, at 11:00 a.m., local time, for the
following purposes:
(1) To elect two Class A Directors of Harken to hold office in
accordance with Harken's Certificate of Incorporation until
the 2000 Annual Meeting of Stockholders and until their
respective successors shall be duly elected and qualified; and
(2) 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 15,
1997 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 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, 1997
<PAGE> 3
HARKEN ENERGY CORPORATION
5605 N. MACARTHUR BOULEVARD, SUITE 400
IRVING, TEXAS 75038
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 9, 1997
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 Omni Dallas Hotel, 1590 LBJ Freeway, Dallas, Texas
75234 on Monday, June 9, 1997, at 11:00 a.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, 1997.
RECORD DATE AND VOTING SECURITIES
The Board of Directors has fixed the close of business on April 15,
1997 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 15, 1997, Harken had 104,058,246 shares
of Common Stock outstanding.
QUORUM AND 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 present or represented, any
business may be transacted that might have been transacted at the meeting as
originally called.
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 at the close of business on April 15,
1997 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. On
any other matters 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 15, 1997.
<PAGE> 4
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:
FOR election of management's two Class A Directors to serve until 2000.
Each of the nominees for election as directors has agreed to serve if
elected. Harken knows of no reason why either of the nominees for election as
directors would be unable to serve. Should either or both 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 Annual 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 ChaseMellon Shareholder Services to solicit proxies by mail,
telephone, telegraph or personal contact. The estimated cost of the
professional solicitation will be approximately $5,000 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.
2
<PAGE> 5
PROPOSAL ONE: 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 Board of Directors be
divided into Classes A, B and C, with staggered terms of three (3) years each.
Two Class A Directors will be elected at the Annual Meeting to hold office
until the 2000 Annual Meeting of Stockholders and until their respective
successors are duly elected and qualified.
NOMINEES FOR ELECTION AS CLASS A DIRECTORS:
<TABLE>
<CAPTION>
DIRECTOR
NAME, AGE AND BUSINESS EXPERIENCE SINCE
--------------------------------- --------
<S> <C>
MIKEL D. FAULKNER (Age - 47) - Chairman of the Board of Harken 1982
since February 1991; CEO of Harken since 1982, and President of
Harken from 1982 until February 1993.
BRUCE N. HUFF (Age - 46) - Senior Vice President and Chief 1996
Financial Officer of Harken since 1990.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RE-ELECTION OF
MESSRS. FAULKNER AND HUFF 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 - 73) - 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 six years; Director of Anera (a
charitable organization); Director of Amideast (a charitable
organization); Director of Middle East Institute.
MICHAEL R. EISENSON (Age - 41) - From 1986 to present, President 1987 1998
and Chief Executive Officer of Harvard Private Capital Group,
Inc., the wholly-owned subsidiary of Harvard Management Company,
Inc., which manages the private equity and real estate portfolios
of the Harvard University endowment fund. Director of ImmunoGen,
Inc., a biopharmaceutical company; Director of NHP Incorporated,
a property management company; Director of Playtex Products,
Inc., a consumer products company; Director of Somatix Therapy
Corporation, a biopharmaceutical company; and Director of United
Auto Group, Inc., an auto dealership consolidator and retailer.
DONALD W. RAYMOND (Age - 59) - Consultant to Harken from February 1993 1999
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 - 52) - President of Harken from March 1994 1999
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.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME, AGE AND BUSINESS EXPERIENCE SINCE EXPIRES
--------------------------------- -------- -------
<S> <C> <C>
HOBART A. SMITH (Age - 60) - From June 1991 to present, Mr. Smith 1997 1998
has served as a consultant to Smith International Inc., an oil
field service company; previously Mr. Smith served as Vice
President Customer Relations for Smith International, Inc.;
Director of Bonray Drilling Corp.
GARY B. WOOD, PH.D. (Age - 47) - Founder and Chief Executive 1995 1999
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 Health Industry Council and Concorde
Funds, Inc.
</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 1996, the Board of Directors held six meetings, which included
two regularly scheduled meetings and four special meetings. The Board of
Directors also acted by written consent four times. The Board of Directors has
standing Audit and Compensation Committees. During 1996, the Audit Committee,
then comprised of Talat Othman and Edwin Kettenbrink, held one meeting and
reviewed the financial statements of Harken and received reports and other
communications from Harken's independent auditors. Following the resignation
of Messrs. Othman and Kettenbrink from the Board of Directors, in January 1997,
Messrs. Ameen and Smith were appointed to the Audit Committee. During 1996,
the Compensation Committee, comprised of Messrs. Eisenson and Raymond, held two
meetings, and 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 1996, 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).
4
<PAGE> 7
COMPENSATION OF DIRECTORS
During 1996, 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 1996
pursuant to such arrangement was $4,000, except for 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 fees of $6,000
were 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.
