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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 3, 1999
HARKEN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 0-9207 95-2841597
(State or other jurisdiction of (Commission File (IRS Employer
incorporation) Number) Identification No.)
16285 PARK TEN PLACE, SUITE 600 77084
HOUSTON, TEXAS 77084 (ZIP Code)
(Address of principal executive offices)
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Registrant's telephone number, including area code: (281) 717-1300
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ITEM 1. N/A
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS:
Harken Energy Corporation has acquired Xplor Energy, Inc. ("Xplor")
pursuant to the terms of an Agreement and Plan of Merger dated August 19, 1999
("the Agreement") which has been approved by the Xplor shareholders. Xplor owns
oil and gas properties primarily along the Texas and Louisiana Gulf Coasts. The
properties are primarily natural gas and have an estimated 42 BCFE of proved
reserves with a significant amount of additional exploratory acreage.
Under the terms of the Agreement, Harken has issued 7,500,000 shares of
Harken common stock and issued 2,366,066 warrants for the purchase of Harken
common stock at $2.50 per share in exchange for all of the outstanding shares of
Xplor. Xplor will continue to be obligated under its present banking facility,
which had an outstanding balance of approximately $14.2 million at closing.
ITEM 3. N/A
ITEM 4. N/A
ITEM 5. N/A
ITEM 6. N/A
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS:
In accordance with Item 7(a)(4) and Item 7(b), audited financial
statements of Xplor Energy, Inc., along with pro forma financial statements of
Harken reflecting the acquisition, will be filed by amendment to this Form 8-K
no later than 60 days after September 3, 1999.
Exhibits
The Exhibits to this Report are listed in the Exhibit index set forth
elsewhere herein.
ITEM 8. N/A
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HARKEN ENERGY CORPORATION
Date: September 3, 1999 By: /s/ Bruce N. Huff
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Bruce N. Huff,
President and Chief Financial Officer
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INDEX TO EXHIBITS
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EXHIBIT NO. DESCRIPTION
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2 Agreement and Plan of Merger by and among Harken Energy
Corporation, XEI Acquisition Corp., and Xplor Energy, Inc.
dated August 19, 1999.
99.1 Stock Purchase Warrant Nos. 99A-1 and 99A-2 for the purchase
of a total of 2,336,066 (subject to adjustment) of Harken
Energy Corporation common stock.
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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
HARKEN ENERGY COMPANY,
XEI ACQUISITION CORP.,
AND
XPLOR ENERGY, INC.
AUGUST 19, 1999
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ARTICLE I THE MERGER...........................................................................................7
SECTION I.01. The Merger........................................................................................7
SECTION I.02. Filing of Certificate of Merger and Related Certificates..........................................8
SECTION I.03. Effect of Merger..................................................................................8
SECTION I.04. Merger Consideration..............................................................................8
SECTION I.05. Payment for Shares in the Merger..................................................................9
SECTION I.06. Dissenting Shares................................................................................10
SECTION I.07. Transfer of Shares Immediately Prior to the Effective Time.......................................10
SECTION I.08. Restricted Legend................................................................................10
SECTION I.09. Registration Rights..............................................................................11
ARTICLE II STOCKHOLDER APPROVAL...............................................................................14
SECTION II.01. Approval of the Stockholders....................................................................14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................................14
SECTION III.01. Existence and Good Standing....................................................................14
SECTION III.02. Capitalization.................................................................................14
SECTION III.03. Corporate Authority............................................................................15
SECTION III.04. Noncontravention...............................................................................15
SECTION III.05. Subsidiaries and Investments...................................................................16
SECTION III.06. Financial Statements...........................................................................16
SECTION III.07. Undisclosed Liabilities........................................................................17
SECTION III.08. Books and Records..............................................................................17
SECTION III.09. Title..........................................................................................17
SECTION III.10. Independent and Internal Engineering Reports...................................................18
SECTION III.11. Title to Interests.............................................................................18
SECTION III.12. Compliance with Leases and Laws; Operation of Assets...........................................19
SECTION III.13. Equipment......................................................................................21
SECTION III.14. Contracts, Agreements, Commitments and Other Matters...........................................21
SECTION III.15. Restrictive Documents and Governmental Consents................................................24
SECTION III.16. Litigation.....................................................................................24
SECTION III.17. Taxes..........................................................................................24
SECTION III.18. Insurance......................................................................................25
SECTION III.19. Patents, Trademarks, Trade Names, Etc..........................................................25
SECTION III.20. Compliance with Law............................................................................25
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SECTION III.21. Labor Relations................................................................................26
SECTION III.22. Employee Benefit Matters.......................................................................26
SECTION III.23. Absence of Certain Changes or Events...........................................................27
SECTION III.24. No Brokers' or Other Fees......................................................................28
SECTION III.25. Copies of Documents............................................................................29
SECTION III.26. Environmental Matters..........................................................................29
SECTION III.27. No Affiliate Ownership.........................................................................29
SECTION III.28. Sale of Production.............................................................................29
SECTION III.29. Status of Wells................................................................................30
SECTION III.30. Hedging........................................................................................30
SECTION III.31. Drilling Obligations...........................................................................31
SECTION III.32. Royalty Interests..............................................................................31
SECTION III.33. Seismic Information............................................................................31
SECTION III.34. Tax Partnerships...............................................................................31
SECTION III.35. Notes and Accounts Receivable..................................................................31
SECTION III.36. Full Disclosure................................................................................31
SECTION III.37. Opinion of Financial Advisor...................................................................32
SECTION III.38. Disclaimer of Representations and Warranties of the Company....................................32
ARTICLE IV REPRESENTATIONS OF HARKEN AND SUB..................................................................32
SECTION IV.01. Existence and Good Standing of Harken...........................................................32
SECTION IV.02. Existence and Good Standing of Sub..............................................................32
SECTION IV.03. Corporate Authority.............................................................................32
SECTION IV.04. Noncontravention................................................................................33
SECTION IV.05. No Brokers' or Other Fees.......................................................................33
SECTION IV.06. Capitalization..................................................................................33
SECTION IV.07. Litigation......................................................................................33
SECTION IV.08. Copies of Documents.............................................................................33
SECTION IV.09. Reports with the Securities and Exchange Commission.............................................34
SECTION IV.10. Harken Common Stock and Warrants................................................................34
SECTION IV.11. Full Disclosure.................................................................................35
SECTION IV.12. Books and Records...............................................................................35
SECTION IV.13. Taxes...........................................................................................35
SECTION IV.14. Restrictive Documents and Governmental Consents.................................................35
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SECTION IV.15. Title...........................................................................................36
SECTION IV.16. Harken Independent Engineering Report...........................................................36
SECTION IV.17. Disclaimer of Representations and Warranties of Harken and Sub..................................36
ARTICLE V COVENANTS..........................................................................................37
SECTION V.01. Conduct of Business of the Company and Harken....................................................37
SECTION V.02. Exclusive Dealing................................................................................37
SECTION V.03. Review of the Company and Harken; Confidentiality................................................37
SECTION V.04. Regulatory and Other Filings and Approvals.......................................................38
SECTION V.05. Reasonable Best Efforts..........................................................................38
SECTION V.06. Public Announcements.............................................................................38
SECTION V.07. AMEX Quotation...................................................................................39
SECTION V.08. Change of Control Payments.......................................................................39
SECTION V.09. Directors' and Officers' Insurance...............................................................39
SECTION V.10. Investor Agreement...............................................................................39
SECTION V.11. Issuance of Securities...........................................................................39
SECTION V.12. Benefit Plans and Related Matters................................................................39
SECTION V.13. Resignations.....................................................................................40
ARTICLE VI CONDITIONS TO HARKEN'S OBLIGATIONS.................................................................40
SECTION VI.01. Good Standing Certificates; Secretary's Certificate.............................................40
SECTION VI.02. No Material Adverse Change......................................................................41
SECTION VI.03. Truth of Representations and Warranties.........................................................41
SECTION VI.04. Performance of Agreements.......................................................................41
SECTION VI.05. No Litigation Threatened........................................................................41
SECTION VI.06. Approvals.......................................................................................41
SECTION VI.07. Intra-Company Debt..............................................................................41
SECTION VI.08. Proceedings.....................................................................................42
SECTION VI.09. Stockholder Approval............................................................................42
SECTION VI.10. Warrants........................................................................................42
SECTION VI.11. XPLOR Shareholder Agreement.....................................................................42
SECTION VI.12. Expense Reimbursement Agreement.................................................................42
SECTION VI.13. Credit Agreement................................................................................42
ARTICLE VII CONDITIONS TO THE COMPANY'S OBLIGATIONS............................................................42
SECTION VII.01. Truth of Representations and Warranties........................................................42
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SECTION VII.02. Approvals......................................................................................43
SECTION VII.03. No Material Adverse Change.....................................................................43
SECTION VII.04. No Litigation Threatened.......................................................................43
SECTION VII.05. Performance of Agreements......................................................................43
SECTION VII.06. Proceedings....................................................................................43
SECTION VII.07. Good Standing Certificates; Secretary's Certificate............................................43
SECTION VII.08. Fairness Opinion...............................................................................44
ARTICLE VIII SURVIVAL OF REPRESENTATIONS; RECOVERY.............................................................44
SECTION VIII.01. Non-Survival of Representations...............................................................44
ARTICLE IX CLOSING...........................................................................................44
SECTION IX.01. Deliveries at the Closing.......................................................................44
SECTION IX.02. Time and Place..................................................................................44
ARTICLE X MISCELLANEOUS.....................................................................................45
SECTION X.01. Knowledge........................................................................................45
SECTION X.02. Expenses.........................................................................................45
SECTION X.03. Governing Law....................................................................................45
SECTION X.04. Definitions......................................................................................45
SECTION X.05. Captions.........................................................................................50
SECTION X.06. Publicity........................................................................................50
SECTION X.07. Notices..........................................................................................50
SECTION X.08. Parties in Interest..............................................................................51
SECTION X.09. Counterparts.....................................................................................51
SECTION X.10. Entire Agreement.................................................................................51
SECTION X.11. Amendments.......................................................................................52
SECTION X.12. Severability.....................................................................................52
SECTION X.13. Third Party Beneficiaries........................................................................52
SECTION X.14. Termination of Agreement.........................................................................52
SECTION X.15. Procedure for Termination........................................................................53
SECTION X.16. Schedules........................................................................................53
SECTION X.17. Conspicuous Disclaimers..........................................................................53
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EXHIBITS
EXHIBIT A Certificate of Merger
EXHIBIT B Certificate of Incorporation
EXHIBIT C Bylaws
EXHIBIT D Allocation of Merger Consideration
EXHIBIT E Form of Warrant
EXHIBIT F Investor Agreement
EXHIBIT G Notice of Action by Written Consent and Appraisal Rights
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of August 19,
1999 by and among Harken Energy Corporation, a Delaware corporation ("Harken"),
XEI Acquisition Corp., a Delaware corporation ("Sub"), and XPLOR Energy, Inc., a
Delaware corporation ("XPLOR" or the "Company"). Harken, the Sub and XPLOR are
collectively referred to as the "Parties".
W I T N E S S E T H:
WHEREAS, (i) Sub is a corporation organized and existing under the laws
of the State of Delaware and is a wholly-owned subsidiary of Harken, (ii) Harken
is a corporation organized and existing under the laws of the State of Delaware,
and (iii) the Company is a corporation organized and existing under the laws of
the State of Delaware;
WHEREAS, the Board of Directors of Harken, Sub and the Company deem it
advisable and in the best interests of their stockholders that the Company
become a subsidiary of Harken pursuant to the Merger (as defined in Section
I.01) hereinafter provided for, and desire to make certain representations,
warranties and agreements in connection with such Merger; and
WHEREAS, each of the Company and Sub has obtained the necessary
stockholder approval of the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, provisions and covenants contained in this Agreement, the Parties
hereby agree as follows:
ARTICLE I
THE MERGER
SECTION I.01. THE MERGER. (a) Harken has caused Sub to execute and
deliver, and the Company has executed and delivered, this Agreement providing
for the merger of Sub with and into the Company (the "Merger") and the
conversion of the outstanding shares of the 1998 Series A Redeemable Preferred
Stock, par value $0.001 per share, and the shares of the 1998 Series B
Redeemable Preferred Stock, par value $0.001 per share of the Company
(collectively, the "Preferred Stock") as set forth herein. Each outstanding
share of Common Stock of the Company, par value $0.001 per share (the "Common
Stock"), shall be converted into the right to receive no consideration in the
Merger and shall therefore be cancelled and the holders thereof (the "XPLOR
Common Stockholders") shall have no further rights therein and no consideration
will be paid with respect thereto other than amounts due, if any, pursuant to
applicable appraisal rights pursuant to Section 262 of the Delaware General
Corporation Law (the "Delaware Statute"). The Company shall be the surviving
corporation (the "Surviving Corporation") in the Merger and shall become a
wholly-owned subsidiary of Harken. From and after the Effective Time (as defined
in Section I.02), the identity and separate existence of Sub shall cease, and
the Company shall succeed, without other transfer, to all the rights,
properties, assets, debts and liabilities of Sub.
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(b) Harken shall reserve an aggregate of 9,836,066 shares of the common
stock, par value $.01 per share, of Harken, (including preferred share purchase
rights issuable pursuant to the Rights Agreement, dated April 9, 1998 between
Harken and ChaseMellon Shareholder Services, L.L.C., as rights agent, or any
other purchase right issued in substitution thereof) (collectively, "Harken
Common Stock"), prior to the Merger to permit the delivery of shares of Harken
Common Stock to the existing preferred stockholders of the Company (the "XPLOR
Preferred Stockholders", and collectively with the XPLOR Common Stockholders,
the "XPLOR Stockholders") pursuant to the terms of this Agreement following the
Merger. Each of Harken and the Company shall use its commercially reasonable
efforts to cause the Merger to be consummated in accordance with the terms of
this Agreement.
SECTION I.02. FILING OF CERTIFICATE OF MERGER AND RELATED CERTIFICATES.
Immediately after all conditions to this Agreement have been satisfied or
waived, the Parties hereto shall cause to be filed a certificate of merger
pertaining to the Merger in substantially the form of Exhibit A hereto (the
"Certificate of Merger"), or such other documents necessary to effect the Merger
in accordance with the Delaware Statute, and the Merger shall become effective
substantially simultaneously in accordance with the terms of this Agreement
(such time and date are referred to herein as the "Effective Time").
SECTION I.03. EFFECT OF MERGER. The Parties agree to the following
provisions with respect to the Merger:
(a) Name of Surviving Corporation. The name of the Company, as
the surviving corporation in the Merger, from and after the Effective
Time shall be "XPLOR Energy, Inc.," until changed or amended in
accordance with applicable law.
(b) Charter Documents. The Restated Certificate of
Incorporation and Bylaws of the Surviving Corporation shall be amended
and restated at and as of the Effective Time to read as the Certificate
of Incorporation and Bylaws of the Sub immediately prior to the
Effective Time. Copies of the Amended and Restated Certificate of
Incorporation and Bylaws are attached as Exhibit B and C, respectively.
(c) Officers and Directors of Surviving Corporation. The
officers and directors of Sub immediately prior to the Effective Time
will be the officers and directors of the Surviving Corporation.
SECTION I.04. MERGER CONSIDERATION.
(a) At the Effective Time, subject to Section I.06, each share of
Preferred Stock issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holders
thereof, be converted into 0.871442 shares of Harken Common Stock (the "Merger
Shares") in the form of certificates representing shares of Harken Common Stock
issued by Harken. No fractional shares shall be issued and in no event shall
Harken be required to issue in excess of an aggregate of 7,500,000 shares of
Harken Common Stock in connection with the Merger other than pursuant to the
exercise of Warrants as
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described below. Each holder of Preferred Stock and the number of shares of
Harken Common Stock to be issued to each such holder is set forth on Exhibit D
attached hereto.
(b) At the Effective Time, Harken will issue an aggregate of 2,336,066
warrants exercisable for Harken Common Stock at a per share purchase price of
$2.50 per share (the "Warrants," and collectively with the Merger Shares, the
"Merger Consideration") to the holders of Preferred Stock as set forth on
Exhibit D. The Warrants, a form of which is attached as Exhibit E, will expire
eighteen (18) months after the date of issue; provided, however, if during the
eighteen (18) months, no twenty (20) consecutive trading day period existed
where the average closing price for the Harken Common Stock is greater than the
exercise price of the Warrant at such time, then the term of the Warrants will
be automatically extended for an additional twelve (12) months. The Warrants
shall, in the aggregate, be exercisable for 2,336,066 shares of Harken Common
Stock, subject to adjustment as provided therein.
(c) At the Effective Time, each share of Common Stock and each share of
Preferred Stock (collectively, the "Shares") shall, by virtue of the Merger and
without any action on the part of the holders thereof be converted into the
right to receive no Merger Consideration and shall therefore, cease to be
outstanding, be canceled and retired and cease to exist, and each holder of a
certificate representing any such Shares ("XPLOR Stock Certificates") shall
thereafter cease to have any rights with respect to such Shares, except the
right to receive for each of the shares of Preferred Stock, upon the surrender
of such certificates representing such shares of Preferred Stock (the "XPLOR
Preferred Stock Certificates") in accordance with Section I.05, the Merger
Consideration allocable to such shares as provided in Sections I.04(a) and (b)
and the amount of dividends or other distributions related to the Harken Common
Stock, if any, with a record date after the Effective Time.
(d) At the Effective Time, each share of common stock, par value $.01
per share, of Sub issued and outstanding immediately prior to the Effective Time
shall automatically become an equal number of shares of Common Stock.
SECTION I.05. PAYMENT FOR SHARES IN THE MERGER. The manner of making
payment for Shares in the Merger shall be as follows:
(a) At or promptly after the Effective Time, subject to Section I.08,
Harken shall distribute to each holder of Preferred Stock, upon surrender of one
or more XPLOR Preferred Stock Certificates for cancellation (or, in lieu
thereof, upon presentation of an affidavit stating that the XPLOR Preferred
Stock Certificate has been lost or destroyed and an appropriate indemnity bond
has been posted), the Merger Consideration due for each share of Preferred Stock
represented thereby, if any, in accordance with the provisions of Section I.04.
If payment is to be made to a person other than the person in whose name the
XPLOR Preferred Stock Certificate surrendered is registered, it shall be a
condition of payment that the XPLOR Preferred Stock Certificate so surrendered
shall be properly endorsed, with signatures guaranteed or notarized, or
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other taxes required by reason of the payment
to a person other than the registered holder of the XPLOR Preferred Stock
Certificate surrendered, or such person shall establish to the satisfaction of
Harken that such tax has been paid or is not applicable. Notwithstanding the
foregoing, no Party hereto shall be liable to a holder of shares of Preferred
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Stock for any cash, shares of Harken Common Stock or dividends thereon delivered
to a public official pursuant to applicable escheat law. Until surrendered in
accordance with the provisions of Section I.05, each XPLOR Preferred Stock
Certificate representing shares of Preferred Stock shall represent, for all
purposes, only the right to receive the Merger Consideration.
(b) No dividends or other distributions that are declared after the
Effective Time on shares of Harken Common Stock and payable to the holders of
record after the Effective Time will be paid to persons entitled by reason of
the Merger to receive shares of Harken Common Stock until such persons surrender
their XPLOR Preferred Stock Certificates. Upon such surrender, there shall be
paid to the person in whose name the shares of Harken Common Stock are issued
any dividends or other distributions having a record date after the Effective
Time and payable with respect to such shares of Harken Common Stock between the
Effective Time and the time of such surrender. After such surrender there shall
be paid to the person in whose name the shares of Harken Common Stock are issued
any dividends or other distributions on such shares of Harken Common Stock which
shall have a record date after the Effective Time and prior to such surrender
and a payment date after such surrender and such payment shall be made on such
payment date. In no event shall the persons entitled to receive such dividends
or other distributions be entitled to receive interest on such dividends or
other distributions. Prior to such person surrendering such person's XPLOR
Preferred Stock Certificate or XPLOR Preferred Stock Certificates, such person
shall not be entitled to vote or exercise any rights or ownership with respect
to the shares of Harken Common Stock held by it from time to time hereunder.
SECTION I.06. DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, in the event that appraisal rights are available in
connection with the Merger pursuant to Section 262 of the Delaware Statute,
shares of Common Stock that are issued and outstanding immediately prior to the
Effective Time and that are held by the stockholders of XPLOR who did not vote
in favor of the Merger and who comply with all of the relevant provisions of
Section 262 of the Delaware Statute (the "Appraisal Shares") shall not be
cancelled as provided in Section I.04(c), unless and until such holders shall
have failed to perfect or shall have effectively withdrawn or lost such right,
and such holder's shares of Common Stock shall thereupon be deemed to have been
cancelled as provided in Section I.04(c), as of the Effective Time. The
Surviving Corporation shall give the XPLOR Stockholders set forth in Section
3.02(a) of the Disclosure Schedule prompt notice of any rights for appraisal by
mailing the material as set forth in Exhibit G on or about the Effective Date
and taking all appropriate action required of the Surviving Corporation to
comply with any demand for appraisal under Delaware law and pursuant to the
terms of the Investor Agreement.
SECTION I.07. TRANSFER OF SHARES IMMEDIATELY PRIOR TO THE EFFECTIVE
TIME. No transfers of Shares shall be made on the stock transfer books of the
Company after the close of business on the day prior to the date of the
Effective Time.
SECTION I.08. RESTRICTED LEGEND. The Company acknowledges and agrees
that any certificates representing the Merger Shares will bear the following
restrictive legend in substantially the following form and a stop-transfer order
may be placed against their transfer:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
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SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE ISSUER OF SUCH SECURITIES TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO
RULE 144.