In January 1997, the Board of Directors approved a new compensation
plan for its non-employee Directors. Pursuant to this plan, Harken will pay to
each non-employee Director an annual retainer of $10,000 plus $2,500 for each
committee on which the Director serves. Non-employee Directors would not
receive any additional fees for meetings attended. In addition, each
non-employee Director would be granted options to purchase Common Stock. Each
non-employee Director would receive options to purchase 25,000 shares of Common
Stock less the number of shares underlying any existing stock options. All
options granted to non-employee directors would be issued at the market price
of the Common Stock on the date of the grant and all options would vest over a
period of four years, 25% per year. On February 1, 1997, Messrs. Ameen,
Raymond, Smith and Wood were granted options to purchase 20,000, 25,000, 25,000
and 15,000 shares of Common Stock, respectively, each with an exercise price of
$3.56 per share, the market price of the Common Stock on such date.
CERTAIN MATTERS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
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 bore interest at the Broker Loan Rate plus 1/2%
and was due October 2, 1999. The loan was 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 1996, the
largest amount of indebtedness under this loan was $173,333, and as of December
1996 the full amount of this loan was forgiven.
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 1996 Mr. Ameen was paid a total of $17,007 in consulting fees
pursuant to such arrangement.
5
<PAGE> 8
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
compensation paid during fiscal years 1996, 1995 and 1994 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").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------------------------- -------------------------------
Securities
Name and Principal Fiscal Other Annual Underlying All Other
Position Year Salary Bonus Compensation Options/SAR's(#) Compensation
- ------------------------- ------ ---------- -------- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mikel D. Faulkner 1996 $170,000 $60,000 $186,175 (1) 550,000 --
Chairman and Chief 1995 $150,000 -- $182,239 325,000 --
Executive Officer 1994 $155,938 -- $179,899 325,000 --
Richard H. Schroeder 1996 $170,000 $60,000 $ 9,875 (2) 350,000 --
President and Chief 1995 $150,000 -- $ 9,598 275,000 --
Operating Officer 1994 $120,581(6) -- $ 4,400 400,000 --
Bruce N. Huff 1996 $150,000 $27,000 $ 8,266 (3) 150,000 --
Sr. Vice President and 1995 $135,000 -- $ 2,596 100,000 --
Chief Financial Officer 1994 $135,000 -- $ 2,596 225,000 --
Stephen C. Voss 1996 $110,667 $20,000 $ 9,921 (4) 150,000 --
Sr. Vice President 1995 $102,000 -- $ 3,276 100,000 --
1994 $102,000 -- $ 2,984 225,000 --
Larry E. Cummings 1996 $108,750 $10,000 $ 2,375 (5) 60,000 --
Vice President, Secretary 1995 $105,000 -- $ 2,310 20,000 --
and General Counsel 1994 $105,000 -- $ 2,310 75,000 --
</TABLE>
______________________
(1) Includes $7,198 relating to use of a company car, $3,269 for unused
sick leave and vacation, $2,375 of 401(k) matching and $173,333 of
debt forgiveness.
(2) Includes $7,500 related to a car allowance and $2,375 of 401(k)
matching.
(3) Includes $4,500 related to a car allowance, $1,170 of 401(k) matching
and $2,596 for unused sick leave and vacation.
(4) Includes 401(k) matching of $2,375 and $7,546 relating to a car
allowance.
(5) Represents 401(k) matching.
(6) Represents compensation received during 1994 beginning on Mr.
Schroeder's date of hire on March 11, 1994.
6
<PAGE> 9
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SAR's
Underlying Granted to Exercise Grant Date
Options/SAR's Employees in Basis Expiration Present
Name Granted Fiscal Year Price Date Value(1)
- ------------------------ ------------- ------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Mikel D. Faulkner 390,000 22.4% $3.000 10/01/06 $537,322
160,000 9.2% $3.000 10/14/06 $190,151
Richard H. Schroeder 250,000 14.4% $3.000 10/01/06 $344,437
100,000 5.7% $3.000 10/14/06 $118,845
Bruce N. Huff 100,000 5.7% $3.000 10/01/06 $137,775
50,000 2.9% $3.000 10/14/06 $59,422
Stephen C. Voss 100,000 5.7% $3.000 10/01/06 $137,775
50,000 2.9% $3.000 10/14/06 $59,422
Larry E. Cummings 60,000 3.4% $3.000 10/14/06 $71,307
</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 $1.38 per option with respect to the October 1, 1996 grants
and $1.19 per option with respect to the October 14, 1996 grants.
This analysis took into consideration the grant date market price of
the Common Stock of $2.75 per share on October 1, 1996 and $2.50 on
October 14, 1996, an assumed four year life of such options and a risk
free rate of return of 6%.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
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 --- --- 559,992 956,250 $931,954 $507,812
Richard H. Schroeder --- --- 268,750 756,250 $393,750 $531,250
Bruce N. Huff --- --- 187,500 337,500 $207,813 $257,812
Stephen C. Voss --- --- 177,500 337,500 $207,813 $257,812
Larry E. Cummings --- --- 152,564 112,500 $264,643 $75,938
</TABLE>
__________________________
(1) The closing price for the Common Stock as reported on the American
Stock Exchange as of December 31, 1996 was $3.00. 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.
7
<PAGE> 10
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:
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 1996 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 1995 including the acquisition of oil and gas
interest which substantially increased the Company's domestic oil and gas
reserve base and the significant progress toward Harken's Colombian exploration
efforts. 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 1996. Cash compensation for 1996 were set,
on average, 10% higher than 1995 levels.