The legend set forth above shall be removed and Harken shall issue a
certificate without such legend to the holder of Merger Shares upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such holder provides Harken with an opinion of legal counsel, in form, substance
and scope reasonably acceptable to Harken to the effect that a public sale or
transfer of such Merger Shares may be made without registration under the
Securities Act and such Merger Shares are being sold or transferred in
accordance with the method described therein as well as all applicable state
securities laws, (b) such holder provides Harken with reasonable assurances that
such Merger Shares are being sold pursuant to Rule 144 under the Securities Act
(or a successor rule thereto), (c) such holder sells its Merger Shares in a
transaction registered under the Securities Act, or (d) two years have elapsed
from the date hereof and Harken receives an opinion of counsel, in form,
substance and scope reasonably acceptable to Harken that the volume limitations
in Rule 144(e) do not apply.
SECTION I.09. REGISTRATION RIGHTS.
(a) After one year from the date hereof, (i) the holders of a majority
of the Merger Shares issued to or held by XP Holdings, L.L.C., its subsidiaries
and affiliates and their respective successors and assigns on one hand (the "XP
Holdings Group") and (ii) the holders of a majority of the Merger Shares issued
to or held by the other XPLOR Preferred Stockholders, their subsidiaries and
affiliates and their respective successors and assigns on the other
(collectively, the "TCW Investors"), shall each have a collective right by
written notice to Harken (a "Demand Notice") to require Harken to file a
registration statement (a "Registration Statement") on an appropriate form under
the Securities Act registering for resale all of the Merger Shares and any
shares issued to date upon the exercise of the Warrants which are held by the
group (the "Registrable Securities") which are covered by such Demand Notice.
Upon receipt of a Demand Notice, Harken shall use its commercially reasonable
efforts to file such Registration Statement and cause it to be declared
effective as soon as practicable.
(b) If at any time during the one (1) year period from the date hereof
Harken proposes to file a Registration Statement with respect to an offering of
Harken Common Stock (except on Form S-4, Form S-8 or any successor form
thereto), for its own account for cash, then Harken shall give written notice of
such proposed filing to holders of the Registrable Securities at least fifteen
(15) days before the anticipated filing date (the "Piggyback Notice"). The
Piggyback Notice shall offer such holders the opportunity to register all of the
Registrable Securities on the Registration Statement (a "Piggyback
Registration"). If any holder of Registrable Securities requests such Piggyback
Registration, Harken shall, subject to the limitation set forth in Section
I.09(c) below, include in the Piggyback Registration the requested number of
Registrable Securities.
(c) If Harken is undertaking a Piggyback Registration, Harken shall use
its commercially reasonable efforts to cause the managing underwriters of a
proposed underwritten
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offering of equity securities to include all requested Registrable Securities on
the same terms and conditions as any similar equity securities of Harken
included therein. Notwithstanding the foregoing, if the managing underwriters of
such underwritten offering determine in good faith that the total number of
securities that such holders and Harken propose to include in such offering is
such as to materially and adversely affect the success of such offering, then
the securities to be offered for the account of holders of Registrable
Securities or any other holders shall be reduced or limited pro rata in
proportion to the respective dollar amounts of securities held by such holder to
the extent necessary to reduce the total number of securities to be included in
such offering to the amount recommended by such managing underwriters.
(d) If any shares issued or issuable pursuant to the Warrants held by
either the XP Holdings Group or the TCW Investors remain unregistered after such
group has exercised its rights pursuant to Section I.09(a) (the "Remaining
Warrant Shares"), the holders of a majority of the Remaining Warrant Shares for
the XP Holdings Group and the holders of a majority of the Remaining Warrant
Shares for the TCW Investors shall each have the right by written notice (a
"Warrant Demand Notice") to require Harken to file a Registration Statement on
an appropriate form under the Securities Act registering for resale all of the
Remaining Warrant Shares (a "Warrant Share Registration") held by such group
that have been issued to date and that have not been previously registered
pursuant to either Section I.09(a) or (b).
(e) Harken shall use its reasonable efforts to cause the Registration
Statement to be declared effective by the Securities and Exchange Commission
(the "SEC") and any state securities commission as soon as practicable after its
filing with the SEC, and to remain effective and current until such time as all
of the Registrable Securities included in such Registration Statement are sold
pursuant to the Registration Statement (the "Effective Period") and to execute
an underwriting agreement in customary form and reasonably satisfactory to
Harken and to reasonably assist such sale; provided, however, that (i) any
selling stockholder thereunder (a "Selling Stockholder") shall use its
reasonable efforts to provide written notice to Harken prior to any sale of
Registrable Securities, (ii) Harken shall have no obligation to cause the
Registration Statement to remain effective for the benefit of a particular
Selling Stockholder if such Selling Stockholder is able to sell all remaining
Registrable Securities owned by such Selling Stockholder in compliance with Rule
144 in a single transaction to which the volume limitations of Rule 144(e) do
not apply or if such volume limitations are applicable without exceeding such
limitations. Harken shall promptly notify the Selling Stockholders, their
counsel and the managing underwriters, if any, and confirm such notice in
writing (an "Occurrence Notice"), (i) of the issuance by the SEC of any stop
order suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of any prospectus or the initiation of
any proceeding by any person or entity for that purpose, (ii) of the happening
of any event that makes any statement made in such Registration Statement or
related prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in such Registration Statement, prospectus or documents so that
it will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made (in the case
of the related prospectus only), not misleading, and (iii) of Harken's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate. Upon receipt of an Occurrence Notice, each
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Selling Stockholder shall forthwith discontinue disposition of the Registrable
Securities covered by the applicable Registration Statement or prospectus until
the earlier to occur of (x) the receipt of such Selling Stockholder of a
supplemented or amended Registration Statement or Prospectus as contemplated by
the following sentence or (y) the receipt by such Selling Stockholder of written
notice from Harken (a "Clearance Notice") that the use of the applicable
prospectus or Registration Statement may be resumed. If Harken shall deliver an
Occurrence Notice to any Selling Stockholder, (i) the Registrable Securities
subject to such Registration Statement or prospectus shall remain Registrable
Securities for purposes of this Agreement, and (ii) Harken shall use its
commercially reasonable efforts to promptly prepare and file a supplement or
post-effective amendment to the Registration Statement, prospectus or document
incorporated or deemed incorporated by reference or prepare and file such other
documents and take such other actions as may be required to permit each Selling
Stockholder to consummate the sale of the Registrable Securities subject to such
Registration Statement or prospectus.
(f) Notwithstanding anything to the contrary herein, Harken shall not
be required to register any Registrable Securities or Remaining Warrant Shares
more than once in a Demand Registration or Warrant Share Registration, as
appropriate, and shall not be required to effect (i) more than one Demand
Registration and one Warrant Share Registration for the XP Holdings Group or
(ii) more than one Demand Registration and Warrant Share Registration for the
TCW Investors; provided, however, that if (A) any offering or sale of any
Registrable Securities or Remaining Warrant Shares pursuant to a Demand
Registration or Warrant Share Registration, as appropriate, is not consummated
due to (i) any failure by Harken to perform its obligations under this Agreement
or (ii) the withdrawal by the group (either the XP Holdings Group or the TCW
Investors) having given the Demand Notice or Warrant Demand Notice at any time
before the Registration Statement has become effective or in the case of an
underwritten offering, if a material adverse change in Harken's financial
position or business occurs that causes such offering not to close, then the
Demand Notice or Warrant Demand Notice with respect to which such Registration
Statement was filed shall not be counted as a Demand Notice or Warrant Demand
Notice for such group.
(g) EXPENSES. Harken shall pay all expenses on any registration
hereunder, other than underwriting discounts and commissions; transfer, stamp,
and similar taxes; and other than expenses incurred by the Selling Stockholder
whose Registrable Securities are being sold for legal, investment banking, or
other similar services obtained by such Selling Stockholder in connection with
such registration and sale.
(h) ASSIGNMENT OF REGISTRATION RIGHTS. The registration rights set
forth in this Section I.09 with respect to the Registrable Securities or
Remaining Warrant Shares are not assignable without the express written consent
of Harken, which consent shall not be unreasonably withheld; provided, however,
that if any Registrable Securities, Remaining Warrant Shares or Warrants are
transferred to an Affiliate of an XPLOR Preferred Stockholder, the registration
rights set forth in this Section I.09 may be assigned to such Person without
Harken's consent.
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ARTICLE II
STOCKHOLDER APPROVAL
SECTION II.01. APPROVAL OF THE STOCKHOLDERS. This Agreement has been
adopted and approved by the XPLOR Stockholders as required under its charter
documents and the Delaware Statute, and such approval includes the approval of
all holders of XPLOR Preferred Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Harken that the statements
contained in this Article III are correct and complete as of the date of this
Agreement and will be correct and complete as of the Effective Time (as though
made then and as though the Effective Time were substituted for the date of this
Agreement throughout this Article III), except as set forth in the disclosure
schedule delivered by the Company to Harken on the date hereof and initialed by
the Parties (the "Disclosure Schedule"). Nothing in the Disclosure Schedule
shall be deemed adequate to disclose an exception to a representation or
warranty made herein, however, unless the Disclosure Schedule identifies the
exception with reasonable particularity and describes the relevant facts in
reasonable detail or specifically refers to the information contained in the
Disclosure Book as defined in Section X.04. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Article III.
SECTION III.01. EXISTENCE AND GOOD STANDING. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has the corporate power and authority to
own its properties and to carry on its business as now being conducted. The
Company is duly qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of properties or the conduct of
its business requires such qualification, except when the failure to have such
authorization, to be so qualified or to be in good standing would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION III.02. CAPITALIZATION. As of the date of this Agreement, (a)
4,413,771 shares of Common Stock are issued and outstanding and 295,642 are held
in treasury; (b) the entire authorized capital stock of the Company consists of
30,000,000 shares of Common Stock and 20,000,000 shares of Preferred Stock.
12,249,563 shares of Preferred Stock have been designated as 1998 Series A
Preferred Stock, 7,376,143 of which are issued and outstanding and none are held
in treasury; (c) 1,230,280 shares of Preferred Stock have been designated as
1998 Series B Preferred Stock all of which are issued and outstanding and none
are held in treasury; (d) 8,606,423 warrants, each exercisable for one share of
Common Stock, are outstanding and trade with the Preferred Stock; (e) 1,547,507
stock options, each exercisable for one share of Common Stock, are outstanding;
and (f) 1,600,000 shares of Common Stock are reserved for issuance upon exercise
of outstanding stock options. No other capital stock or equity securities of or
interest in the Company are authorized or outstanding. All of the issued and
outstanding Shares have been duly authorized, are validly issued, fully paid,
and nonassessable, and are not
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subject to any preemptive rights and are held of record by the respective XPLOR
Stockholders as set forth in Section 3.02(a) of the Disclosure Schedule. Each
holder of record of stock options and warrants is set forth in Section 3.02(b)
of the Disclosure Schedule. Except as set forth in Section 3.02(b) of the
Disclosure Schedule, there are no other outstanding or authorized options,
warrants, purchase rights, subscription rights conversion rights, exchange
rights, or other contracts or commitments that could require the Company to
issue, sell, or otherwise cause to become outstanding any of its capital stock
or that could require the Company to redeem, repurchase, or otherwise acquire
any of its capital stock. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights with
respect to the Company. Other than the XPLOR Shareholder Agreement (as defined
below), which shall terminate as of the Effective Time, there are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock of the Company. In addition, as of the Closing Date,
all options and warrants issued and outstanding and held by the holders of the
XPLOR Preferred Stock or the persons set forth in Section 3.02(c) of the
Disclosure Schedule, shall have been cancelled so that no such options or
warrants shall remain outstanding and no such holder of such options or warrants
shall have any remaining rights therein and neither the Company nor any of its
Subsidiaries shall have any remaining obligations thereto. Except as set forth
in Section 3.02(b) of the Disclosure Schedule, the Company has no obligations to
redeem or buy any Shares from any holder thereof.
SECTION III.03. CORPORATE AUTHORITY. The Company has the requisite
corporate power and authority to enter into this Agreement and the other
agreements contemplated by this Agreement (the "Related Agreements") to which
the Company is a party. The execution and delivery of this Agreement and the
Related Agreements to which the Company is a party and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by the Board of Directors and approved by the requisite Company
stockholders, no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement, the Related Agreements and the
transactions contemplated hereby and thereby which have not been obtained. All
such consents and approvals, if any, so obtained are listed on Section 3.03 of
the Disclosure Schedule. This Agreement is and the Related Agreements to which
the Company is a party will be, duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery hereof and
thereof by the other Parties hereto and thereto, this Agreement constitutes, and
the Related Agreements to which the Company is a party will constitute, valid
and binding agreements of the Company enforceable against the Company in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium or other similar
laws affecting the rights of creditors generally.
SECTION III.04. NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (a) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which any of the Company and
its Subsidiaries is subject or any provision of the charter or bylaws of any of
the Subsidiary and its Subsidiaries or (b) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, permit, instrument, or other
arrangement to which any of the Company and its Subsidiaries is a party or by
which it is bound
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or to which any of its assets is subject (or result in the imposition of any
security interest upon any of its assets), except where a waiver or consent to
such event has been obtained or the occurrence of any such event would not have
a Material Adverse Effect. None of the Company and its Subsidiaries needs to
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order for the Parties
hereto to consummate the transactions contemplated by this Agreement other than
as disclosed in Section 3.04 of the Disclosure Schedule.
SECTION III.05. SUBSIDIARIES AND INVESTMENTS. Section 3.05 of the
Disclosure Schedule sets forth for each subsidiary of the Company (each a
"Subsidiary"): (a) its name and jurisdiction of incorporation, (b) the number of
shares of authorized capital stock of each class of its capital stock, (c) the
number of issued and outstanding shares of each class of its capital stock, the
names of the holders thereof, and the number of shares held by each such holder,
and (d) the number of shares of its capital stock held in treasury. Each of the
Subsidiaries of the Company is duly qualified to do business and is in good
standing in each jurisdiction in which its ownership or leasing of properties or
the conduct of its business requires such qualification, except where the
failure to be so qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect. All of the issued and outstanding
shares of capital stock of each Subsidiary of the Company have been duly
authorized and are validly issued, fully paid, and nonassessable and not subject
to any preemptive rights. No other equity securities of, or interest in, the
Subsidiaries of the Company are authorized or outstanding. Except as disclosed
in Section 3.05 of the Disclosure Schedule, the Company or its Subsidiaries
holds of record and owns beneficially all of the outstanding shares of each
Subsidiary of the Company, free and clear of any restrictions on transfer (other
than restrictions under the Securities Act and state securities laws), Taxes,
security interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, demands or other encumbrances. There are no outstanding or
authorized options, warrants, purchase rights, conversion rights, exchange
rights, or other contracts or commitments that could require any of the Company
and its Subsidiaries to sell, transfer, or otherwise dispose of any capital
stock of any of such Subsidiaries or that could require any such Subsidiary to
issue, sell, or otherwise cause to become outstanding any of its own capital
stock. There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to any Subsidiary of the Company.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of any Subsidiary of the Company.
Except as disclosed in Section 3.05 of the Disclosure Schedule, none of the
Company and its Subsidiaries controls directly or indirectly or, other than
participation in oil and gas operations in the ordinary course of business, has
any direct or indirect equity participation in any corporation, partnership,
trust, or other business association which is not a Subsidiary of the Company.
SECTION III.06. FINANCIAL STATEMENTS. Included in the Disclosure Book
are the following financial statements of the Company: (a) the audited
consolidated financial statements of the Company for the fiscal years ended
December 31, 1997 and December 31, 1998 and related notes, (b) the Company's
unaudited consolidated and consolidating financial statements for the fiscal
quarter ended June 30, 1999, including the balance sheet (the "June Balance
Sheet"), and (c) all schedules and opinions of certified public accountants
(collectively, the "Financial Statements"). The Financial Statements (a) fairly
present in accordance with generally accepted accounting principles the assets,
liabilities and financial condition of the
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Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations for the respective periods ended on
such dates, (b) have been prepared from, and are consistent with, the books and
records of the Company and its consolidated Subsidiaries (which books and
records are correct and complete in all material respects), and (c) except as
otherwise set forth in the notes thereto, (i) have been prepared in accordance
with generally accepted accounting principles consistently applied and (ii)
include all adjustments that are necessary for a fair presentation of the
information shown (subject, in the case of reports other than annual year-end
reports, to normal year-end audit adjustments which will not be material,
individually or in the aggregate). Since December 31, 1998, there has been no
change, other than changes in the oil and gas industry generally and in the
ordinary course of business consistent with past practice or as described in
Section 3.06 of the Disclosure Schedule, in the assets or liabilities, or in the
business or condition, financial or otherwise, or in the results of operations,
of the Company and the Subsidiaries which has had a Material Adverse Effect.
SECTION III.07. UNDISCLOSED LIABILITIES. To the Company's best
knowledge, none of the Company and its Subsidiaries has any material liability
(and there is no basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any of them
giving rise to any material liability), except for (a) liabilities set forth on
the face of the June Balance Sheet (rather than in any notes thereto), (b)
liabilities set forth in Section 3.06 of the Disclosure Schedule, (c)
liabilities which have arisen after June 30, 1999 in the ordinary course of
business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law), and (d) liabilities which in the aggregate
would not have a Material Adverse Effect.
SECTION III.08. BOOKS AND RECORDS. The minute books of the Company and
the Subsidiaries, as previously made available to Harken and its
representatives, are in good order, correct, and complete (in all material
respects), and accurately reflect all meetings of and corporate actions or
written consents by the XPLOR Stockholders and Board of Directors of the Company
and the Subsidiaries.
SECTION III.09. TITLE. The Company and the Subsidiaries have good and
defensible title to all the properties and assets of every kind, character and
description (real, personal or mixed, tangible and intangible), including,
without limitation, all parcels of real property, pipelines, rights-of-way and
easements and other incidental rights and permits, reflected on the June Balance
Sheet or which would have been reflected on the June Balance Sheet if such
property or asset had been acquired prior to June 30, 1999, (the "Assets")
except for Assets that are obsolete or that have been disposed of in the
ordinary course of business between the date of the June Balance Sheet and the
date of this Agreement, free and clear of all encumbrances of any nature except
for (a) the encumbrances and title defects specifically described in Section
3.09 of the Disclosure Schedule; (b) mortgages and encumbrances which secure
indebtedness or obligations which are properly reflected on the Financial
Statements and, if such indebtedness exceeds $50,000, listed in Section 3.09 of
the Disclosure Schedule; (c) Permitted Encumbrances; and (d) such imperfections
of title and encumbrances, if any, as do not materially interfere with the
present use of any of the Assets subject thereto.
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SECTION III.10. INDEPENDENT AND INTERNAL ENGINEERING REPORTS. (a) The
Company has made available to Harken the results of the Independent Engineering
Report, prepared by Netherland, Sewell & Associates, Inc. with respect to
reserves as of December 31, 1998 (the "Independent Engineering Report") on the
oil and gas fields listed on the attachment thereto (the "Evaluated Properties")
in which the Company will have interests subsequent to the Effective Time. The
Independent Engineering Report is the latest independent engineering report
available to the Company relating to the Evaluated Properties. The Company has
provided no materially false or misleading information to and has not withheld
from the Independent Engineer any material information with respect to the
preparation of the Independent Engineering Report. Except as disclosed on
Schedule 3.10 of the Disclosure Schedule, the Company is not aware of any facts
or circumstances that should reasonably cause the Company to conclude that (i)
any of the information that was supplied by the Company to the Independent
Engineer in connection with its preparation of the Independent Engineering
Report is not currently correct in all material respects (other than normal
depletion by production in the ordinary course) or (ii) the Independent
Engineering Report is incorrect in any material respect.
(b) The Company has made available to Harken the results of the
internal engineering report, with respect to reserves as of June 30, 1999, a
copy of which is attached hereto as Schedule 3.10 of the Disclosure Schedule
(the "Internal Engineering Report"), on the Evaluated Properties. The Internal
Engineering Report is the latest engineering report available to the Company
relating to the Evaluated Properties. The Internal Engineering Report does not
contain any materially false or misleading information and is currently correct
in all material respects (other than normal depletion by production in the
ordinary course).
SECTION III.11. TITLE TO INTERESTS. (a) Except as disclosed in Section
3.11 of the Disclosure Schedule, (i) the Company and its Subsidiaries own the
interest in producing oil wells and producing gas wells described in the
Independent Engineering Report, (individually a "Well" and collectively the
"Wells"), (ii) the Company's and its Subsidiaries' net revenue interest and
leasehold cost bearing interest (i.e., working interest) in each Well are as
described in the Independent Engineering Report, and (iii) each oil, gas, and
mineral lease in which the Company and its Subsidiaries own any interest and the
type of interest owned by the Company and its Subsidiaries (individually and
collectively, the "Leases") are described in the Disclosure Book. The lands
identified in the Leases and owned by the Company and/or its Subsidiaries are
individually and collectively called the "Land." The Wells, the Leases, and the
Land, together with all of the Company's right, title and interest in (i) all
contracts, agreements, leases, licenses, permits, authorization, easements, and
orders (individually and collectively called "XPLOR Agreements") in any way
relating to the Wells, the Leases and/or the Land, the operations conducted or
to be conducted pursuant thereto or thereon, or the production, treatment, sale
or disposal of hydrocarbons or water produced therefrom or attributable thereto,
(ii) all personal property, fixtures (including, without limitation, pipe,
plants and pipelines), equipment (including, without limitation, compressors,
parts, rods, tubular goods and supplies) and improvements located at, under or
on the Wells, the Leases and/or the Land, or used or obtained in connection
therewith or with the operation or maintenance of the Wells or other facilities
thereon or with the production, treatment, sale or disposal of hydrocarbons or
water produced therefrom or attributable thereto, and (iii) all other rights and
interests in, to or under or derived from the Wells, the Leases, the XPLOR
Agreements, and/or the Land (including, without limitation, all mineral and
royalty interests, and all overriding royalty interests and all other
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interests in or payable out of or measured by production, and all surface
interests, for a term or in fee), or in any way relating thereto, are referred
to herein as the "Interests."
(b) With respect to each Well, the Company's and its Subsidiaries'
interests in the Leases and the Land are such that, after giving effect to the
XPLOR Agreements, existing spacing orders, operating agreements, unit
agreements, communitization agreements and orders, unitization orders and
pooling designations and orders, subject to any limitations described in Section
3.11 of the Disclosure Schedule and Permitted Encumbrances, and after taking
into account all royalty interests, overriding royalty interests, net profits
interests, production payments and other burdens on production attributable to
third parties, (i) the Company and its Subsidiaries are entitled, during the
respective terms of the Leases covering such Well, to a share (expressed as a
decimal) of all oil, gas and other minerals produced from such Well which is not
less than the "net revenue interest" set forth in connection with the
description of such Well, free and clear of all liens, claims, mortgages, deeds
of trust, assignments of production, and security interests, other than those
described in Section 3.11 of the Disclosure Schedule, (ii) the Company and its
Subsidiaries own an undivided interest (expressed as a decimal) equal to the
"working interest" set forth in connection with the description of such Well in
and to all property and rights incident thereto, including all rights in, to and
under all agreements, leases, permits, easements, licenses and orders in any way
relating thereto, and in and to all wells, personal property, fixtures and
improvements thereon, appurtenant thereto or used or obtained in connection
therewith or with the production or treatment or sale or disposal of
hydrocarbons or water produced therefrom or attributable, for a share of the
costs relating to the exploration, development, and operation of such Well which
is no greater than the "working interest" set forth in connection with the
description of such Well. Notwithstanding the foregoing, title to the Company's
Interests classified as proved developed producing, proved developed
nonproducing and proved undeveloped in the Independent Engineering Report is of
a type and nature customarily acceptable to the reasonably prudent oil and gas
operator of oil and gas interests.
SECTION III.12. COMPLIANCE WITH LEASES AND LAWS; OPERATION OF ASSETS.
Except as set forth in Section 3.12 of the Disclosure Schedule:
(a) Each Lease is in full force and effect and all rentals, royalties,
shut-in well payments, bonuses and other payments due or payable from or by the
Company and its Subsidiaries under the Leases and applicable laws, rules and
regulations, have been properly and timely paid, except where the failure to pay
properly and timely is in the normal course of business and would not have a
Material Adverse Effect, and all conditions necessary to keep the Leases in full
force and effect as of the date hereof and as of the Closing Date have been or
shall be fully performed, including, to the best of the Company's knowledge, all
payments or obligations due from or by third parties except where the failure to
satisfy such conditions is in the normal course of business and would not have a
Material Adverse Effect;
(b) The Company and its Subsidiaries are entitled to receive (and are
currently receiving with respect to producing oil, gas and/or mineral leases)
without present suspense or presently required indemnity against asserted or
known defects or disputes regarding the Company's and its Subsidiaries'
ownership, from each pipeline purchaser or other purchaser of production, or
from the person receiving payments from any such purchasers, the proceeds
attributable to the net revenue interest in production from each of the Leases,
except as set forth
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in Section 3.12 of the Disclosure Schedule, where the failure to receive such
proceeds would not have a Material Adverse Effect;
(c) All Wells operated by the Company and its Subsidiaries have been
drilled, completed and bottomed within the boundaries of each of the respective
Leases or within the limits otherwise permitted by contract and by law, and no
such Well is subject to material penalties or restrictions on allowables because
of any overproduction (legal or illegal) which would prevent the assignment of a
full allowable (including maximum permissible tolerance) to each such Well by
the state or local governmental agency having jurisdiction. No Well is subject
to any "take or pay" or similar obligation by which a purchaser of production
has made payment to the Company and its Subsidiaries for oil, gas or mineral
production yet to be delivered, or by which any party is entitled to take or
receive production from the Leases without thereafter paying the full value
therefor;
(d) The Company and its Subsidiaries have complied with all applicable
laws relating to the production of or from the Interests, the conduct of
drilling, completion, and production operations with respect to the Interests
and the regulation thereof and have administered and maintained the Interests in
a reasonable manner and in accordance with generally prevailing standards of the
oil and gas industry, except where the failure to comply or so administer or
maintain would not have a Material Adverse Effect;
(e) The Company and its Subsidiaries have not received notice of
violation or probable violation of any applicable law relating to or directly or
indirectly affecting the Interests, nor are there any such violations, other
than such violations which would not have a Material Adverse Effect;
(f) There have been no demands for cancellation or termination of any
of the Interests or for any claimed breach of any Interest due to the failure of
the Company, its Subsidiaries or any third party to produce or conduct drilling
or other operations thereon, nor have there been any suits, enforcement
proceedings or other actions filed, threatened or anticipated by the Company and
its Subsidiaries which might have a Material Adverse Effect;
(g) The Company and its Subsidiaries hold all licenses, franchises,
permits, easements, certificates, consents, rights and privileges ("Permits")
necessary to the operation of the Interests, and to the best of the Company's
knowledge, each third party operator of any of the Interests holds all Permits
necessary to the operation of the Interests except for such Permits the lack of
which would not have a Material Adverse Effect;
(h) To the best knowledge of the Company's management, except as set
forth in Section 3.12(h) of the Disclosure Schedule and except for current
invoices received within ten (10) days of the date hereof, which invoices were
incurred in the ordinary course of business, all invoices, statements, bills and
accounts of and to the Company and its Subsidiaries for labor, services,
materials or supplies furnished to or for the Interests have been paid in full
in the ordinary course of business consistent with past practices and the
Company and its Subsidiaries are current in payment of all joint interest
billings for operations or other contracts pertaining to the operation of the
Interests;
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(i) All production from the Wells operated by the Company or its
Subsidiaries have been properly accounted for and all proceeds attributable
thereto have been properly paid in the ordinary course of business consistent
with past practices;
(j) No production or sale of oil, gas or other hydrocarbons heretofore
produced or sold from or attributable to the Interests has been in excess of any
allowable quantity or price or in violation of any other rule or regulation
affecting the sale of hydrocarbons as established by the applicable regulatory
authorities except where such excess or violation would not have a Material
Adverse Effect;
(k) No gas produced is subject to the price control jurisdiction of the
Federal Energy Regulatory Commission ("FERC") under the Natural Gas Policy Act;
and
(l) The Company and its Subsidiaries have properly prepared in full
compliance with all applicable laws and regulations and have timely filed all
reports required to be filed by any law, government entity, or agency as a
result of the operation of the Interests and no extensions of time to file any
such reports has been requested except where the failure to fully comply and
timely file or any extension request would not have a Material Adverse Effect.
SECTION III.13. EQUIPMENT. That portion of the Interests consisting of
personal property, facilities, and fixtures including, without limitation, all
equipment and assets used in connection with the operation of the Interests, is
in good condition and repair, ordinary wear and tear excepted, and is adequate
for the proper operation of the Interests, except for such repairs and additions
necessary for the proper operation of the Interests and which individually or in
the aggregate would not result in a Material Adverse Effect.
SECTION III.14. CONTRACTS, AGREEMENTS, COMMITMENTS AND OTHER MATTERS.
(a) Included in the Disclosure Book, the Independent Engineering Report, and
Sections 3.14 and 3.22 of the Disclosure Schedule is a true, and correct
description of all of the following (whether written or oral), including all
amendments thereto, to which the Company or its Subsidiaries is a party or by
which any of the Assets is materially affected and that is currently in effect
or has any outstanding obligations thereunder ("Material Contracts"):
(i) any note, agreement, mortgage, indenture, security
agreement and other instruments relating to the borrowing of money or
evidence of credit for the deferred purchase price of property, or the
direct or indirect guarantee by the Company or any of its Subsidiaries
of any such indebtedness or deferred purchase price in excess of
$50,000;
(ii) any lease of real property and material personal property
providing for annual payments under any such lease in excess of
$25,000;
(iii) any partnership or joint venture agreement other than in
the ordinary course of business;
(iv) any management, employment and consulting agreement or
other contract for personal services that is not terminable by the
Company or any Subsidiary party
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thereto on not more than three month's notice without penalty copies of
which have been provided to Harken;
(v) any agreement providing for liability for severance pay or
benefits triggered by a change in control (any such amounts that will
be due shall be specifically set forth in Section 3.14(a)(v) of the
Disclosure Schedule), collective bargaining agreements, labor
contracts, or labor or personnel policies copies of all of which have
been provided to Harken;
(vi) any agreement or commitment for capital expenditures in
excess of $25,000, for any single project (it being represented and
warranted that the liability under all undisclosed agreements and
commitments for capital expenditures does not exceed $100,000 in the
aggregate for all projects);
(vii) any plan, contract or arrangement providing for bonuses,
pensions, deferred compensation, retirement plan payments, profit
sharing, stock options, stock purchase rights, stock appreciation
rights, incentive pay, or for any other plan for the benefit of the
Company's and its Subsidiaries' current or former directors, officers,
and employees (and any persons participating in, or having any rights
with respect to, any of the foregoing are set forth on Schedule
3.14(a)(vii) of the Disclosure Schedule, which includes the details of
such participation);
(viii) any contract, commitment or agreement that involves the
disposition of any assets of the Company or any of its Subsidiaries not
in the ordinary course of business consistent with past practice;
(ix) any contract, commitment or agreement between the Company
or any of its Subsidiaries, on the one hand, and any affiliate of the
Company, on the other hand, involving consideration in excess of
$5,000;
(x) any contract (A) for the sale of oil or other liquid
hydrocarbons or minerals produced or to be produced from the Assets
that is not terminable by the Company or the Subsidiary party thereto
or their respective successors without penalty on no more than ninety
(90) days' notice or (B) for the sale of gas produced or to be produced
from the Assets that has a term exceeding one year, warrants the amount
of gas to be delivered or has a pricing provision not based on current
market value;
(xi) any advance payment agreement or any oil and gas
balancing agreement, or any group of related agreements of such type,
under which the Company or any of its Subsidiaries has a net
obligation, as of the most recent date available, which shall be no
more than ninety (90) days prior to the date hereof, in excess of
$25,000 in cash or market value in oil or gas;
(xii) any contract or agreement relating to the Assets under
which the Company or any of its Subsidiaries has outstanding
indebtedness, obligations or liability for borrowed money, or liability
for the deferred purchase price of property, excluding
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normal trade payables due in less than ninety (90) days, or has the
obligation to incur any such indebtedness, obligation or liability, in
each case in excess of $25,000;
(xiii) any agreement concerning confidentiality or
noncompetition other than joint operating agreements or area of mutual
interest agreements, entered into in the ordinary course of business;
(xiv) any agreement (or series of related agreements) under
which it has advanced or loaned any amount to any officer, director, or
employee of any of the Company and its Subsidiaries; and
(xv) any other agreement, contract or commitment (or related
group thereof) that involves payments or receipts, individually or in
the aggregate over a twelve (12) month period, will result in a
material loss in the assets of the Company or any Subsidiaries, or
involves consideration in excess of more than $50,000.
(b) The Company has made available to Harken true, correct and complete
copies of all written Material Contracts and has provided accurate descriptions
of all oral Material Contracts. Except as set forth in Section 3.14 of the
Disclosure Schedule and as provided in Section III.33, each of the Material
Contracts has been executed by the Parties thereto, is in full force and effect
and is enforceable against the Company or one of its Subsidiaries, as
applicable, in accordance with its terms (except that (i) the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought) and
has not been amended or modified in any way (whether in writing or orally).
Except as set forth in Section 3.14 of the Disclosure Schedule, each Material
Contract will continue to be legal, valid, binding, enforceable, and in full
force and effect on substantially the same terms following the consummation of
the transactions contemplated hereby, except where the lack of such continuation
would not have a Material Adverse Effect. Except as set forth in Section 3.14 of
the Disclosure Schedule and as provided in Section III.33, neither the Company,
any of its Subsidiaries nor any other party to any Material Contract is in or
alleged to be in material breach of any Material Contract, or has failed to
perform any material obligation required to be performed by them, and there does
not exist under any provision thereof any event that, with the giving of notice
or the lapse of time or both, would constitute such a breach or default, except
for such breaches, defaults and events as to which requisite waivers or consents
have been obtained or which, in the aggregate, would not have a Material Adverse
Effect. Except as listed in Section 3.14 of the Disclosure Schedule or
discussions or negotiations that Harken or its agents or representatives have
participated in, neither the Company nor any of its Subsidiaries is
participating in any discussions or negotiations regarding modification of or
amendment to any Material Contract or entry into any new Material Contract.
(c) Except with respect to past due accounts payable or outstanding
indebtedness to suppliers (which are set forth on Schedule 3.14(c) of the
Disclosure Schedule listing an aging of the Company's indebtedness), the
Company's and its Subsidiaries' relationships with their respective suppliers
are generally satisfactory.
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(d) Other than as set forth in Section 3.14(d) of the Disclosure
Schedule, the Company and its Subsidiaries do not have outstanding any powers of
attorney, including, but not limited to, powers of attorney with respect to
representation before governmental agencies, customs agents and brokers or given
in connection with qualification to conduct business in any other jurisdiction.
SECTION III.15. RESTRICTIVE DOCUMENTS AND GOVERNMENTAL CONSENTS. The
Company and its Subsidiaries are not subject to, or a party to, any charter,
by-law, mortgage, lien, lease, license, permit, agreement, contract, instrument,
law, rule, ordinance, regulation, order, judgment or decree, or any other
restriction of any kind or character, which would prevent consummation of the
transactions contemplated by this Agreement or the Related Agreements,
compliance by the Company with the terms, conditions and provisions hereof or
thereof or, to the best knowledge of the Company, the continued operation of the
Company's and its Subsidiaries' businesses after the date hereof on
substantially the same basis as heretofore operated or which would restrict the
ability of the Company or its Subsidiaries to acquire any property or conduct
business in any area except as would not have a Material Adverse Effect. Other
than in connection or compliance with the provisions of the Delaware Statute,
the Securities Act of 1933 (the "Securities Act"), the securities, takeover or
blue sky laws of the various states, neither the nature of the Company or of any
its Subsidiaries, nor of any of their respective businesses or properties, nor
any relationship between the Company or any of its Subsidiaries and any other
Person is such as to require consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority on the part of
the Company as a condition to the execution and delivery of this Agreement and
the Related Agreements and the consummation by the Company of the transactions
contemplated by this Agreement and the Related Agreements.
SECTION III.16. LITIGATION. Except as disclosed in Section 3.16 of the
Disclosure Schedule, there is no action, suit, proceeding or investigation
pending or currently threatened against the Company or any of its Subsidiaries,
including any action, suit, proceeding or investigation that questions the
validity of this Agreement or the Related Agreements or the Company's right to
enter into this Agreement or the Related Agreements, or to consummate the
transactions contemplated hereby or thereby or which, if decided in a manner
adverse to the Company, would reasonably be expected to have a Material Adverse
Effect.
SECTION III.17. TAXES. (a) Except as disclosed in Section 3.17 of the
Disclosure Schedule or where the failure to file Tax Returns (as defined below)
and pay Taxes (as defined below) would not reasonably be expected to have a
Material Adverse Effect, the Company and each of its Subsidiaries has (i) duly
filed with the appropriate Federal, state, local and foreign taxing authorities
all Tax Returns required to be filed by or with respect to the Company and its
Subsidiaries as of the date of this Agreement, and such Tax Returns are true,
correct and complete in all material respects and (ii) paid or made provision
for in the Financial Statements all Taxes of the Company and its Subsidiaries
shown to be due on such Tax Returns. To the best knowledge of the Company, there
are no tax liens on any of the Assets other than liens for current real estate
taxes not yet due or Taxes being contested in good faith by appropriate
proceedings and disclosed in Section 3.17 of the Disclosure Schedule. Except as
set forth in Section 3.17 of the Disclosure Schedule, the Company has not
received any written notice of deficiency, assessment or proposed assessment
from any Federal, state, local, tribal or foreign
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taxing authority with respect to liabilities for Taxes of the Company or its
Subsidiaries which have not been paid or finally settled, and, there is no
pending tax examination of or tax claim assessed against the Company, any of its
Subsidiaries or any of the Assets, and any such deficiency, assessment, proposed
assessment or tax claim disclosed in Section 3.17 of the Disclosure Schedule is
being contested in good faith through appropriate proceedings.
(b) For purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies, penalties or other assessments imposed by any United
States Federal, state, local, tribal or foreign taxing authority, including, but
not limited to, income, severance, ad valorem, service, leasing, occupation,
excise, property, sales and use, transfer, franchise, payroll, withholding,
social security or other taxes and assessments, including any interest,
penalties or additions attributable thereto.
(c) For purposes of this Agreement, "Tax Return" shall mean any return,
report, information return or other document (including any related or
supporting information) filed or required to be filed with any taxing authority
with respect to Taxes.
SECTION III.18. INSURANCE. Section 3.18 of the Disclosure Schedule or
the Disclosure Book sets forth the material information with respect to each
current insurance policy (including policies providing property, casualty,
liability, and workers' compensation, and employee benefits coverage and bond
and surety arrangements) to which any of the Company and its Subsidiaries is a
party, a named insured, or otherwise the beneficiary of coverage. With respect
to each such insurance policy in effect as of the date of this Agreement: (i)
the policy is legal, valid, binding, enforceable, and in full force and effect;
(ii) the policy will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby other than the Directors' and Officers'
insurance; (iii) neither any of the Company and its Subsidiaries nor, to the
knowledge of any of the directors and officers (and employees responsible for
insurance matters) of the Company or its Subsidiaries, any other party to the
policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (iv) no party
to the policy has repudiated any provision thereof. Section 3.18 of the
Disclosure Schedule briefly describes any self-insurance arrangements affecting
any of the Company and its Subsidiaries.
SECTION III.19. PATENTS, TRADEMARKS, TRADE NAMES, ETC. Except as
disclosed in Section 3.19 of the Disclosure Schedule, neither the Company nor
its Subsidiaries own, license or use any patents, trademarks, trade names and
copyrights which are material to the business of the Company or its
Subsidiaries.
SECTION III.20. COMPLIANCE WITH LAW. Except as disclosed in Section
3.20 of the Disclosure Schedule, the Company and its Subsidiaries are not in
violation of any order, injunction, judgment, ruling, law or regulation of any
court or governmental authority applicable to the property or business of the
Company or its Subsidiaries. The licenses, permits and other governmental
authorizations held by the Company and its Subsidiaries are valid and sufficient
for the conduct of the Company's and its Subsidiaries' business as currently
conducted and
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presently proposed to be conducted, except where the failure to hold such
licenses, permits and other governmental authorizations would not have a
Material Adverse Effect.
SECTION III.21. LABOR RELATIONS. Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement applicable to
employees of the Company or its Subsidiaries. Except as would not reasonably be
expected to have a Material Adverse Effect, the Company and its Subsidiaries are
in compliance in all material respects with all applicable laws, ordinances,
regulations, statutes, rules and restrictions relating to (a) employment, (b)
hiring, promotion, employment and pay practices, (c) terms and conditions of
employment and (d) federal and state wages and hours laws; and neither the
Company nor any of its Subsidiaries is engaged in any unfair labor practice
which has had or is reasonably likely to have a Material Adverse Effect. No
strike, slowdown, picketing or work stoppage by any union or other group of
employees against the Company, any of its Subsidiaries or any of their
properties wherever located, and no secondary boycott with respect to their
products, lockout by them of any of their employees or any other labor trouble
or other occurrence, event or condition of a similar character, has occurred or,
been threatened.
SECTION III.22. EMPLOYEE BENEFIT MATTERS. (a) Section 3.22 of the
Disclosure Schedule or as specifically set forth in the Disclosure Book contains
a true and complete list of all employee benefit plans (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) as well as any and all amounts that to the Company's knowledge may be
owed by the Company under each such plan, including but not limited to, any
under funded amounts, and all bonus, stock option, stock purchase, incentive,
deferred compensation, profit sharing, phantom stock, vacation, retiree medical
or life insurance, supplemental retirement, severance, disability, death or
other employee benefit plans, programs or arrangements, and all material
employment or compensation agreements, in each case for the benefit of, or
relating to, any current employee or former employee, officer or director of the
Company or any of its Subsidiaries (collectively, the "Plans").
(b) None of the Plans (i) is a multiemployer plan, within the meaning
of Section 3(37) or 4001(a)(3) of ERISA or a single employer pension plan,
within the meaning of Section 4001(a)(15) of ERISA, for which the Company could
incur liability under Section 4063 or 4064 of ERISA or (ii) provides or promises
to provide retiree medical or life insurance benefits.
(c) All Plans are in compliance in all material respects with the
requirements prescribed by applicable statutes, orders or governmental rules or
regulations currently in effect with respect thereto, and the Company has
performed all material obligations required to be performed by it under, and is
not in any material respect in default under or in violation of, any of the
Plans.
(d) The Company has no Plans that are qualified under Section 501(a) of
the Internal Revenue Code.
(e) The Company has not incurred any material liability to the Pension
Benefit Guaranty Corporation or any "withdrawal liability" within the meaning of
Section 4201 of ERISA, in either case relating to any Plan or any pension plan
maintained by any company which would be treated as a single employer with the
Company, under Section 4001 of ERISA.