Cash bonuses. The Committee annually determines cash bonus levels
based upon the same factors considered when setting each executive's base
salary. In 1995, cash bonuses ranged from 9% of base salary to 35% of base
salary.
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
8
<PAGE> 11
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
1996 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 1996.
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
1995 in its annual review of Mr. Faulkner's compensation.
The Committee took note of the fact that Harken made significant
progress in 1995 towards implementing its overall business strategy.
Specifically, Harken completed several acquisitions of oil and gas properties
in 1995 which increased Harken's domestic oil and gas reserve base and made
significant progress in its Colombian exploration efforts.
The Committee increased Mr. Faulkner's base salary for 1996 13.3% over
his base salary for 1995, and a cash bonus of $60,000 was granted to Mr.
Faulkner. The Committee also granted Mr. Faulkner options to purchase 550,000
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.
9
<PAGE> 12
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 AMEX Natural Resources Index over the same
period (assuming the investment of $100 in the Common Stock, the S&P 500 Index
and the AMEX Natural Resources Index on December 31, 1991 and reinvestment of
all dividends).
[GRAPH]
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Harken Energy Corp $100 $ 64 $ 25 $ 43 $ 35 $ 60
S&P 500 Index 100 104 112 110 147 178
AMEX Natural Resources Index 100 88 108 107 131 161
</TABLE>
10
<PAGE> 13
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 15, 1997. 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 7,120,823 (1) 6.84%
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) 6.47%
c/o 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"), 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 is a wholly-owned subsidiary of the President and
Fellows of Harvard College ("Harvard") which assists 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. Although Mr. Eisenson has primary investment responsibility
for the Aeneas shares, he possesses neither sole investment nor 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. The basis for certain of this information
is Amendment 11 to Schedule 13D filed with the Securities and Exchange
Commission (the "Commission") on January 17, 1997 by Aeneas, Harvard
Master Trust and Harvard-Yenching Institute.
(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 Commission
on August 7, 1992 by Abdullah Taha Bakhsh.
11
<PAGE> 14
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 15, 1997.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME BENEFICIAL OWNED CLASS
------------------------------ ------------------ --------
<S> <C> <C>
Michael M. Ameen, Jr. 15,250 (1) (2)
Larry E. Cummings 205,989 (3) (2)
Michael R. Eisenson 6,571,514 (4) 6.31%
Mikel D. Faulkner 724,829 (5) (2)
Bruce N. Huff 268,750 (6) (2)
Donald W. Raymond 242,500 (2)
Richard H. Schroeder 437,500 (6) (2)
Stephen C. Voss 258,750 (6) (2)
Gary B. Wood 109,035 (7) (2)
All Directors and Executive 8,923,867 (8) 8.42%
Officers as a Group (13 Persons)
</TABLE>
__________________________
(1) Includes 3,750 shares issuable upon exercise of currently exercisable
options issued by Harken.
(2) Less than one percent (1%)
(3) Includes 176,314 shares issuable upon exercise of currently
exercisable options issued by Harken.
(4) Includes 6,934,492 shares of Common Stock held of record by Aeneas and
25,000 shares issuable upon exercise of options held by Aeneas.
(5) Includes 722,492 shares issuable upon exercise of currently
exercisable options issued by Harken.
(6) Represents shares issuable upon exercise of currently exercisable
options issued by Harken.
(7) Includes 47,858 shares owned by Concorde Financial Corporation which
is 90% owned by Dr. Wood and 2,500 shares issuable upon exercise of
currently exercisable options issued by Harken.
(8) Includes 1,941,806 shares issuable upon exercise of currently
exercisable options issued by Harken.
12
<PAGE> 15
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
1997. Selection of independent public accountants for fiscal year 1997 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 1996.
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 1998, 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, 1997. All such proposals should
be in compliance with applicable Securities and Exchange Commission
regulations.
By Order of the Board of Directors
Larry E. Cummings,
Secretary
Irving, Texas
April 25, 1997
13
<PAGE> 16
HARKEN ENERGY CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 9, 1997
The undersigned hereby (1) acknowledges receipt of the Notice of
Annual Meeting of Stockholders of Harken Energy Corporation ("Harken") to be
held June 9, 1997, 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.
PROPOSAL: Election of two Class A directors of Harken, to hold office
in accordance with Harken's Certificate of Incorporation and Bylaws
until the 2000 Annual Meeting of Stockholders.
Nominees: Mikel D. Faulkner and Bruce N. Huff
<TABLE>
<S> <C>
[ ] FOR each of the nominees listed above, [ ] WITHHOLD AUTHORITY to vote
except marked to the contrary below. for each of the nominees listed above.
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY ONE NOMINEE, WRITE
THE NAME OF SUCH NOMINEE IN THE SPACE PROVIDED BELOW.)
________________________________________________________________________________
14
<PAGE> 17
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
the proposal. Your shares cannot be voted unless you sign and return this
card.
___________________________ ___________________________ __________
(Signature) (Signature) (Date)
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.
15