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(f) The Company has made available to Harken full and complete copies
of all Plans and, where applicable, summary plan descriptions with respect to
the Plans.
SECTION III.23. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for events
contemplated by this Agreement or disclosed in Sections 3.14, 3.22, or 3.23 of
the Disclosure Schedule or the Disclosure Book, since December 31, 1998:
(a) The Company and its Subsidiaries have used all reasonable efforts
to preserve and retain the business, employees, properties, suppliers and
goodwill of the Company and its Subsidiaries and have operated their respective
operations and conducted business generally only in the ordinary and usual
course consistent with past practice;
(b) There has been no direct or indirect redemption, purchase or other
acquisition by the Company of any shares of its capital stock, or any
declaration setting aside payment of any dividend or other distribution by the
Company;
(c) Other than bonuses paid in cash or stock options granted for the
calendar year 1998, Directors' and Officers' insurance and changes contemplated
by this Agreement, the Company and its Subsidiaries have not, other than in the
ordinary course of their business, (i) entered into or amended any employment,
compensation or severance agreements, (ii) changed any current bonuses or
established any new bonuses, (iii) increased the level of compensation benefits
or perquisites of any executive officer or director, or (iv) established,
entered into or amended in any material respect any pension, employee benefit or
health plans or any other plans, policies, programs, practices or arrangements
relating to employee benefits or compensation other than to maintain compliance
with any applicable law or regulation; and
(d) No event has occurred with respect to the Company or its
Subsidiaries, or the condition of the Evaluated Properties or the Assets, that
results in or is reasonably likely to result in a Material Adverse Effect,
including, but not limited to, any Material Adverse Effect resulting from any
of, or an aggregation of, the following Company actions:
(i) any damage, destruction or loss to any of the Evaluated
Properties or the Assets, whether or not covered by insurance other
than as a result of market conditions generally in the oil and gas
industry;
(ii) any sale, lease, assignment, transfer, movement,
relocation, termination, release or assignment of any of the Evaluated
Properties or the Assets, other than sales of inventory in the ordinary
course of business;
(iii) any waiver or release of any rights of either the
Company or any of its Subsidiaries under any Material Contracts (as
defined in Section III.14);
(iv) any change in any accounting practice or procedure;
(v) any capital expenditure or commitment for additions to
property, plant or equipment;
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(vi) any change in maintenance practices with respect to any
of the Evaluated Properties or the Assets;
(vii) any change in credit policy;
(viii) any change in purchasing or sale practices;
(ix) any change in inventory, equipment spare parts, materials
or liquid levels inconsistent with historical levels maintained in the
ordinary course;
(x) any other occurrence, circumstance or combination thereof,
except for any occurrence or circumstance generally applicable to the
oil and gas industry;
(xi) any assumption, guarantee, endorsement or other
assumption of responsibility by the Company or any of its Subsidiaries
for the material liability or obligation of any other person (whether
absolute, accrued, contingent or otherwise);
(xii) any discharge or satisfaction of any lien or other
encumbrance on any of the Assets or the Evaluated Properties or the
payment of any liability or obligation (whether absolute, accrued,
contingent or otherwise) of the Company or any of its Subsidiaries,
other than in the ordinary course of business and consistent with past
practice;
(xiii) any cancellation, modification or settlement for less
than the full amount thereof of any material debt or claim by or owing
to the Company or any of its Subsidiaries;
(xiv) any transfer or grant by the Company or any of its
Subsidiaries of any right under any contracts and other agreements,
patents, patent licenses, inventions, trade names, trademarks, service
marks or copyrights, or registrations or licenses thereof or
applications therefor, or with respect to any know-how or other
proprietary or trade rights;
(xv) any termination, discontinuance, closing or disposal of
any of the Evaluated Properties or Assets; or
(xvi) any transaction, contract or commitment entered into by
the Company or any Subsidiary which is not in the ordinary course of
business and consistent with past practice.
SECTION III.24. NO BROKERS' OR OTHER FEES. Except as disclosed in
Section 3.24 of the Disclosure Schedule, no broker, finder or investment banker
is entitled to any fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the Company.
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SECTION III.25. COPIES OF DOCUMENTS. The Company has caused to be made
available for inspection and copying by Harken and its advisers, true, complete
and correct copies of all documents referred to in this Article III, or in any
schedule furnished by the Company to Harken.
SECTION III.26. ENVIRONMENTAL MATTERS. Except as set forth in Section
3.26 of the Disclosure Schedule or the Disclosure Book:
(a) Neither the Company nor any of its Subsidiaries has violated or
received any notice alleging any past or present violation of, any applicable
Federal, state, local or foreign laws, statutes, ordinances, rules, regulations,
orders or determinations of any governmental authority applicable to the Company
or applicable to any of its Subsidiaries, as the case may be, in its respective
jurisdiction of operation which are in effect and duly enforced relating to
Environmental Laws, to the extent that any such violation, or such violations in
the aggregate, would reasonably be expected to have a Material Adverse Effect.
(b) No hazardous waste, substance or material has been stored, treated
or disposed of by the Company or any of its Subsidiaries or to the knowledge of
the Company by any person on any real estate owned or leased by the Company or
its Subsidiaries, respectively, except in compliance with applicable
Environmental Laws; and the Company and its Subsidiaries have lawfully disposed
of their hazardous waste products with respect to the operations of their
businesses except, in each case, where such failure to be in compliance or to
obtain, store, treat or dispose of such waste products could not have a Material
Adverse Effect.
(c) The Company is not aware of any facts or circumstances that could
reasonably lead the Company or any of its Subsidiaries to conclude that the
costs and liabilities, other than the currently budgeted capital expenditures,
associated with the effect of Environmental Laws on the business, operations and
properties of the Company and its Subsidiaries (including, without limitation,
any capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties) could, singly or in the aggregate, have a Material
Adverse Effect.
(d) The Company has caused to be made available to Harken for its
review true and complete copies and results of any reports, studies, analyses,
tests, or monitoring possessed by the Company or its Subsidiaries pertaining to
Hazardous Materials or Hazardous Activities in, on, or under the Facilities, or
concerning compliance by any of the Company or its Subsidiaries with
Environmental Laws.
SECTION III.27. NO AFFILIATE OWNERSHIP. Except as set forth in Section
3.27 of the Disclosure Schedule, no Person controlled by, controlling or under
common control with the Company (other than its Subsidiaries) owns any interest
in any of the Assets or the Evaluated Properties.
SECTION III.28. SALE OF PRODUCTION. Except as set forth in the
Disclosure Book or Section 3.28 of the Disclosure Schedule and except as would
not have a Material Adverse Effect, the Company and its Subsidiaries have no
production from any Well which is subject to balancing rights of third parties
or is subject to balancing duties under governmental
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requirements, and no third party has production from any Well which is subject
to the balancing rights of the Company or its Subsidiaries. Except as disclosed
in the Disclosure Book or Section 3.28 of the Disclosure Schedule, the Company
and its Subsidiaries have not collected any proceeds from the sale of
hydrocarbons produced from the Interests which are subject to refund. Except as
set forth in the Disclosure Book or Section 3.28 of the Disclosure Schedule,
proceeds from the sale of oil, gas and natural gas liquids from the Wells are
being received by the Company and its Subsidiaries in a materially timely manner
and based upon the net revenue interest described in the Disclosure Book for
each such Well and in accordance with the terms of the applicable purchase
agreement governing such sale, and are not being held in suspense for any reason
except in the ordinary course of business consistent with past practices. The
Company has described pursuant to Section III.14 all contracts and agreements
and made available to Harken for examination all contracts and agreements
terminable by the Company and its Subsidiaries upon less than ninety (90) days'
notice pursuant to which hydrocarbons produced from the Interests are sold,
transported, processed or otherwise disposed of or marketed. Except as disclosed
in the Disclosure Book or Section 3.26 of the Disclosure Schedule, no person has
any call upon, preferential right or option to purchase or similar rights with
respect to the Interests or to the production therefrom except at prevailing
market prices. Except as disclosed pursuant to the Disclosure Book or Section
3.14 of the Disclosure Schedule, no person has a right of first refusal with
respect to the Interests triggered by the transactions contemplated hereby.
Except as disclosed in the Disclosure Book or Section 3.28 of the Disclosure
Schedule, price renegotiation procedures have not been commenced under FERC
Order No. 451 which involve or which hereafter may affect any gas produced from
the Interests. Except as disclosed in the Disclosure Book or Section 3.28 of the
Disclosure Schedule, no offer of credits under FERC Order No. 500 has been made
which would entitle any purchaser of gas produced from the Interests to credit
transported volumes against such purchaser's take-or-pay obligations under any
contract for the sale of gas produced form the Interests.
SECTION III.29. STATUS OF WELLS. Except as disclosed in the Disclosure
Book or Section 3.29 of the Disclosure Schedule, all Wells set forth in the
Independent Engineering Report, excluding proved undeveloped and proved
developed nonproducing properties as identified in such report, are producing or
operationally capable of producing hydrocarbons (based upon prevailing economic
conditions) without the necessity of recompletion or material reworking
operations. Except as disclosed in the Disclosure Book or Section 3.29 of the
Disclosure Schedule or reserved for in the June Balance Sheet, the Company and
its Subsidiaries have no obligations existing for the plugging or abandonment
(including obligations for restoration of the surface) of any oil and/or gas
well, salt water disposal well or other well located at the Interests other than
the general obligation to plug and abandon wells.
SECTION III.30. HEDGING. Section 3.30 of the Disclosure Schedule or the
Disclosure Book sets forth for the periods shown obligations of the Company and
each of its Subsidiaries for the delivery of hydrocarbons attributable to any of
the properties of the Company or any of its Subsidiaries in the future on
account of prepayment, advance payment, take-or-pay or similar obligations
without then or thereafter being entitled to receive full value therefor. Except
as set forth in Section 3.30 of the Disclosure Schedule or the Disclosure Book,
as of the date of this Agreement, neither the Company nor any of its
Subsidiaries is bound by futures, hedge, swap, collar, put, call, floor, cap,
option or other contracts that are intended to benefit from or reduce or
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eliminate the risk of fluctuations in the price of commodities, including
hydrocarbons, or securities.
SECTION III.31. DRILLING OBLIGATIONS. Other than as set forth in
Section 3.31 of the Disclosure Schedule or the Disclosure Book, the Company and
its Subsidiaries do not have any material drilling obligations or other
development commitments that are not terminable at will by the Company or the
Subsidiary party thereto without penalty, other than commitments and obligations
that arose in the ordinary course of business where the sole consequence to the
Company or the Subsidiary party thereto for a failure to participate is to
suffer a "non-consent" penalty or forfeit an interest in the undeveloped lands
subject to the commitment or obligation.
SECTION III.32. ROYALTY INTERESTS. Section 3.32 of the Disclosure
Schedule hereof contains a true, correct and complete description of any
royalty, overriding royalty, net profit or similar interests in oil and gas
properties of the Company or its Subsidiaries, held by any current or former
directors, officers, employees, or consultants of the Company, or their assigns,
any independent contractors engaged by the Company, or any other Persons.
SECTION III.33. SEISMIC INFORMATION. Section 3.33 of the Disclosure
Schedule describes all material agreements by which the Company has a license to
use, a right or commitment to acquire, or that otherwise provide access to, 3-D
seismic data (such agreements collectively referred to as the "Seismic
Agreements"). True and complete copies of the Seismic Agreements will be
delivered to Harken upon request. Except as set forth in the Seismic Agreements,
the Company has no obligations in order to have full use of the seismic
information covered by the Seismic Agreements. Except to the extent set forth in
the Seismic Agreements, the transactions contemplated by this Agreement will not
terminate or otherwise should not adversely affect the Company's rights under
the Seismic Agreements.
SECTION III.34. TAX PARTNERSHIPS. No item of the Interests is treated
for income tax purposes by the Company and its Subsidiaries as being owned by a
partnership.
SECTION III.35. NOTES AND ACCOUNTS RECEIVABLE. Except as disclosed in
Section 3.35 of the Disclosure Schedule, the Financial Statements, or the
Disclosure Book, all notes and accounts receivable of the Company and its
Subsidiaries are reflected properly on their books and records, and to the
Company's best knowledge, are valid receivables subject to no setoffs or
counterclaims, are current and collectible within sixty (60) days after the
Effective Time or in accordance with their terms, subject only to the reserve
for bad debts set forth on the face of the June Balance Sheet (rather than in
any notes thereto) as adjusted for the passage of time through the Effective
Time in accordance with the past custom and practice of the Company and its
Subsidiaries.
SECTION III.36. FULL DISCLOSURE. The Company has disclosed to Harken
all material facts pertaining particularly to the Company, its Subsidiaries, the
Evaluated Properties or the Assets (as opposed to public information concerning
marketing conditions generally in the oil and gas industry) which, in the
reasonable business judgment of the Company, have a Material Adverse Effect on,
or in the future would be reasonably expected to have a Material Adverse Effect
on, the Company, one of its Subsidiaries, the Evaluated Properties or the Assets
or the ownership, operation or maintenance of any of the Evaluated Properties or
the Assets.
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SECTION III.37. OPINION OF FINANCIAL ADVISOR. The Board of Directors of
XPLOR has received the written opinion of Prudential Securities, Inc. dated
prior to the Effective Time, to the effect that, the Merger Consideration is
fair from a financial point of view, to the XPLOR Stockholders, and a copy has
been provided to Harken.
SECTION III.38. DISCLAIMER OF REPRESENTATIONS AND WARRANTIES OF THE
COMPANY. THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY CONTAINED IN THIS
AGREEMENT ARE EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES,
EXPRESS OR IMPLIED, AND THE COMPANY HEREBY DISCLAIMS ALL OTHER REPRESENTATIONS
AND WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, INCLUDING WITHOUT LIMITATION (i)
ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY, (ii) ANY EXPRESS OR IMPLIED
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (iii) ANY EXPRESS OR IMPLIED
WARRANTY AS TO CONDITION, OR (iv) ANY EXPRESS OR IMPLIED WARRANTY OF CONFORMITY
TO MODELS OR SAMPLES OF MATERIALS AND MAKES NO REPRESENTATIONS AS TO QUALITY OR
QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE INTERESTS OR THE
ABILITY OF THE INTERESTS TO PRODUCE HYDROCARBONS.
ARTICLE IV
REPRESENTATIONS OF HARKEN AND SUB
Except to the extent a matter may be disclosed in the SEC Reports (as
defined in Section IV.09) filed five (5) business days prior to the date of this
Agreement or provided to the Company, Harken and Sub represent, warrant and
agree as follows:
SECTION IV.01. EXISTENCE AND GOOD STANDING OF HARKEN. Harken is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Harken has the corporate power and authority to own
its properties and to carry on its business as now being conducted. Harken is
duly qualified to do business and is in good standing in each jurisdiction in
which its ownership or leasing of its properties or the conduct of its business
requires such qualification, except for jurisdictions in which the failure to be
so qualified or to be in good standing would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION IV.02. EXISTENCE AND GOOD STANDING OF SUB. Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Sub has the corporate power and authority to own its
properties and to carry on its business as now being conducted. Sub is duly
qualified to do business and is in good standing in each jurisdictions in which
its ownership or leasing of its properties or the conduct of its business
requires such qualification, except for jurisdictions in which the failure to be
so qualified or to be in good standing would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION IV.03. CORPORATE AUTHORITY. Harken has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement
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constitutes the valid and legally binding obligation of Harken, enforceable in
accordance with its terms and conditions. Harken need not give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
SECTION IV.04. NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (a) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Harken or Sub is subject or any provision
of their respective charter or bylaws or (b) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which either Harken or Sub is a party or by which either is bound
or to which any of their respective assets are subject (or result in the
imposition of any security interest upon any of their assets), except where the
occurrence of such event would not have a Material Adverse Effect. Other than
those contemplated hereby, none of Harken and Sub needs to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties hereto to consummate
the transactions contemplated by this Agreement.
SECTION IV.05. NO BROKERS' OR OTHER FEES. No broker, finder or
investment banker is entitled to any fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Harken or Sub.
SECTION IV.06. CAPITALIZATION. As of the date of this Agreement,
without giving effect to the transaction contemplated hereby, the entire
authorized capital stock of Harken consists of 225,000,000 shares of Harken
Common Stock, of which 136,160,830 Common Stock are issued and outstanding and
of which 1,218,000 shares of Harken Common Stock are held in treasury; and
10,000,000 shares of preferred stock, none of which are outstanding. All
outstanding shares have been duly authorized and validly issued and are fully
paid and non-assessable and are not subject to any preemptive rights. A total of
1,520,000 warrants and 14,509,624 stock options, each exercisable for one share
of Harken Common Stock, are outstanding. In addition, approximately $85.0
million of 5% convertible notes are outstanding. Harken has reserved for
issuance 87,621,170 shares of Harken Common Stock to be issued upon exercise or
conversion of any outstanding stock options, warrants or convertible notes. No
other capital stock or equity securities of or interests in Harken are
authorized or outstanding.
SECTION IV.07. LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against Harken or Sub that
questions the validity of this Agreement or the Related Agreements or Harken's
or Sub's right to enter into this Agreement or the Related Agreements, or to
consummate the transactions contemplated hereby or thereby or which, if decided
in a manner adverse to Harken or Sub, would reasonably be expected to have a
Material Adverse Effect.
SECTION IV.08. COPIES OF DOCUMENTS. Harken and Sub have caused to be
made available for inspection and copying by the Company and its advisers, true,
complete and correct
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copies of all documents referred to in this Article IV or in any schedule
furnished by Harken and Sub to the Company or reasonably requested in writing by
the Company.
SECTION IV.09. REPORTS WITH THE SECURITIES AND EXCHANGE COMMISSION. All
registration statements, reports, proxy statements and other materials
(collectively, "SEC Reports") required to be filed by Harken with the Commission
since January 1, 1999 were filed within the applicable required time periods (or
any extensions related thereto), complied in all respects with the applicable
requirements of the Securities Act and the Securities Exchange Act of 1934 (the
"1934 Act") and the applicable rules and regulations of the Commission
promulgated thereunder, and at the time filed (or, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing if
such filing has been provided to the Company) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Harken has furnished
the Company with complete and accurate copies of its quarterly report on Form
10-Q for the fiscal quarter ended June 30, 1999, and all other reports or
documents required to be filed by Harken pursuant to Section 13(a) or 15(d) of
the 1934 Act since the filing of the most recent quarterly report on Form 10-Q.
The consolidated balance sheets and the related statements of income,
stockholders' equity and cash flow (including the related notes thereto) of
Harken included in the SEC Reports complied as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the Commission with respect thereto and have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
prior periods (except as otherwise noted therein). The balance sheets included
in the SEC Reports present fairly the consolidated financial position of Harken
and its consolidated subsidiaries as of their respective dates, and, except as
indicated therein, reflect all claims against and all debts and liabilities of
Harken and its consolidated subsidiaries, fixed or contingent, as at the
respective dates thereof, and the related statements of income, stockholders'
equity and cash flow fairly present the results of its operations and its cash
flow for the periods presented therein (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments). Since December
31, 1998, there has been no material adverse change in the assets or
liabilities, or in the business or condition, financial or otherwise, or in the
results of operations of Harken and its consolidated subsidiaries taken as a
whole other than changes in the oil and gas industry generally and changes in
the ordinary course of business consistent with past practice and, other than
the transactions contemplated by this Agreement or set forth in Section 4.9 of
the Disclosure Schedule, to the knowledge of Harken, no fact or condition exists
or is contemplated or threatened which might cause such a change in the future.
SECTION IV.10. HARKEN COMMON STOCK AND WARRANTS. The Harken Common
Stock to be issued as part of the Merger Consideration will be duly authorized
and, upon issuance pursuant to the terms of this Agreement or the Warrants, such
shares will be validly issued, fully paid, and non-assessable, and will not be
subject to any preemptive or similar right. The Warrants to be issued as part of
the Merger Consideration will be duly authorized, executed and delivered, and
upon issuance pursuant to the terms of this Agreement, will constitute the valid
and legally binding obligation of Harken, enforceable in accordance with their
terms and conditions.
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SECTION IV.11. FULL DISCLOSURE. Harken has disclosed to the Company all
material facts pertaining particularly to Harken, its subsidiaries, the Harken
Evaluated Properties, or the Harken Assets (as opposed to public information
concerning marketing conditions generally in the oil and gas industry) which, in
the reasonable business judgment of Harken, have a Material Adverse Effect on,
or in the future would be reasonably expected to have a Material Adverse Effect
on, Harken, its Subsidiaries, the Harken Evaluated Properties, or the Harken
Assets or the ownership operation, or maintenance of any of the Harken Evaluated
Properties or the Harken Assets.
SECTION IV.12. BOOKS AND RECORDS. The minute books of Harken, as
previously made available to the Company and its representatives, accurately
reflect all meetings of and corporate actions or written consents by the Board
of Directors of Harken.
SECTION IV.13. TAXES. (a) Except where the failure to file Tax Returns
and pay Taxes would not reasonably be expected to have a Material Adverse
Effect, Harken and Sub have (i) duly filed with the appropriate Federal, state,
local and foreign taxing authorities all Tax Returns required to be filed by or
with respect to Harken and Sub as of the date of this Agreement, and such Tax
Returns are true, correct and complete in all material respects and (ii) paid or
made provision for in the Financial Statements all Taxes of Harken and Sub to be
due on such Tax Returns. To the best knowledge of Harken and Sub, there are no
tax liens on any of the Assets other than liens for current real estate taxes
not yet due or Taxes being contested in good faith by appropriate proceedings.
Harken or the Sub have not received any written notice of deficiency, assessment
or proposed assessment from any Federal, state, local, tribal or foreign taxing
authority with respect to liabilities for Taxes of Harken or Sub which have not
been paid or finally settled, and, there is no pending tax examination of or tax
claim assessed against Harken, the Sub or any of the Assets, and any such
deficiency, assessment, proposed assessment or tax claim is being contested in
good faith through appropriate proceedings.
SECTION IV.14. RESTRICTIVE DOCUMENTS AND GOVERNMENTAL CONSENTS. Harken
and Sub are not subject to, or a party to, any charter, by-law, mortgage, lien,
lease, license, permit, agreement, contract, instrument, law, rule, ordinance,
regulation, order, judgment or decree, or any other restriction of any kind or
character, which would prevent the execution and delivery of this Agreement or
the Related Agreements, the consummation of the transactions contemplated by
this Agreement or the Related Agreements, compliance by Harken and Sub with the
terms, conditions and provisions hereof or thereof or, to the best knowledge of
Harken and Sub, the continued operation of Harken's and Sub's businesses after
the date hereof on substantially the same basis as heretofore operated or which
would restrict the ability of Harken or Sub to acquire any property or conduct
business in any area except as would not have a Material Adverse Effect. Other
than in connection or compliance with the provisions of the Delaware Statute,
the Securities Act, the securities, takeover or blue sky laws of the various
states, neither the nature of Harken and the Sub, nor of any of their respective
businesses or properties, nor any relationship between Harken and the Sub and
any other Person is such as to require consent, approval or authorization of, or
filing, registration or qualification with, any governmental authority on the
part of Harken as a condition to the execution and delivery of this Agreement
and the Related Agreements and the consummation by Harken and the Sub of the
transactions contemplated by this Agreement and the Related Agreements.
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SECTION IV.15. TITLE. Harken and Sub have good and defensible title to
all the properties and assets of every kind, character and description (real,
personal or mixed, tangible and intangible), including, without limitation, all
parcels of real property, pipelines, rights-of-way and easements and other
incidental rights and permits, reflected on the latest balance sheet included in
the SEC Reports (the "Harken Assets") except for Harken Assets that are obsolete
or that have been disposed of in the ordinary course of business free and clear
of all encumbrances of any nature except for (i) the encumbrances and title
defects specifically described in Schedule 4.15; (ii) mortgages and encumbrances
which secure indebtedness or obligations which are properly reflected on
Schedule 4.15, if such indebtedness exceeds $50,000; (iii) Permitted
Encumbrances; and (iv) such imperfections of title and encumbrances, if any, as
do not materially interfere with the present use of any of the Harken Assets
subject thereto.
SECTION IV.16. HARKEN INDEPENDENT ENGINEERING REPORT. Harken has made
available to the Company the results of the Harken Independent Engineering
Report, prepared by Gaffney, Cline & Associates, DeGolyer and MacNaughton and JR
Butler and Company with respect to reserves as of December 31, 1998 (the "Harken
Independent Engineering Report") on the oil and gas fields listed on the
attachment thereto (the "Harken Evaluated Properties") in which Harken will have
interests subsequent to the Effective Time. The Harken Independent Engineering
Report is the latest independent engineering report available to Harken relating
to the Harken Evaluated Properties. Harken has provided no materially false or
misleading information to and has not withheld from the Independent Engineer any
material information with respect to the preparation of the Harken Independent
Engineering Report. Except as set forth on Section 4.16 of the Disclosure
Schedule, Harken is not aware of any facts or circumstances that should
reasonably cause Harken to conclude that (i) any of the information that was
supplied by Harken to the Independent Engineer in connection with its
preparation of the Harken Independent Engineering Report is not currently
correct in all material respects (other than normal depletion by production in
the ordinary course) or (ii) the Harken Independent Engineering Report is
incorrect in any material respect.
SECTION IV.17. DISCLAIMER OF REPRESENTATIONS AND WARRANTIES OF HARKEN
AND SUB. THE REPRESENTATIONS AND WARRANTIES OF HARKEN AND SUB CONTAINED IN THIS
AGREEMENT ARE EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES,
EXPRESS OR IMPLIED, AND HARKEN AND SUB HEREBY DISCLAIM ALL OTHER REPRESENTATIONS
AND WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, INCLUDING WITHOUT LIMITATION (i)
ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY, (ii) ANY EXPRESS OR IMPLIED
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (iii) ANY EXPRESS OR IMPLIED
WARRANTY AS TO CONDITION, OR (iv) ANY EXPRESS OR IMPLIED WARRANTY OF CONFORMITY
TO MODELS OR SAMPLES OF MATERIALS AND MAKES NO REPRESENTATIONS AS TO QUALITY OR
QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE HARKEN INTERESTS
OR THE ABILITY OF THE INTERESTS TO PRODUCE HYDROCARBONS.
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ARTICLE V
COVENANTS
SECTION V.01. CONDUCT OF BUSINESS OF THE COMPANY AND HARKEN. During the
period from the date of this Agreement to the Effective Time, or the dates, if
any, on which this Agreement is earlier terminated pursuant to Section X.14
hereof, each of Harken and the Company shall conduct its respective operations
only according to its ordinary and usual course of business and the Company
shall use reasonable best efforts to preserve intact its respective business
organization, keep available the services of its officers and employees and
maintain satisfactory relationships with licensors, suppliers, distributors,
lessees, clients and others having business relationships with it.
Notwithstanding the immediately preceding sentence, pending the Effective Time
and except as may be first approved by Harken, or the Company, as the case may
be, or as is otherwise permitted or required by this Agreement, the Company will
(a) refrain from making any bonus, pension, retirement or insurance payment or
arrangement to or with any persons except those that may have already been
accrued and from increasing any benefits payable under any Plan; (b) refrain
from entering into any contract or commitment except contracts in the ordinary
course of business; and (c) refrain from making any change affecting any bank,
safe deposit or power of attorney arrangements; and each of Harken, Sub, and the
Company will (x) cause its Certificate of Incorporation and By-Laws to be
maintained in their form on the date of this Agreement and (y) refrain from
declaring, setting aside, paying or distributing any dividends or distribution
with respect to its capital stock or engage in any similar recapitalization.
During the period from the date of this Agreement to the Effective Date, each of
Harken, Sub, and the Company shall confer on a regular and frequent basis to
report material operational matters and to report the general status of ongoing
operations. Each of Harken, Sub, and the Company shall notify Harken of any
unexpected emergency or other change in the normal course of its business or in
the operation of its properties and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), adjudicatory proceedings, budget meetings or submissions
involving any material property of Harken, Sub, or the Company, and to keep each
other fully informed of such events and permit each other's respective
representatives prompt access to all materials prepared in connection therewith.
SECTION V.02. EXCLUSIVE DEALING. During the period from the date of
this Agreement to the earlier of (i) the Effective Time or (ii) the termination
of this Agreement pursuant to Section X.14 hereof, the Company shall not take
any action to, directly or indirectly, encourage, solicit, initiate or engage in
discussions or negotiations with, or provide any information to, any Person,
other than Harken, concerning any purchase of the Shares or any merger or sale
of all or substantially all of the assets of the Company and the Subsidiaries or
similar transaction involving the Company and any of the Subsidiaries. The
Company will immediately notify Harken if any Person makes any proposal, after
inquiry, or contact with respect to any of the foregoing.
SECTION V.03. REVIEW OF THE COMPANY AND HARKEN; CONFIDENTIALITY. (a)
Harken and the Company may, prior to the Effective Time, through their
respective representatives, review the properties, books and records of the
Company and their respective financial and legal condition as they deem
necessary or advisable to familiarize itself themselves with such
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properties and other matters; such review shall not, however, affect the
representations and warranties made by Harken, Sub, and the Company hereunder.
(b) Each of Harken and the Company shall permit each other and their
respective representatives to have, after the date of execution hereof, full
access to the premises and to all the books and records of the Company and
Harken and will cause the officers of Harken, Sub, and the Company to furnish
each other with such financial and operating data and other information with
respect to the business and properties of Harken, Sub, and the Company as they
shall from time to time reasonably request. In the event of termination of this
Agreement, each of Harken and the Company shall keep confidential any material
information obtained from the other concerning the properties, operations and
business (unless readily ascertainable from public or published information or
trade sources) until the same ceases to be material (or becomes so
ascertainable) and shall return to each other all copies of any schedules,
statements, documents or other written information obtained in connection
therewith. Harken, Sub and the Company shall deliver or cause to be delivered on
the Closing Date, and at such other times and places as shall be reasonably
agreed upon, such additional instruments as the Company, Harken and Sub may
reasonably request for the purpose of carrying out this Agreement.
SECTION V.04. REGULATORY AND OTHER FILINGS AND APPROVALS. Each of
Harken, Sub and the Company shall duly make all regulatory filings required to
be made by each in respect of this Agreement or the transactions contemplated
hereby. Harken, Sub and the Company shall use all reasonable efforts to obtain
all regulatory approvals necessary to carry out the transactions contemplated by
this Agreement.
SECTION V.05. REASONABLE BEST EFFORTS. Subject to the fiduciary duties
of the directors of Harken, Sub and the Company under applicable law as advised
by counsel, each of Harken, Sub and the Company agrees to use its reasonable
best efforts promptly to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and to
make effective the transactions contemplated by this Agreement and the Related
Agreements, including the satisfaction of all conditions thereto, and shall use
their reasonable best efforts to obtain all waivers, permits, consents and
approvals and to effect all registrations, filings and notices with or to third
parties or governmental or public bodies or authorities that are, in the opinion
of either Harken, Sub and the Company, necessary or desirable in connection with
the transactions contemplated by this Agreement and the Related Agreements,
including, without limitation, filings and approvals to the extent required
under the Delaware Statute, the securities, takeover or blue sky laws of the
various states, the Securities Act, the regulatory laws of various states in
which Harken, Sub and the Company conduct business, and consents and waivers
required under any material contracts, agreements, leases, licenses or other
documents to which Harken, Sub or the Company is a party. If at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement and the Related Agreements, the proper officers or
directors of Harken, Sub and the Company shall take such action.
SECTION V.06. PUBLIC ANNOUNCEMENTS. Harken and the Company shall
consult each other before issuing any press release or other public announcement
regarding the Merger, and shall not issue any such press release or other public
announcement without the consent of the
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other unless required by law, as advised by counsel, or by obligations pursuant
to any listing agreement with any national securities exchange.
SECTION V.07. AMEX QUOTATION. Harken shall prepare and submit a listing
application covering the shares to be issued in the Merger Consideration for
quotation on The American Stock Exchange as promptly as practicable after the
date hereof.
SECTION V.08. CHANGE OF CONTROL PAYMENTS. The "change of control"
provisions of the employment agreements set forth in Section 3.14 of the
Disclosure Schedule shall be paid by Harken at the Effective Time or, in lieu
thereof, other payments as arranged with such persons employed pursuant to such
employment agreements.
SECTION V.09. DIRECTORS' AND OFFICERS' INSURANCE. Reference is hereby
made to all provisions of the Restated Certificate of Incorporation and Bylaws
of the Company and its Subsidiaries and all indemnification agreements between
the Company or any Company Subsidiary and any director, officer, or employee of
the Company which agreements are disclosed in Section 5.09 of the Disclosure
Schedule that contemplate indemnification of directors, officers, and employees
of the Company and its Subsidiaries (the "Company Indemnification Provisions").
From and after the Effective Time, the Surviving Corporation shall, and Harken
shall cause the successor to the Surviving Corporation to, honor the Company's
existing obligations to indemnify all present and former directors, officers,
and employees of the Company and its Subsidiaries to the fullest extent called
for by the Company Indemnification Provisions. The Surviving Corporation shall
also advance expenses (including reasonable attorneys' fees), as reasonably
incurred by such individuals to the fullest extent permitted by applicable law
provided that if required by law such individual provides an undertaking to
repay such advances if it is ultimately determined that such individual is not
entitled to indemnification. The Company has purchased a "tail policy," the
details of which are set forth in Section 5.09 of the Disclosure Schedule to
provide the directors and officers of the Company with the coverage set forth
therein.
SECTION V.10. INVESTOR AGREEMENT. Harken shall have received an
executed Agreement, a form of which is attached as Exhibit F, from each XPLOR
Preferred Stockholder. In addition, the document shall include a waiver on the
part of each holder of Preferred Stock, of such holders' rights pursuant to
Article Ninth of the Certificate of Incorporation, including in particular,
Section 4.2 therein and each Preferred Stockholder shall hold harmless and
indemnify Harken, Sub, the Company and its Subsidiaries from certain claims,
obligations and liabilities as set forth therein.
SECTION V.11. ISSUANCE OF SECURITIES. Without the prior written consent
of the Company, Harken shall not issue or agree to issue any shares of capital
stock (except upon the exercise of outstanding rights, options or warrants to
purchase common stock in exchange for full payment), bonds or other corporate
securities during the period between the date hereof and the Effective Time.
SECTION V.12. BENEFIT PLANS AND RELATED MATTERS. (a) Harken shall take
such actions as are necessary to fulfill the Company's severance obligations to
its employees and to
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make available to former employees of the Company continued employee and welfare
benefits after the Effective Time as required by COBRA or other applicable law.
(b) Other than as set forth in Sections V.12(a) and (c) and subject to
the provisions of Harken's policies and programs, any employee of the Company
retained by Harken or its affiliates (at their sole and absolute discretion)
after the Effective Time (each, a "Transferred Employee") shall be eligible to
participate or eligible for accrual of benefits, vesting and contributions or
accruals to be made or credited following the Effective Time under each of
Harken's employee benefit plans, programs or arrangements available to all or
substantially all of Harken's employees, subject to the terms upon which such
plans allow new participation by Harken's employees. Each Transferred Employee
shall be credited with the time-in-service that the employee accrued with the
Company or its Subsidiaries.
(c) Except as expressly provided in this Section V.12, Harken has no
obligation to (i) make any contributions or accruals with respect to any period
preceding the Effective Time, (ii) offer Transferred Employees the same or
comparable employee plans or benefits as those offered by the Company, or (iii)
assume any liability of the Company with respect to the Company's employee
benefit plans or severance policy, accrued vacation or sick leave for the
Company's employees, or the Company's employment of the Transferred Employees
prior to the Effective Time. This Agreement is not intended to create and does
not create any contractual or legal rights in or enforceable by any employee of
the Company or upon any party other than the Company and Harken. Any oral or
written communications to the employees of the Company prior to the Effective
Time concerning the subject matter of this Section V.12 shall be approved in
advance by the Company and Harken.
SECTION V.13. RESIGNATIONS. The Company will procure from each director
and officer of the Company and its Subsidiaries written resignation as of the
Effective Time from each and every such position that such person holds with the
Company or any of its Subsidiaries and the Company shall deliver such written
resignation to Harken at Closing.
ARTICLE VI
CONDITIONS TO HARKEN'S OBLIGATIONS
All obligations of Harken to be discharged under this Agreement at the
Closing are subject to the fulfillment, prior to or at the Closing, of each of
the following conditions, unless waived in writing by Harken prior to or at the
Closing:
SECTION VI.01. GOOD STANDING CERTIFICATES; SECRETARY'S CERTIFICATE. The
Company shall have delivered to Harken (a) copies of the charter, including all
amendments thereto, certified by the Secretary of State or other appropriate
official of the jurisdiction of incorporation of the Company and each of the
Subsidiaries; (b) certificates from the Secretary of State or other appropriate
official of the jurisdiction of incorporation to the effect that the Company and
the Subsidiaries are in good standing or subsisting in such jurisdiction and
listing all charter documents of the Company and the Subsidiaries on file; (c) a
certificate from the Secretary of State or other appropriate official in each
State in which the Company and the Subsidiaries are qualified to do business to
the effect that the Company and the Subsidiaries are in good standing
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in such state; and (d) a certificate, dated as of the Closing Date and signed by
the chief executive officer of XPLOR, which contains resolutions or written
consents of the board of directors of XPLOR and the XPLOR Stockholders related
to the approval of this Agreement and the Related Agreements.
SECTION VI.02. NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date,
there shall have been no material adverse change in the assets or liabilities,
the business or condition, financial or otherwise, the results of operations, or
prospects of the Company and its Subsidiaries taken as a whole that would or
would be reasonably likely to have a Material Adverse Effect other than such
change that affects Harken and the Company in a substantially similar manner and
the Company shall have delivered to Harken a certificate, dated the Closing
Date, to such effect. A change resulting from a change in the prices of oil and
gas, stock market conditions, general economic conditions, or oil and gas
industry conditions will not be deemed to be a material adverse change pursuant
to this Section VI.02.
SECTION VI.03. TRUTH OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained in this Agreement or in
any schedule delivered pursuant hereto shall be true and correct in all material
respects (except for such representations and warranties which are qualified by
"material" or "Material Adverse Effect" which shall be true and correct) on and
as of the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date except as expressly contemplated
herein or in the schedules delivered pursuant to this Agreement, and the Company
shall have delivered to Harken on the Closing Date a certificate, dated the
Closing Date, to such effect.
SECTION VI.04. PERFORMANCE OF AGREEMENTS. Each and all of the
agreements of the Company to be performed on or before the Closing Date pursuant
to the terms hereof shall have been duly performed in all material respects, and
the Company shall have delivered to Harken a certificate, dated the Closing
Date, to such effect.
SECTION VI.05. NO LITIGATION THREATENED. No action or proceedings shall
have been instituted or, to the best knowledge of the Company, threatened before
a court or other government body or by any public authority to restrain or
prohibit any of the transactions contemplated hereby, and the Company shall have
delivered to Harken a certificate, dated the Closing Date, to such effect.
SECTION VI.06. APPROVALS. All governmental and other consents and
approvals, if any, necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been received. No action or proceeding
shall have been commenced or threatened seeking any injunction, restraining
order or other order which seeks to prohibit, restrain, invalidate or set aside
the effectuation of the transaction contemplated herein.
SECTION VI.07. INTRA-COMPANY DEBT. All indebtedness of the directors,
officers and employees of the Company and the Subsidiaries to the Company and
the Subsidiaries shall have been repaid in full except for intercompany
receivables and payables in the ordinary course of business.
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SECTION VI.08. PROCEEDINGS. All proceedings to be taken by the Company
in connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Harken and its counsel and Harken shall have received copies of all
such documents and other evidences as it or its counsel may reasonably request
in order to establish the consummation of such transactions and the taking of
all proceedings in connection therewith.
SECTION VI.09. STOCKHOLDER APPROVAL. This Agreement shall have been
duly approved by the XPLOR Stockholders in accordance with applicable law.
SECTION VI.10. WARRANTS. All warrants to purchase capital stock of the
Company shall have been terminated.
SECTION VI.11. XPLOR SHAREHOLDER AGREEMENT. The Shareholder Agreement,
dated as of July 29, 1998, by and among XPLOR Energy, Inc., XP Holdings, LLC,
Trust Company of the West, TCW Debt and Royalty Fund VI, L.P., TCW Debt and
Royalty Fund VIB, L.P., TCW DR VI Royalty Partnership, L.P., and the other
shareholders named therein ( the "XPLOR Shareholders Agreement") shall be
terminated and such agreement shall be of no further force or effect and no
party thereto shall have any remaining rights or obligations thereunder as of
the Effective Date.
SECTION VI.12. EXPENSE REIMBURSEMENT AGREEMENT. The Expense
Reimbursement Agreement, dated July 29, 1998, by and between the Company and
Beacon Energy Management shall be terminated and such agreement shall be of no
further force or effect and no party thereto shall have any remaining rights or
obligations thereunder for services rendered after the Closing Date but the
Surviving Corporation shall honor rights and obligations for reasonable expenses
that may have arisen prior to such termination.
SECTION VI.13. CREDIT AGREEMENT. The Amended and Restated Credit
Agreement by and among XPLOR Energy SPV-I, Inc. and Christiania Bank OG
Kreditkasse ASA and the other lenders party thereto shall have been amended or
superseded by a new facility satisfactory to Harken and a written letter of the
Lenders shall have been received stating that no default shall exist or come to
exist as of the Closing Date.
ARTICLE VII
CONDITIONS TO THE COMPANY'S OBLIGATIONS
All obligations of the Company to be discharged under this Agreement at
the Closing are subject to the fulfillment, prior to or at the Closing, of each
of the following conditions, unless waived pursuant to Section II.03 or in
writing by the Company prior to or at the Closing:
SECTION VII.01. TRUTH OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Harken and Sub contained in this Agreement or
in any schedule delivered pursuant hereto shall be true and correct in all
material respects (except for such representations and warranties which are
qualified by "material" or "Material Adverse Effect" which shall be true and
correct) on and as of the Closing Date with the same effect as though such
representations
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and warranties had been made on and as of such date; and Harken and Sub shall
have delivered to the Company on the Closing Date a certificate, dated the
Closing Date, to such effect.
SECTION VII.02. APPROVALS. All governmental and all other consents and
approvals, if any, necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been received. No action or proceeding
shall have been commenced or threatened seeking any injunction, restraining
order or other order which seeks to prohibit, restrain, invalidate or set aside
the effectuation of the Merger.
SECTION VII.03. NO MATERIAL ADVERSE CHANGE. Prior to the Effective
Time, there shall have been no material adverse change in the assets or
liabilities, the business or condition, financial or otherwise, the results of
operations, or prospects of Harken on a consolidated basis that would or would
be reasonably likely to have a Material Adverse Effect other than such change
that affects Harken and the Company in a substantially similar manner and Harken
shall have delivered to the Company a certificate, dated the Closing Date, to
such effect. A change resulting from a change in the prices of oil and gas,
stock market conditions, general economic conditions, or oil and gas industry
conditions will not be deemed to be a material adverse change pursuant to this
Section VII.03.
SECTION VII.04. NO LITIGATION THREATENED. No action or proceedings
shall have been instituted or, to the best knowledge of Harken, threatened
before a court or other government body or by any public authority to restrain
or prohibit any of the transactions contemplated hereby, and Harken and Sub
shall have delivered to the Company a certificate, dated the Closing Date, to
such effect.
SECTION VII.05. PERFORMANCE OF AGREEMENTS. Each and all of the
agreements of Harken and its officers and directors and Sub to be performed on
or before the Closing Date pursuant to the terms hereof or the Agreements shall
have been duly performed in all material respects, and Harken and Sub shall have
delivered to the Company a certificate, dated the Closing Date, to such effect.
SECTION VII.06. PROCEEDINGS. All proceedings to be taken by Harken or
Sub in connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Company and its counsel and the Company shall have received
copies of all such documents and other evidences as it or its counsel may
reasonably request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith.
SECTION VII.07. GOOD STANDING CERTIFICATES; SECRETARY'S CERTIFICATE.
Harken and Sub shall have delivered to the Company (a) copies of the charter,
including all amendments thereto, certified by the Secretary of State or other
appropriate official of the jurisdiction of incorporation of Harken and Sub; (b)
certificates from the Secretary of State or other appropriate official of the
jurisdiction of incorporation to the effect that Harken and Sub are in good
standing or subsisting in such jurisdiction and listing all charter documents of
Harken and Sub on file; and (c) a certificate of Harken dated as of the
Effective Time and signed by an executive officer of Harken or Sub, as
appropriate, which contains resolutions or written consents of the board of
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directors of Harken and Sub, as appropriate, related to the approval of this
Agreement and the Related Agreements.
SECTION VII.08. FAIRNESS OPINION. The Company shall have received a
fairness opinion from Prudential Securities in form and substance satisfactory
to the Company and its Board of Directors.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; RECOVERY
SECTION VIII.01. NON-SURVIVAL OF REPRESENTATIONS. Except as set forth
in the Investor Agreement and the terms of the securities issued as Merger
Consideration, the representations, warranties, covenants and agreements of the
Company, Harken and Sub set forth in this Agreement shall not survive the Merger
contemplated hereby and shall expire at the Effective Time; provided, however,
that the covenants of Harken set forth in Sections I.01(b), I.02, I.04, I.05,
I.06, I.08, I.09, IV.10, V.05, V.07, V.08, V.09, V.12 and X.02, and Article VIII
shall survive the Merger contemplated hereby. Except as set forth in the
Investor Agreement, in the absence of fraud, Harken, the Company, Sub, and the
Surviving Corporation shall covenant and agree never to institute, directly or
indirectly, any action or proceeding against the XPLOR Stockholders based upon
or arising out of or in any manner related to, the breach of a representation,
warranty, covenant or agreement contained in this Agreement.
ARTICLE IX
CLOSING
SECTION IX.01. DELIVERIES AT THE CLOSING. Immediately following the
satisfaction of the conditions set forth in Articles VI and VII hereof, the
Company and Sub shall cause a Certificate of Merger to be filed in accordance
with the provisions of the Delaware Statute, and shall take any and all other
lawful actions and do any and all other lawful things necessary to cause the
Merger to become effective.
SECTION IX.02. TIME AND PLACE. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Harken Energy Corporation, 16285 Park Ten Place, Suite 600, Houston, Texas
77084, as soon as reasonably practicable after such time as the conditions set
forth in Articles VI and VII shall have been satisfied or waived, or at such
other place or at such other time as may be mutually agreed upon by Harken and
the Company (the "Closing Date").
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ARTICLE X
MISCELLANEOUS
SECTION X.01. KNOWLEDGE. Where any representation or warranty contained
in this Agreement is expressly qualified by reference to the knowledge,
information and/or belief of the Company, Sub or Harken, each of the Company,
Sub or Harken confirms that he or it, as the case may be, has made due and
diligent inquiry as to the matters that are the subject of such representations
and warranties.
SECTION X.02. EXPENSES. The Parties hereto shall pay all of their own
expenses relating to the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of their respective counsel and
financial advisers and engineers. Notwithstanding the foregoing, the XPLOR
Preferred Stockholders shall pay all of their own and the Company's and its
Subsidiaries' expenses (other than the fees of Prudential as set forth on
Schedule 3.24, the cost to purchase the tail policy as set forth in Section 5.09
of the Disclosure Schedule and the cash payments referred to in Section V.08 (or
other arrangements to be paid in cash in lieu thereof), which shall be paid by
Harken) in connection with the transactions contemplated hereby.
SECTION X.03. GOVERNING LAW. The interpretation and construction of
this Agreement, and all matters relating hereto, shall be governed by the laws
of the State of Delaware without regard to the principles or conflicts of law
applicable thereto.
SECTION X.04. DEFINITIONS. For purposes of this Agreement, the
following capitalized terms shall have the meanings set forth below:
"Agreement" shall have the meaning set forth in the Introduction.
"Appraisal Shares" shall have the meaning set forth in Section I.07.
"Assets" shall have the meaning set forth in Section III.09.
"Certificate of Merger" shall have the meaning set forth in Section
I.02.
"Clearance Notice" shall have the meaning set forth in Section I.09(d).
"Closing" shall have the meaning set forth in Section IX.02.
"Closing Date" shall have the meaning set forth in Section IX.02.
"Common Stock" shall have the meaning set forth in Section I.01.
"Company Indemnification Provisions" shall have the meaning set forth
in Section V.09.
"Delaware Statute" shall have the meaning set forth in Section I.01.
"Demand Notice" shall have the meaning set forth in Section I.09.
"Disclosure Book" means the binder labeled "XPLOR ENERGY, INC.
Disclosure Book" dated August 10, 1999.
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"Effective Period" shall have the meaning set forth in Section I.09.
"Effective Time" shall have the meaning set forth in Section I.02.
"Environmental Law" means any applicable legal requirement which is in
effect that requires or relates to: (a) advising appropriate
authorities, employees, and the public of intended or actual releases
of pollutants or hazardous substances or materials, violations of
discharge limits, or other prohibitions and of the commencements of
activities, such as resource extraction or construction, that could
have significant impact on the environment; (b) preventing or reducing
to acceptable levels the release of pollutants or hazardous substances
or materials into the environment; (c) reducing the quantities,
preventing the release, or minimizing the hazardous characteristics of
wastes that are generated; (d) assuring that products are designed,
formulated, packaged, and used so that they do not present unreasonable
risks to human health or the environment when used or disposed of; (e)
protecting resources, species, or ecological amenities, including any
"Wetlands" as defined in the Clean Water Act and the regulations
promulgated thereunder; (f) reducing to acceptable levels the risks
inherent in the transportation of hazardous substances, pollutants,
oil, or other potentially harmful substances; (g) cleaning up
pollutants that have been released, preventing the threat of release,
or paying the costs of such clean up or prevention; or (h) making
responsible parties pay private parties, or groups of them, for damages
done to their health or the environment, or permitting self-appointed
representatives of the public interest to recover for injuries done to
public assets.
"ERISA" shall have the meaning set forth in Section III.22.
"Evaluated Properties" shall have the meaning set forth in Section
III.10.
"Facilities" means any real property, leaseholds, or other interests
currently or formerly owned or operated by any of the Company or its
Subsidiaries and any buildings, plants, structures, or equipment
(including motor vehicles, tank cars, and rolling stock) currently or
formerly owned or operated by any of the Company or its Subsidiaries.
"FERC" shall have the meaning set forth in Section III.12.
"Financial Statements" shall have the meaning set forth in Section
III.06.
"Harken" shall have the meaning set forth in the Introduction.
"Harken Assets" shall have the meaning set forth in Section IV.15.
"Harken Common Stock" shall have the meaning set forth in Section I.01.
"Harken Independent Engineering Report" shall have the meaning set
forth in Section IV.16.
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"Hazardous Activity" means the distribution, generation, handling,
importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or
use (including any withdrawal or other use of groundwater) of Hazardous
Materials in, on, under, about, or from the Facilities or any part
thereof into the environment, and any other act, business, operation,
or thing that increases the danger, or risk of danger, or poses an
unreasonable risk of harm to Persons or property on or off the
Facilities, or that may affect the value of the Facilities or any of
the Company and its Subsidiaries.
"Hazardous Materials" means any waste or other substance that is
listed, defined, designated, or classified as, or otherwise determined
to be, hazardous, radioactive, or toxic or a pollutant or a contaminant
under or pursuant to any Environmental Law, including any admixture or
solution thereof, and specifically including petroleum and all
derivatives thereof or synthetic substitutes therefor and asbestos or
asbestos containing materials.
"Independent Engineering Report" shall have the meaning set forth in
Section III.10.
"Insured Parties" shall have the meaning set forth in Section V.09.
"Internal Engineering Report" shall have the meaning set forth in
Section III.10.
"Interests" shall have the meaning set forth in Section III.11.
"Land" shall have the meaning set forth in Section III.11.
"Leases" shall have the meaning set forth in Section III.11.
"June Balance Sheet" shall have the meaning set forth in Section
III.06.
"Material Adverse Effect" shall mean a material adverse effect on the
business, results of operation or financial condition of XPLOR and the
Subsidiaries (as hereinafter defined) or Harken and its subsidiaries,
as the case may be, taken as a whole, but not including effects that
are applicable to XPLOR and the Subsidiaries or Harken and its
subsidiaries, as the case may be, resulting from market conditions
generally in the oil and gas industry.
"Material Contracts" shall have the meaning set forth in Section
III.14.
"Merger" shall have the meaning set forth in Section I.01(a).
"Merger Consideration" shall have the meaning set forth in Section
I.04.
"Merger Shares" shall have the meaning set forth in Section I.04.
"Occurrence Notice" shall have the meaning set forth in Section
I.09(d).
"Permits" shall have the meaning set forth in Section III.12(g).
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"Permitted Encumbrances" Permitted Encumbrances shall mean (i)
royalties, overriding royalties, reversionary interests and similar
burdens if the cumulative effect of such burdens does not and will not
reduce the net revenue interest with respect to a well or property
below the net revenue interest shown in the Independent Engineering
Report or increase the working interest with respect to such well or
property above the working interest shown in the Independent
Engineering Report; (ii) the terms and conditions of all leases,
servitudes, production sales contracts, division orders, contracts for
sale, purchase, exchange, refining or processing of hydrocarbons,
unitization and pooling designations, declarations, orders and
agreements, operating agreements, agreements of development, area of
mutual interest agreements, farmout agreements, gas balancing or
deferred production agreements, processing agreements, plant
agreements, pipeline, gathering and transportation agreements,
injection, repressuring and recycling agreements, salt water or other
disposal agreements, seismic or geophysical permits or agreements, and
other agreements including, without limitation, the terms and
conditions of any and all contracts and agreements set forth in the
Independent Engineering Report covering production sales contracts and
all other contracts and agreements disclosed in schedules to this
Agreement, to the extent that such contracts and agreements do not and
will not reduce the net revenue interest of any well or property
included in the Interests (as defined in Section III.09) below the net
revenue interest shown in the Independent Engineering Report or
increase the working interest with respect to such well or property
above the working interest shown in the Independent Engineering Report
without a proportionate increase in the net revenue interest with
respect to such well or property; (iii) easements, rights of way,
servitudes, permits, surface leases and other rights with respect to
surface obligations, pipelines, grazing, canals, ditches, reservoirs,
or the like, conditions, covenants or other restrictions, and easements
of streets, alleys, highways, pipelines, telephone lines, power lines,
railways and other easements and rights of way on, over or in respect
of any of the Interests, so long as they are not such that would have a
material adverse effect on such Interest; (iv) any preferential
purchase rights, required third party consents to assignment and
similar agreements and obligations applicable to the transactions
contemplated hereby with respect to which prior to the Effective Time
(A) waivers or consents have been obtained from the appropriate person,
or (B) the applicable period of time for asserting such rights has
expired without any exercise of such rights; (v) liens for Taxes (as
defined in Section III.15) or assessments not yet delinquent or being
protested in good faith by appropriate action brought in the normal
course; (vi) materialmen's, mechanic's, repairman's, employee's,
contractor's, operator's, and other similar liens or charges arising in
the ordinary course of business (A) if they have not been filed
pursuant to law, (B) if filed, they have not yet become due and payable
or payment is being withheld as provided by law or (C) if their
validity is being contested in good faith in the ordinary course of
business by appropriate action; (vii) approvals that are ministerial in
nature and are customarily obtained from governmental authorities after
the Effective Time in connection with transactions of the same nature
as are contemplated hereby; (viii) conventional rights of reassignment
arising in respect of abandonment, cessation of production or
expiration of leases; (ix) all rights reserved to or vested in any
governmental authority to control or regulate any of the Interests in
any manner, and all applicable laws, rules and orders of governmental
authorities; (x) any other liens, charges, encumbrances, contracts,
agreements, instruments, obligations, effects or irregularities of any
kind whatsoever that would not have a Material Adverse
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Effect; and (xi) overriding royalties pursuant to the Company's
overriding royalty incentive plan, whether oral or written, as
specifically described in the Disclosure Book. In addition, any
overriding royalties that have not been assigned of record as of
December 31, 1999, are set forth in Section 3.32 of the Disclosure
Schedule.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or other department or agency thereof.
"Piggyback Notice" shall have the meaning set forth in Section I.10.
"Plans" shall have the meaning set forth in Section III.22.
"Preferred Stock" shall have the meaning set forth in Section I.01.
"Related Agreements" shall have the meaning set forth in Section
III.03.
"Registrable Securities" shall have the meaning set forth in Section
I.10.
"Registration Statement" shall have the meaning set forth in Section
I.10.
"SEC" shall have the meaning set forth in Section I.10.
"SEC Reports" shall have the meaning set forth in Section IV.09.
"Securities Act" shall have the meaning set forth in Section III.15.
"Selling Stockholder" shall have the meaning set forth in Section I.10.
"Shares" shall have the meaning set forth in Section I.04(c).
"Sub" shall have the meaning set forth in the Introduction.
"Subsidiaries" shall have the meaning set forth in Section III.05.
"Surviving Corporation" shall have the meaning set forth in Section
I.01.
"Taxes" shall have the meaning set forth in Section III.17.
"Tax Return" shall have the meaning set forth in Section III.17.
"TCW Investors" shall have the meaning set forth in Section I.09(a).
"TCW Registrable Securities" shall have the meaning set forth in
Section I.09(a).
"Transferred Employee" shall have the meaning set forth in Section
V.12.
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"XP Holdings Group" shall have the meaning as set forth in Section
I.09(a).
"XP Registrable Securities" shall have the meaning as set forth in
Section I.09(a).
"XPLOR" or "Company" shall have the meaning set forth in the
Introduction.
"XPLOR Agreements" shall have the meaning set forth in Section
III.11(a).
"XPLOR Common Stockholder" shall have the meaning set forth in Section
I.01
"XPLOR Stock Certificates" shall have the meaning set forth in Section
I.04(c).
"XPLOR Preferred Stockholder" shall have the meaning set forth in
Section I.01.
"XPLOR Stockholder" or "XPLOR Stockholders" means the XPLOR Preferred
Stockholders and the XPLOR Common Stockholders.
"XPLOR 401(k) Plan" shall have the meaning set forth in Section V.12.
"Warrants" shall have the meaning set forth in Section I.04.
"Well" or "Wells" shall have the meaning set forth in Section III.11.
"1934 Act" shall have the meaning set forth in Section IV.09.
SECTION X.05. CAPTIONS. The Article and Section captions used herein
are for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement. All references in this Agreement to an Article
or Section, when used without further attribution, shall refer to Articles or
Sections of this Agreement.
SECTION X.06. PUBLICITY. Except as otherwise required by law and the
rules and regulations of The American Stock Exchange, none of the Parties hereto
shall issue any press release or make any other public statement, in each case
relating to or connected with or arising out of this Agreement or the matters
contained herein, without obtaining the prior approval of Harken and the Company
to the contents and the manner of presentation and publication thereof.
SECTION X.07. NOTICES. Any notice or other communications required or
permitted hereunder shall be sufficiently given if delivered in person or sent
by overnight courier or by registered or certified mail, postage prepaid,
addressed as follows or by facsimile transmission to the number set forth below:
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If to the Company:
XPLOR Energy, Inc.
10200 Grogans Mill Road, Suite 500
The Woodlands, Texas 77380
Attention: Steven W. Nance
Facsimile: (281) 364-3759
With a copy to:
King & Spalding
1100 Louisiana, Suite 3300
Houston, Texas 77002
Attention: Nancy A. Chafin
Facsimile: (713) 751-3290
If to Harken or Sub:
Harken Energy Corporation
16285 Park Ten Place, Suite 600
Houston, Texas 77084
Attention: Larry E. Cummings
Facsimile: (281) 717-1400
With a copy to:
Baker & McKenzie
1200 Smith Street, Suite 1200
Houston, Texas 77002
Attention: Amar Budarapu
Facsimile: (713) 427-5099
or such other address as shall be furnished in writing by any such party, and
such notice or communication shall be deemed to have been given as of the date
so delivered or mailed.
SECTION X.08. PARTIES IN INTEREST. This Agreement may not be
transferred, assigned, pledged or hypothecated by any Party hereto, other than
by operation of law. This Agreement shall be binding upon and shall inure to the
benefit of the Parties hereto and their respective heirs, executors,
administrators, successors and assigns.
SECTION X.09. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one instrument.
SECTION X.10. ENTIRE AGREEMENT. This Agreement, including the other
documents referred to herein which form a part hereof, contains the entire
understanding of the Parties hereto with respect to the subject matter contained
herein and therein and supersedes all prior agreements and understandings
between the Parties with respect to such subject matter. All
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exhibits and schedules referred to herein and attached hereto are incorporated
herein by reference.
SECTION X.11. AMENDMENTS. This Agreement may not be changed orally, but
only by an agreement in writing signed by Harken, Sub and the Company.
SECTION X.12. SEVERABILITY. In case any provision in this Agreement
shall be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
SECTION X.13. THIRD PARTY BENEFICIARIES. Each Party hereto intends that
except for the provisions of Articles I and VIII (the last sentence thereof) and
Sections V.08, V.09, and V.10, this Agreement shall not benefit or create any
right or cause of action in or on behalf of any person other than the Parties
hereto.
SECTION X.14. TERMINATION OF AGREEMENT. Notwithstanding anything
contained in this Agreement to the contrary, this Agreement may be terminated
and abandoned only in the following manner:
(a) by the mutual written consent of the Board of Directors of Harken
and the Company at any time prior to the Closing; or
(b) by Harken, Sub or the Company if the Closing shall not have
occurred on or before September 30, 1999; provided, however, that the right to
terminate this Agreement under this Section X.14(b) shall not be available to
any Party whose failure to fulfill any obligation, covenant or condition under
this Agreement has been the cause of, or resulted in, the failure of the Closing
to occur on or before such date; or
(c) by Harken, Sub or the Company, at any time prior to the Closing, if
any court of competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated by this Agreement and such order, decree, ruling
or other action shall have become final and nonappealable; or
(d) By Harken or Sub if any condition set forth in Article VI could not
be satisfied on or prior to September 30, 1999, unless such failure shall have
been caused by or resulted from the failure of Harken or Sub to perform in any
material respect any material covenant or agreement of either of them set forth
in this Agreement or the material breach by Harken or Sub of any material
representation or warranty of either of them set forth in this Agreement; or
(e) By the Company if any condition set forth in Article VII could not
be satisfied on or prior to September 30, 1999, unless such failure shall have
been caused by or resulted from the failure of the Company to perform in any
material respect any material covenant or agreement of it contained in this
Agreement or the material breach by the Company of any material representation
or warranty of it contained in this Agreement.
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SECTION X.15. PROCEDURE FOR TERMINATION. In the event of the
termination of this Agreement and abandonment of the transactions contemplated
hereby by any or all of the Parties pursuant to Section X.14 hereof, written
notice thereof shall forthwith be given to the other Party specifying the
provision hereof pursuant to which such termination is made and this Agreement
and the transactions contemplated by this Agreement shall be abandoned and, all
obligations except for the provisions of the third sentence of Section V.03,
Section V.07 and this Section X.15 of this Agreement shall forthwith become void
and have no effect, without any liability on the part of any Party or its
respective directors, officers, employees, agents, consultants or stockholders.
If this Agreement is terminated as provided herein:
(a) Each Party shall redeliver or destroy all documents, work papers
and other materials of the other Party relating to the transactions contemplated
hereby, whether so obtained before or after the execution of this Agreement, to
the Party furnishing the same; and
(b) All information received by any Party hereto with respect to the
business of the other Party (other than information which is a matter of public
knowledge or which has heretofore been or is hereafter published in any
publication for public distribution or filed as public information with any
governmental authority) shall not at any time be used for the advantage of, or
disclosed to third parties by, such Party to the detriment of the Party
furnishing such information.
SECTION X.16. SCHEDULES. The disclosure made in any Section of the
Disclosure Schedule with respect to any representation and warranty shall be
deemed to be made with respect to any other representation and warranty which
requires the same or similar disclosure to the extent that the subject matter of
such disclosure to one applies to another representation and warranty.
SECTION X.17. CONSPICUOUS DISCLAIMERS. THE PARTIES AGREE THAT TO THE
EXTENT REQUIRED TO BE OPERATIVE, THE DISCLAIMERS OF CERTAIN WARRANTIES AND OTHER
MATTERS CONTAINED IN THIS AGREEMENT ARE "CONSPICUOUS" DISCLAIMERS FOR THE
PURPOSES OF ANY APPLICABLE LAW, RULE, OR ORDER.
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IN WITNESS WHEREOF, Harken, Sub, and the Company have executed this
Agreement to be effective as of the day and year first above written.
HARKEN ENERGY CORPORATION
----------------------------------
Name:
Title:
XEI ACQUISITION CORP.
----------------------------------
Name:
Title:
XPLOR ENERGY, INC.
----------------------------------
Name:
Title:
54
<PAGE> 1
EXHIBIT 99.1
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER ANY STATE SECURITIES LAWS. NEITHER THIS WARRANT NOR ANY OF SUCH SECURITIES
MAY BE SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION UNDER SAID ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR
EXEMPTIONS THEREFROM. THIS WARRANT MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, OR
OTHERWISE DISPOSED OF EXCEPT UPON THE CONDITIONS SPECIFIED IN THIS WARRANT, AND
NO SALE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF THIS WARRANT SHALL BE
VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE BEEN COMPLIED
WITH.
WARRANT NO. 99A-1
Warrant to Purchase 2,002,128 Shares
(subject to adjustment) of Common Stock of
Harken Energy Corporation
Void after 5:00 p.m.
Houston, Texas
August 19, 2001
HARKEN ENERGY CORPORATION
STOCK PURCHASE WARRANT
THIS IS TO CERTIFY THAT, for value received, XP HOLDINGS, LLC, whose
address is % The Beacon Group, Atten: Robert P. Semmens, 399 Park Avenue, New
York, NY 10022, or its assigns (the "Holder"), upon due exercise of this
Warrant, is entitled to purchase from Harken Energy Corporation, a Delaware
corporation (the "Company"), at any time and through and including 5:00 p.m.,
Houston, Texas local time, on February 19, 2001 (the "Expiration Date")
2,002,128 shares (the "Shares") of fully paid and non-assessable common stock,
par value $.01 per share (the "Common Stock"), of the Company, at an exercise
price of $2.50 per share (the "Exercise Price") or in a cashless exchange for a
reduced number of shares (the "Net Issuable Exchange") as provided below;
provided that if no twenty (20) consecutive trading day period exists prior to
the Expiration Date where the average closing price of the Common Stock during
such period is greater than the Exercise Price then in effect, then the
Expiration Date will be extended to February 19, 2002. Both the Exercise Price
and number of Shares are subject to possible adjustment as provided below.
<PAGE> 2
This Warrant is subject to the following terms, provisions and
conditions:
1. Exercise of Warrant.
(a) Subject to subsection 1(b) below, the Holder may exercise this
Warrant in whole at any time through the Expiration Date or in part from time to
time through the Expiration Date, but only in such multiples as are required to
permit the issuance by the Company of one or more full shares of Common Stock,
by surrender of this Warrant with the Form of Subscription attached hereto duly
executed, to the Company no later than 5:00 P.M., Houston, Texas local time on
the Expiration Date, together with the payment of the Exercise Price for each of
the Shares for which the Warrant is exercised. Payment for the Shares to be
purchased upon exercise of this Warrant may be made by wire transfer of Fed
Funds or by the delivery of a certified or cashier's check payable to the
Company for the aggregate Exercise Price of the Shares purchased; provided,
however, that at the Holder's option, payment of the Exercise Price may be made
by a Net Issuable Exchange pursuant to Section 11. In case of the exercise of
this Warrant in part prior to the Expiration Date, the Company will deliver to
the Holder a new Warrant of like tenor in the name of the Holder evidencing the
right to purchase the number of shares as to which this Warrant has not been
exercised.
(b) The Warrant may not be exercised by the Holder unless, at the time
of exercise, (i) there is either (A) a registration statement or prospectus
covering the Common Stock, that is effective under (1) the Act, and (2) the
securities laws of the state of the address of record of such Holder, or (B) an
exemption available from registration for the Warrant exercise and issuance of
Common Stock in the opinion of counsel reasonably satisfactory to the Company
provided by the Holder to the Company, and (ii) such exercise and issuance would
otherwise be in compliance with applicable law in the opinion of such counsel
provided to the Company. The Warrant may not be, directly or indirectly,
transferred to, or exercised by, any person in any state where such transfer or
exercise would violate any law, including securities laws, of such state.
Legends as required by applicable federal and state laws may be placed on the
certificates representing the Shares. The Holder and the Company agree to
execute such documents and instruments as counsel for the Company reasonably
deems necessary to effect compliance of the issuance of this Warrant and any
Shares issued upon exercise hereof with applicable federal and state securities
laws.
(c) The exercise of the Warrant will be deemed to have been effected at
5:00 P.M., Houston, Texas local time on the day the Holder complies with the
terms of subsection 1(a) above.
2. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
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<PAGE> 3
(a) Shares to be Fully Paid. All Shares will, upon issuance, be legally
and validly issued, fully paid, and non-assessable and free from preemptive
rights, all taxes, liens, and charges with respect to the issue thereof.
(b) Reservation of Shares. During the period within which this Warrant
may be exercised, the Company will at all times have authorized, and reserved
for the purpose of issue upon exercise of this Warrant, a sufficient number of
shares of Common Stock to provide for the exercise of this Warrant.
(c) Certain Actions Prohibited. The Company will not, by amendment of
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, (i) the Company
will not increase the par value of the shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, (ii)
before taking any action which would cause an adjustment reducing the Exercise
Price below the then par value of the shares of Common Stock so receivable, the
Company will take all such corporate action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
non-assessable shares of Common Stock at such adjusted Exercise Price upon the
exercise of this Warrant.
(d) Listing. If the issuance of any Shares required to be reserved for
purposes of exercise of this Warrant requires listing on any national securities
exchange, before such Shares may be issued upon exercise of this Warrant, the
Company will, at its expense, use its commercially reasonable efforts to cause
such Shares to be duly approved, or listed on the relevant national securities
exchange, as the case may be, at such time, so that such Shares may be issued in
accordance with the terms hereof.
(e) Available Information. The Company will comply with the reporting
requirements of Sections 13 and 15(d) of the Securities Act of 1934, as amended.
The Company covenants that if it is not required to file such reports, it will,
upon the request of the Holder, make publicly available such information, and it
will take such further action as any Holder may reasonably request, all to the
extent required from time to time to enable the Holder to sell the shares
underlying the Warrants without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission. Upon the
request of Holder, the Company will deliver to Holder a written statement that
it has complied with such requirements.
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<PAGE> 4
(f) The Company shall pay all expenses, transfer taxes and other
charges payable in connection with the preparation, issue and delivery of stock
certificates issued pursuant to this Warrant, except that, in case such stock
certificates shall be registered in a name or names other than the name of the
Holder, funds sufficient to pay all stock transfer taxes which shall be payable
upon the issuance of such stock certificate or certificates shall be paid by the
Holder at the time of delivering the notice of exercise mentioned above.
3. Stock Dividends Reclassifications, Reorganization, Anti-Dilution
Provisions, Etc.
This Warrant is subject to the following further provisions:
(a) Stock Dividends and Stock Splits. In case, after the Closing Date
and prior to the expiration of this Warrant by exercise or by its terms, the
Company issues any shares of its Common Stock as a stock dividend or
distribution or divides the number of shares of Common Stock, then, in either of
such cases, the Exercise Price per share of the Shares purchasable pursuant to
this Warrant in effect at the time of such action will be proportionately
reduced and the number of the Shares at that time purchasable pursuant to this
Warrant shall be proportionately increased; and conversely, in the event the
Company shall combine such shares of its Common Stock into a smaller number of
shares, then, and in such event, the Exercise Price per share of the Shares
purchasable pursuant to this Warrant in effect at the time of such action shall
be proportionately increased and the number of Shares at that time purchasable
pursuant to this Warrant shall be proportionately decreased.
(b) Certain Corporate Events. In case, after the Closing Date and prior
to the expiration of this Warrant by exercise or by its terms, (i) the Company
is recapitalized by reclassifying its outstanding Common Stock into stock with a
different par value or by changing its outstanding Common Stock with par value
to stock without par value, (ii) the Company or a successor entity consolidates
or merges with or conveys all or substantially all of its or of any successor
entity's property and assets to one or more, or any combination of,
corporations, partnerships, limited liability companies, joint ventures or other
entities (any such entity being included within the meaning of the term
"successor entity" in the event of any consolidation or merger of any such
entity with, or the sale of all or substantially all of the property of any such
entity to, another entity or entities), or (iii) the Company or a successor
entity dissolves, liquidates, or winds up its affairs, the Holder of this
Warrant will thereafter receive, upon the terms and conditions and during the
time specified in this Warrant, in lieu of the Shares theretofore purchasable
upon the exercise of this Warrant, the kind and amount of shares of stock, other
securities and or assets receivable upon such recapitalization or consolidation,
merger, conveyance, dissolution, liquidation, or winding up by the Holder of the
number of shares of Common Stock which the Holder of this Warrant might have
purchased, immediately prior to such recapitalization or consolidation, merger,
conveyance, dissolution, liquidation, or winding up after deduction or payment
of the appropriate Exercise Price.
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<PAGE> 5
(c) Issuance of Additional Shares of Common Stock. If the Company
issues or sells any Common Stock without consideration or for consideration per
share less than the Market Price (as defined below) of the Common Stock on the
last trading day immediately preceding such issuance, then the Exercise Price in
effect immediately prior to each such issuance or sale will immediately (except
as provided below) be adjusted to that price determined by multiplying the per
share Exercise Price in effect immediately prior to such issuance or sale, by a
fraction, (1) the numerator of which shall be (x) the number of shares of Common
Stock outstanding immediately prior to such issuance or sale plus (y) the number
of shares of Common Stock which the aggregate consideration received by the
Company for the total number of such additional shares of Common Stock so issued
or sold would purchase at the then effective per share Market Price, on the last
trading day immediately preceding such issuance or sale and (2) the denominator
of which shall be the number of shares of Common Stock outstanding immediately
after such issue or sale. In such event, the number of shares of Common Stock
issuable upon the exercise of this Warrant shall be increased to the number
obtained by dividing (i) the product of (a) the number of shares issuable upon
the exercise of this Warrant before such adjustment, and (b) the Exercise Price
in effect immediately prior to the issuance giving rise to this adjustment by
(ii) the new Exercise Price determined in accordance with the immediately
preceding sentence.
(d) Issuance of Warrants or Other Rights, Convertible Securities. If
the Company issues any options, warrants or other rights to purchase or acquire
Common Stock (whether or not at the time exercisable) or (b) securities by their
terms convertible into or exchangeable for Common Stock (whether or not at the
time so convertible or exchangeable) or options, warrants or rights to purchase
such convertible or exchangeable securities (whether or not at the time
exercisable) and the exercise or conversion price of such options, warrants,
other rights or convertible or exchangeable securities is below the Market
Price, then the per share Warrant Price shall be adjusted in the manner provided
in Section 3(c) on the basis that:
(1) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options, warrants or other
rights to purchase or acquire Common Stock shall be deemed to
have been issued upon the earlier of (A) the date on which the
Company shall enter into a firm contract or commitment for the
issuance of such options, warrants or other rights and (B) the
actual time such options, warrants or rights are issued, and
for a consideration equal to the consideration, if any,
received by the Company upon the issuance of such options,
warrants or rights plus the minimum purchase price provided in
such options, warrants or rights for the Common Stock covered
thereby; and
(2) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities, or upon the exercise
of options, warrants or other rights to purchase or acquire
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<PAGE> 6
such convertible or exchangeable securities and the subsequent
conversion or exchange thereof, shall be deemed to have been
issued upon the earlier of (A) the date on which the Company
shall enter into a firm contract or commitment for the
issuance of such convertible or exchangeable securities, or
upon the options, warrants or rights to purchase such
convertible or exchangeable securities and (B) the actual time
such securities were issued or such options, warrants or
rights were issued, and for a consideration equal to the
consideration, if any, received by the Company for any such
securities and related options, warrants or rights (excluding
any cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be
received by the Company upon the conversion or exchange of
such securities, or upon the exercise of any related options,
warrants or rights to purchase or acquire such convertible or
exchangeable securities and the subsequent conversion or
exchange thereof;
provided, however that no further adjustment of the Exercise Price and the
number of Shares issuable upon exercise of this Warrant will be made for the
actual issuance of Common Stock upon the exercise of an option, warrant or other
right to acquire Common Stock pursuant to its terms or upon the conversion or
exchange of a convertible or exchangeable security pursuant to its terms for
which prior adjustment has been made; except that in the case of any subsequent
change in the number of shares of Common Stock deliverable upon exercise of any
such options, warrants or rights or conversion or exchange of such convertible
or exchangeable securities or any change in the consideration to be received by
the Company upon such exercise, conversion or exchange (but excluding changes
resulting from the anti-dilution provisions thereof to the extent comparable to
the anti-dilution provisions contained herein) the Exercise Price and the number
of Shares issuable upon exercise of this Warrant as then in effect shall be
readjusted to such Exercise Price and number of Shares as would have been
obtained had an adjustment been made upon the issuance of such options, warrants
or rights not exercised prior to such change, or of such convertible or
exchangeable securities not converted or exchanged prior to such change, upon
the basis of such change.
(e) Other Distributions. In case the Company shall fix a record date
for the making of a distribution to all holders of shares of its Common Stock
(i) of shares of any class other than its Common Stock or (ii) of evidence of
indebtedness of the Company or any subsidiary or (iii) of assets (excluding
ordinary cash dividends; and dividends or distributions referred to in Section
3(a)), or (iv) of rights or warrants (excluding those referred to in Section
3(d)), in each such case the Exercise Price in effect immediately prior thereto
shall be reduced immediately thereafter to the price determined by dividing (x)
an amount equal to the difference resulting from (1) the number of shares of
Common Stock outstanding on such record date multiplied by the Exercise Price
per share on such record date, less (2) the fair market value (as reasonably
determined by the Company's board of directors) of such shares or evidences of
indebtedness or assets or rights or warrants to be so distributed, by (y) the
number of shares of Common Stock
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<PAGE> 7
outstanding on such record date; such adjustment shall be made successively
whenever such a record date is fixed. In such event, the number of shares of
Common Stock issuable upon the exercise of this Warrant shall be increased to
the number obtained by dividing (i) the product of (a) the number of Shares
issuable upon the exercise of this Warrant before such adjustment, and (b) the
Exercise Price in effect immediately prior to the issuance giving rise to this
adjustment by (ii) the new Exercise Price determined in accordance with the
immediately preceding sentence.
(f) Certain Repurchases of Common Stock. In case the Company effects a
pro rata repurchase of Common Stock, then the Exercise Price shall be reduced to
the price determined by multiplying the Exercise Price in effect immediately
prior to the effective date of such pro rata repurchase by a fraction of which
the numerator shall be (i) the product of (x) the number of shares of Common
Stock outstanding immediately before such pro rata repurchase and (y) the Market
Price of a share of Common Stock on the trading day immediately preceding the
first public announcement by the Company or any of its affiliates of the intent
to effect such pro rata repurchase, minus (ii) the aggregate purchase price of
the pro rata repurchase, and of which the denominator shall be the product of
(i) the number of shares of Common Stock outstanding immediately prior to such
pro rata repurchase minus the number of shares of Common Stock so repurchased
and (ii) the Market Price per share of Common stock on the trading day
immediately preceding the first public announcement of such pro rata repurchase.
In such event, the number of shares of Common Stock issuable upon the exercise
of its Warrant shall be increased to the number obtained by dividing (i) the
product of (a) the number of Shares issuable upon the exercise of this Warrant
before such adjustment, and (b) the Exercise Price in effect immediately prior
to the pro rata repurchase giving rise to this adjustment by (ii) the new
Exercise Price determined in accordance with the immediately preceding sentence.
(g) Notwithstanding anything to the contrary herein, this Section 3
shall not apply to (i) any securities exercisable, convertible or exchangeable
for Common Stock or any agreements to issue any of the foregoing that are
currently outstanding prior to the date hereof, (ii) any issuance of Common
Stock upon the exercise, conversion or exchange of any securities if the
issuance of such security did not trigger an adjustment pursuant to this Section
3, or (iii) any issuance of Common Stock or any other securities exercisable,
convertible or exchangeable therefor, if issued for consideration in whole or in
part other than cash, where such consideration is deemed in good faith by the
Board of Directors of Harken to be equal to the fair market value of the
securities issued therefor.
(h) For purposes of this Warrant, the "Market Price" of a share of the
Common Stock as of a particular date shall mean, if the Common Stock is traded
on a securities exchange or on the Nasdaq National Market or Nasdaq SmallCap
Market, the closing price of the Common Stock on such exchange or on the Nasdaq
National Market or Nasdaq SmallCap Market for the date in question. If at any
time the Common Stock is not traded on an exchange or on the Nasdaq National
Market or Nasdaq SmallCap Market or otherwise traded in the over-the-counter
market, the Market Price shall be deemed to be the higher of (i) the book value
thereof as
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<PAGE> 8
determined by any firm of independent public accountants of recognized standing
selected by the Board of Directors of the Company as of a date that is within 20
days of the date as of which the determination is to be made, or (ii) the fair
market values thereof determined in good faith by any firm of independent public
accountants or a nationally recognized independent investment banking firm
selected by the Board of Directors of the Company.
(i) Computation of Adjustments. Upon the occurrence of each event
requiring an adjustment of the Exercise Price and/or of the number of Shares
purchasable pursuant to this Warrant in accordance with, and as required by, the
terms of this Section 3, the Company shall compute, or if requested by the
Holder shall forthwith employ a firm of certified public accountants (who may be
the regular accountants for the Company) who shall compute, the adjusted
Exercise Price and the adjusted number of Shares purchasable at such adjusted
Exercise Price by reason of such event in accordance with the provisions of this
Section 3 and shall prepare a certificate setting forth such adjusted Exercise
Price and the adjusted number of Shares and showing in detail the facts upon
which such conclusions are based, including a statement of the consideration
received or to be received by the Company for any additional shares of Common
Stock issued or sold or deemed to have been issued or sold and of the number of
shares of Common Stock outstanding or deemed to be outstanding. All such
calculations shall be to the nearest ten-thousandths and any adjusted Exercise
Price shall be rounded to the nearest cent and any adjusted number of shares
shall be rounded to the nearest whole share. The Company shall mail forthwith to
the Holder of this Warrant a copy of such certificate, and thereafter said
certificate shall be conclusive and shall be binding upon such Holder unless
contested by such Holder by written notice to the Company within 10 days after
receipt of the certificate by such Holder.
(j) In case:
(i) of any classification, reclassification, or other
reorganization of the capital stock of the Company,
consolidation, or merger of the Company with or into another
entity where the Company is not the surviving entity, or
conveyance of all or substantially all of the assets of the
Company;
(ii) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(iii) of a proposal by the Company to take any action of the type
described in this Section 3 (but only if the action of the
type described in this Section 3 would result in an adjustment
in the Exercise Price or the number of Shares into which this
Warrant is exercisable or a change in the type of securities
or property to be delivered upon exercise of this Warrant),
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<PAGE> 9
the Company shall give notice to the Holder, in the manner which notice shall
specify the record date, if any, with respect to any such action and the
approximate date on which such action is to take place. Such notice shall also
set forth the facts with respect thereto as shall be reasonably necessary to
indicate the effect on the Exercise Price and the number, kind or class of
shares or other securities or property which shall be deliverable upon exercise
of this Warrant. In the case of any action which would require the fixing of a
record date, such notice shall be given at least 10 days prior to the date so
fixed, and in case of all other action, such notice shall be given at least 15
days prior to the taking of such proposed action. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of any such
action then, and in any such case, the Company shall mail to the Holder of this
Warrant a brief statement of the event giving rise to such effect and a
description thereof.
4. Non-transferability. Except to an Accredited Investor or Qualified
Institutional Buyer, as defined in the Securities Act, and in compliance with
all applicable federal and state securities laws, this Warrant and any shares
issued upon exercise thereof 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. Any attempted assignment, transfer, pledge,
hypothecation, or other encumbrance of this Warrant and any shares issued upon
exercise thereof contrary to the provisions hereof, and any execution,
attachment, or similar process upon this Warrant, will be null, void, and of no
effect.
5. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the Holder hereof to any voting rights or other rights whatsoever as a
shareholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the Holder hereof to purchase the Shares, and no mere
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder for the Exercise Price or as a shareholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
6. Loss, Theft, Destruction, or Mutilation. Upon receipt by the Company
of evidence satisfactory to it (in the exercise of its reasonable discretion and
provided that an affidavit of the Holder shall be deemed to be satisfactory
evidence) of the ownership of and the loss, theft, destruction, or mutilation of
this Warrant and (in the case of loss, theft, or destruction) of an indemnity
from the Holder satisfactory to the Company (in the exercise of its reasonable
discretion), and (in the case of mutilation) upon surrender and cancellation
thereof, the Company, at the Company's expense, will execute and deliver to the
Holder, in lieu thereof, a new Warrant of like tenor.
7. Register. The Company shall maintain, at its principal office
located at 16285 Park Ten Place, Suite 600, Houston, Texas 77084 (or such other
office or agency of the Company as it may designate by notice to the Holder
hereof), a register for this Warrant, in which the Company shall record the name
and address of the person in whose name this Warrant
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<PAGE> 10
has been issued, as well as the name and address of each transferee as may be
permitted under the terms of this Warrant and each prior owner of this Warrant.
8. Exercise or Transfer Without Registration. Anything in this Warrant
to the contrary notwithstanding if, at the time of the surrender of this Warrant
in connection with any exercise, transfer, or exchange of this Warrant, this
Warrant shall not be registered under the Act and under applicable state
securities laws, the Company may require, as a condition of allowing such
exercise, or exchange, that (i) the Holder of this Warrant, furnish to the
Company a written opinion of counsel, which opinion and counsel are acceptable
to the Company, to the effect that such exercise, or exchange may be made
without registration under said Act and under applicable state securities laws
and (ii) the Holder execute and deliver to the Company an investment letter in
form and substance acceptable to the Company. The Holder of this Warrant, by
taking and holding the same, hereby represents to the Company that such Holder
is an "accredited investor" as defined under the Act and is acquiring this
Warrant for investment and not with a view to the distribution thereof.
9. Notices. All notices requests and other communications required or
permitted to be given or delivered hereunder to the Holder of this Warrant or to
the Holder of shares acquired upon exercise of this Warrant shall be in writing,
and shall be personally delivered or shall be sent by first class mail,
certified or registered mail, postage prepaid and addressed, to such Holder at
the address shown for such Holder on the books of the Company, or at such other
address as shall have been furnished to the Company by notice from such Holder.
All notices, requests and other communications required or permitted to be given
or delivered hereunder to the Company shall be in writing, and shall be
personally delivered (including courier or express service), or shall be sent by
first class mail, certified or registered mail, postage prepaid and addressed,
to the office of the Company at 16285 Park Ten Place, Suite 600, Houston, Texas
77084, Attention: Corporate Secretary, or at such other address as shall have
been furnished to the Holder of this Warrant or to the Holder of shares acquired
upon exercise of this Warrant by notice from the Company. Any such notice,
request, or other communication may be sent by telegram, facsimile or telex, but
shall in such case be subsequently confirmed by a writing personally delivered
or sent by first class mail or by certified or registered mail as provided
above. All notices, requests, and other communications shall be deemed to have
been given either at the time of the delivery thereof to (or the receipt by, in
the case of a telegram, facsimile or telex) the person entitled to receive such
notice at the address of such person for purposes of this Paragraph 9, or, if
mailed, at the completion of the third full business day following the time of
such mailing thereof to such address, as the case may be.
10. Governing Law. This Warrant shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware.
11. Net Issuable Exchange.
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(a) In addition to and without limiting the rights of the Holder under
the terms of this Warrant, the Holder shall have the right (the "Conversion
Right") to convert this Warrant or any portion thereof into shares of Common
Stock as provided in this Section 11 at any time or from time to time prior to
the Expiration Date. Upon exercise of the Conversion Right with respect to a
particular number of shares subject to this Warrant (the "Converted Warrant
Shares"), the Company shall deliver to the Holder, without payment by the Holder
of any exercise price or any cash or consideration other than the surrender of
the right to exercise this Warrant as to the Converted Warrant Shares, a number
of shares of Common Stock determined by multiplying the number of Converted
Warrant Shares by the following:
FMV - Exercise Price
---------------------------------
FMV
FMV shall be determined using the Market Price as of the Conversion
Date and Exercise Price shall be determined as of the close of business on the
Conversion Date (as defined below).
(b) The Conversion Right may be exercised by the Holder by surrendering
this Warrant Certificate at the principal office of the Company together with a
written statement specifying that the Holder thereby intends to exercise the
Conversion Right and indicating the number of shares subject to this Warrant
which are being surrendered (referred to in subsection (a) above as the
Converted Warrant Shares) in exercise of the Conversion Right. Such conversion
shall be effective upon receipt by the Company of this Warrant Certificate
together with the aforesaid written statement or on such later date as is
specified therein (the "Conversion Date"), but not later than the Expiration
Date. Certificates for the shares of Common Stock issuable upon exercise of the
Conversion Right and, in the case of a partial exercise, a new warrant
certificate evidencing the shares remaining subject to this Warrant shall be
issued as of the Conversion Date and shall be delivered to the Holder within 15
days following the Conversion Date.
12. Optional Redemption. Notwithstanding anything to the contrary
herein, within five (5) business days after the exercise of this Warrant by the
holder in accordance with Section 1 above, the Company shall have the right to
deliver to the holder in full satisfaction of all of its obligations pursuant to
the Warrant, cash, in an amount equal to the product of the Market Price on the
day of exercise and number of the Shares which would otherwise be delivered
pursuant to such exercise.
13. Miscellaneous.
(a) Amendments. This Warrant or any provision hereof may not be
changed, waived, or discharged, or terminated orally, but only by an instrument
in writing signed by the party (or any predecessor in interest thereof) against
which enforcement of the same is sought.
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<PAGE> 12
(b) Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
(c) Successors and Assigns. This Warrant shall be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all the Company's assets.
(d) Limitation of Liability. In no event shall any direct or indirect
member, stockholder, officer, director, partner or other representative of
Holder or any of its affiliates be personally liable for any obligation of
Holder under this Agreement. In no event shall recourse with respect to the
obligations under this Agreement of Holder be had to the assets or business of
any person other than Holder.
12
<PAGE> 13
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer under its corporate seal, attested by its duly
authorized officer, on this 19th day of August, 1999.
HARKEN ENERGY CORPORATION
By:
-----------------------------------
[Seal] Name: Larry E. Cummings
Title: Vice President and Secretary
13
<PAGE> 14
FORM OF SUBSCRIPTION
Dated: , .
--------- ---
To:
--------------------------------------
The undersigned, pursuant to the provisions set forth in the within
Warrant Number ________ hereby agrees to purchase ______ shares of Common Stock
covered by such Warrant, and makes payment herewith in full therefor at the
price per share provided by such Warrant in cash or by certified or official
bank check in the amount of $_______________. Please issue a certificate of
certificates for such shares of Common Stock in the following name:
Name:
--------------------------------------------
Address:
-----------------------------------------
-----------------------------------------
Signature:
---------------------------------------
Title of Signing Officer of Agent (if any):
Note: The above signature should correspond exactly with the name on
the face of the within Warrant or with the name of the assignee
appearing in the assignment form.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said Holder covering the balance of the shares purchasable thereunder.
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<PAGE> 15
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER ANY STATE SECURITIES LAWS. NEITHER THIS WARRANT NOR ANY OF SUCH SECURITIES
MAY BE SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION UNDER SAID ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR
EXEMPTIONS THEREFROM. THIS WARRANT MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, OR
OTHERWISE DISPOSED OF EXCEPT UPON THE CONDITIONS SPECIFIED IN THIS WARRANT, AND
NO SALE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF THIS WARRANT SHALL BE
VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE BEEN COMPLIED
WITH.
WARRANT NO. 99A-2
Warrant to Purchase 333,938 Shares
(subject to adjustment) of Common Stock of
Harken Energy Corporation
Void after 5:00 p.m.
Houston, Texas
August 19, 2001
HARKEN ENERGY CORPORATION
STOCK PURCHASE WARRANT
THIS IS TO CERTIFY THAT, for value received, XPLOR SHI, LLC, whose
address is % Trust Company of the West, Atten: Arthur Carlson, 865 S. Figueroa
St., Suite 1800, Los Angeles, CA 90017, or its assigns (the "Holder"), upon due
exercise of this Warrant, is entitled to purchase from Harken Energy
Corporation, a Delaware corporation (the "Company"), at any time and through and
including 5:00 p.m., Houston, Texas local time, on February 19, 2001 (the
"Expiration Date") 333,938 shares (the "Shares") of fully paid and
non-assessable common stock, par value $.01 per share (the "Common Stock"), of
the Company, at an exercise price of $2.50 per share (the "Exercise Price") or
in a cashless exchange for a reduced number of shares (the "Net Issuable
Exchange") as provided below; provided that if no twenty (20) consecutive
trading day period exists prior to the Expiration Date where the average closing
price of the Common Stock during such period is greater than the Exercise Price
then in effect, then the Expiration Date will be extended to February 19, 2002.
Both the Exercise Price and number of Shares are subject to possible adjustment
as provided below.
<PAGE> 16
This Warrant is subject to the following terms, provisions and
conditions:
1. Exercise of Warrant.
(a) Subject to subsection 1(b) below, the Holder may exercise this
Warrant in whole at any time through the Expiration Date or in part from time to
time through the Expiration Date, but only in such multiples as are required to
permit the issuance by the Company of one or more full shares of Common Stock,
by surrender of this Warrant with the Form of Subscription attached hereto duly
executed, to the Company no later than 5:00 P.M., Houston, Texas local time on
the Expiration Date, together with the payment of the Exercise Price for each of
the Shares for which the Warrant is exercised. Payment for the Shares to be
purchased upon exercise of this Warrant may be made by wire transfer of Fed
Funds or by the delivery of a certified or cashier's check payable to the
Company for the aggregate Exercise Price of the Shares purchased; provided,
however, that at the Holder's option, payment of the Exercise Price may be made
by a Net Issuable Exchange pursuant to Section 11. In case of the exercise of
this Warrant in part prior to the Expiration Date, the Company will deliver to
the Holder a new Warrant of like tenor in the name of the Holder evidencing the
right to purchase the number of shares as to which this Warrant has not been
exercised.
(b) The Warrant may not be exercised by the Holder unless, at the time
of exercise, (i) there is either (A) a registration statement or prospectus
covering the Common Stock, that is effective under (1) the Act, and (2) the
securities laws of the state of the address of record of such Holder, or (B) an
exemption available from registration for the Warrant exercise and issuance of
Common Stock in the opinion of counsel reasonably satisfactory to the Company
provided by the Holder to the Company, and (ii) such exercise and issuance would
otherwise be in compliance with applicable law in the opinion of such counsel
provided to the Company. The Warrant may not be, directly or indirectly,
transferred to, or exercised by, any person in any state where such transfer or
exercise would violate any law, including securities laws, of such state.
Legends as required by applicable federal and state laws may be placed on the
certificates representing the Shares. The Holder and the Company agree to
execute such documents and instruments as counsel for the Company reasonably
deems necessary to effect compliance of the issuance of this Warrant and any
Shares issued upon exercise hereof with applicable federal and state securities
laws.
(c) The exercise of the Warrant will be deemed to have been effected at
5:00 P.M., Houston, Texas local time on the day the Holder complies with the
terms of subsection 1(a) above.
2. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
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<PAGE> 17
(a) Shares to be Fully Paid. All Shares will, upon issuance, be legally
and validly issued, fully paid, and non-assessable and free from preemptive
rights, all taxes, liens, and charges with respect to the issue thereof.
(b) Reservation of Shares. During the period within which this Warrant
may be exercised, the Company will at all times have authorized, and reserved
for the purpose of issue upon exercise of this Warrant, a sufficient number of
shares of Common Stock to provide for the exercise of this Warrant.
(c) Certain Actions Prohibited. The Company will not, by amendment of
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, (i) the Company
will not increase the par value of the shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, (ii)
before taking any action which would cause an adjustment reducing the Exercise
Price below the then par value of the shares of Common Stock so receivable, the
Company will take all such corporate action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
non-assessable shares of Common Stock at such adjusted Exercise Price upon the
exercise of this Warrant.
(d) Listing. If the issuance of any Shares required to be reserved for
purposes of exercise of this Warrant requires listing on any national securities
exchange, before such Shares may be issued upon exercise of this Warrant, the
Company will, at its expense, use its commercially reasonable efforts to cause
such Shares to be duly approved, or listed on the relevant national securities
exchange, as the case may be, at such time, so that such Shares may be issued in
accordance with the terms hereof.
(e) Available Information. The Company will comply with the reporting
requirements of Sections 13 and 15(d) of the Securities Act of 1934, as amended.
The Company covenants that if it is not required to file such reports, it will,
upon the request of the Holder, make publicly available such information, and it
will take such further action as any Holder may reasonably request, all to the
extent required from time to time to enable the Holder to sell the shares
underlying the Warrants without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission. Upon the
request of Holder, the Company will deliver to Holder a written statement that
it has complied with such requirements.
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<PAGE> 18
(f) The Company shall pay all expenses, transfer taxes and other
charges payable in connection with the preparation, issue and delivery of stock
certificates issued pursuant to this Warrant, except that, in case such stock
certificates shall be registered in a name or names other than the name of the
Holder, funds sufficient to pay all stock transfer taxes which shall be payable
upon the issuance of such stock certificate or certificates shall be paid by the
Holder at the time of delivering the notice of exercise mentioned above.
3. Stock Dividends Reclassifications, Reorganization, Anti-Dilution
Provisions, Etc.
This Warrant is subject to the following further provisions:
(a) Stock Dividends and Stock Splits. In case, after the Closing Date
and prior to the expiration of this Warrant by exercise or by its terms, the
Company issues any shares of its Common Stock as a stock dividend or
distribution or divides the number of shares of Common Stock, then, in either of
such cases, the Exercise Price per share of the Shares purchasable pursuant to
this Warrant in effect at the time of such action will be proportionately
reduced and the number of the Shares at that time purchasable pursuant to this
Warrant shall be proportionately increased; and conversely, in the event the
Company shall combine such shares of its Common Stock into a smaller number of
shares, then, and in such event, the Exercise Price per share of the Shares
purchasable pursuant to this Warrant in effect at the time of such action shall
be proportionately increased and the number of Shares at that time purchasable
pursuant to this Warrant shall be proportionately decreased.
(b) Certain Corporate Events. In case, after the Closing Date and prior
to the expiration of this Warrant by exercise or by its terms, (i) the Company
is recapitalized by reclassifying its outstanding Common Stock into stock with a
different par value or by changing its outstanding Common Stock with par value
to stock without par value, (ii) the Company or a successor entity consolidates
or merges with or conveys all or substantially all of its or of any successor
entity's property and assets to one or more, or any combination of,
corporations, partnerships, limited liability companies, joint ventures or other
entities (any such entity being included within the meaning of the term
"successor entity" in the event of any consolidation or merger of any such
entity with, or the sale of all or substantially all of the property of any such
entity to, another entity or entities), or (iii) the Company or a successor
entity dissolves, liquidates, or winds up its affairs, the Holder of this
Warrant will thereafter receive, upon the terms and conditions and during the
time specified in this Warrant, in lieu of the Shares theretofore purchasable
upon the exercise of this Warrant, the kind and amount of shares of stock, other
securities and or assets receivable upon such recapitalization or consolidation,
merger, conveyance, dissolution, liquidation, or winding up by the Holder of the
number of shares of Common Stock which the Holder of this Warrant might have
purchased, immediately prior to such recapitalization or consolidation, merger,
conveyance, dissolution, liquidation, or winding up after deduction or payment
of the appropriate Exercise Price.
4
<PAGE> 19
(c) Issuance of Additional Shares of Common Stock. If the Company
issues or sells any Common Stock without consideration or for consideration per
share less than the Market Price (as defined below) of the Common Stock on the
last trading day immediately preceding such issuance, then the Exercise Price in
effect immediately prior to each such issuance or sale will immediately (except
as provided below) be adjusted to that price determined by multiplying the per
share Exercise Price in effect immediately prior to such issuance or sale, by a
fraction, (1) the numerator of which shall be (x) the number of shares of Common
Stock outstanding immediately prior to such issuance or sale plus (y) the number
of shares of Common Stock which the aggregate consideration received by the
Company for the total number of such additional shares of Common Stock so issued
or sold would purchase at the then effective per share Market Price, on the last
trading day immediately preceding such issuance or sale and (2) the denominator
of which shall be the number of shares of Common Stock outstanding immediately
after such issue or sale. In such event, the number of shares of Common Stock
issuable upon the exercise of this Warrant shall be increased to the number
obtained by dividing (i) the product of (a) the number of shares issuable upon
the exercise of this Warrant before such adjustment, and (b) the Exercise Price
in effect immediately prior to the issuance giving rise to this adjustment by
(ii) the new Exercise Price determined in accordance with the immediately
preceding sentence.
(d) Issuance of Warrants or Other Rights, Convertible Securities. If
the Company issues any options, warrants or other rights to purchase or acquire
Common Stock (whether or not at the time exercisable) or (b) securities by their
terms convertible into or exchangeable for Common Stock (whether or not at the
time so convertible or exchangeable) or options, warrants or rights to purchase
such convertible or exchangeable securities (whether or not at the time
exercisable) and the exercise or conversion price of such options, warrants,
other rights or convertible or exchangeable securities is below the Market
Price, then the per share Warrant Price shall be adjusted in the manner provided
in Section 3(c) on the basis that:
(1) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options, warrants or other
rights to purchase or acquire Common Stock shall be deemed to
have been issued upon the earlier of (A) the date on which the
Company shall enter into a firm contract or commitment for the
issuance of such options, warrants or other rights and (B) the
actual time such options, warrants or rights are issued, and
for a consideration equal to the consideration, if any,
received by the Company upon the issuance of such options,
warrants or rights plus the minimum purchase price provided in
such options, warrants or rights for the Common Stock covered
thereby; and
(2) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities, or upon the exercise
of options, warrants or other rights to purchase or acquire
5
<PAGE> 20
such convertible or exchangeable securities and the subsequent
conversion or exchange thereof, shall be deemed to have been
issued upon the earlier of (A) the date on which the Company
shall enter into a firm contract or commitment for the
issuance of such convertible or exchangeable securities, or
upon the options, warrants or rights to purchase such
convertible or exchangeable securities and (B) the actual time
such securities were issued or such options, warrants or
rights were issued, and for a consideration equal to the
consideration, if any, received by the Company for any such
securities and related options, warrants or rights (excluding
any cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be
received by the Company upon the conversion or exchange of
such securities, or upon the exercise of any related options,
warrants or rights to purchase or acquire such convertible or
exchangeable securities and the subsequent conversion or
exchange thereof;
provided, however that no further adjustment of the Exercise Price and the
number of Shares issuable upon exercise of this Warrant will be made for the
actual issuance of Common Stock upon the exercise of an option, warrant or other
right to acquire Common Stock pursuant to its terms or upon the conversion or
exchange of a convertible or exchangeable security pursuant to its terms for
which prior adjustment has been made; except that in the case of any subsequent
change in the number of shares of Common Stock deliverable upon exercise of any
such options, warrants or rights or conversion or exchange of such convertible
or exchangeable securities or any change in the consideration to be received by
the Company upon such exercise, conversion or exchange (but excluding changes
resulting from the anti-dilution provisions thereof to the extent comparable to
the anti-dilution provisions contained herein) the Exercise Price and the number
of Shares issuable upon exercise of this Warrant as then in effect shall be
readjusted to such Exercise Price and number of Shares as would have been
obtained had an adjustment been made upon the issuance of such options, warrants
or rights not exercised prior to such change, or of such convertible or
exchangeable securities not converted or exchanged prior to such change, upon
the basis of such change.
(e) Other Distributions. In case the Company shall fix a record date
for the making of a distribution to all holders of shares of its Common Stock
(i) of shares of any class other than its Common Stock or (ii) of evidence of
indebtedness of the Company or any subsidiary or (iii) of assets (excluding
ordinary cash dividends; and dividends or distributions referred to in Section
3(a)), or (iv) of rights or warrants (excluding those referred to in Section
3(d)), in each such case the Exercise Price in effect immediately prior thereto
shall be reduced immediately thereafter to the price determined by dividing (x)
an amount equal to the difference resulting from (1) the number of shares of
Common Stock outstanding on such record date multiplied by the Exercise Price
per share on such record date, less (2) the fair market value (as reasonably
determined by the Company's board of directors) of such shares or evidences of
indebtedness or assets or rights or warrants to be so distributed, by (y) the
number of shares of Common Stock
6
<PAGE> 21
outstanding on such record date; such adjustment shall be made successively
whenever such a record date is fixed. In such event, the number of shares of
Common Stock issuable upon the exercise of this Warrant shall be increased to
the number obtained by dividing (i) the product of (a) the number of Shares
issuable upon the exercise of this Warrant before such adjustment, and (b) the
Exercise Price in effect immediately prior to the issuance giving rise to this
adjustment by (ii) the new Exercise Price determined in accordance with the
immediately preceding sentence.
(f) Certain Repurchases of Common Stock. In case the Company effects a
pro rata repurchase of Common Stock, then the Exercise Price shall be reduced to
the price determined by multiplying the Exercise Price in effect immediately
prior to the effective date of such pro rata repurchase by a fraction of which
the numerator shall be (i) the product of (x) the number of shares of Common
Stock outstanding immediately before such pro rata repurchase and (y) the Market
Price of a share of Common Stock on the trading day immediately preceding the
first public announcement by the Company or any of its affiliates of the intent
to effect such pro rata repurchase, minus (ii) the aggregate purchase price of
the pro rata repurchase, and of which the denominator shall be the product of
(i) the number of shares of Common Stock outstanding immediately prior to such
pro rata repurchase minus the number of shares of Common Stock so repurchased
and (ii) the Market Price per share of Common stock on the trading day
immediately preceding the first public announcement of such pro rata repurchase.
In such event, the number of shares of Common Stock issuable upon the exercise
of its Warrant shall be increased to the number obtained by dividing (i) the
product of (a) the number of Shares issuable upon the exercise of this Warrant
before such adjustment, and (b) the Exercise Price in effect immediately prior
to the pro rata repurchase giving rise to this adjustment by (ii) the new
Exercise Price determined in accordance with the immediately preceding sentence.
(g) Notwithstanding anything to the contrary herein, this Section 3
shall not apply to (i) any securities exercisable, convertible or exchangeable
for Common Stock or any agreements to issue any of the foregoing that are
currently outstanding prior to the date hereof, (ii) any issuance of Common
Stock upon the exercise, conversion or exchange of any securities if the
issuance of such security did not trigger an adjustment pursuant to this Section
3, or (iii) any issuance of Common Stock or any other securities exercisable,
convertible or exchangeable therefor, if issued for consideration in whole or in
part other than cash, where such consideration is deemed in good faith by the
Board of Directors of Harken to be equal to the fair market value of the
securities issued therefor.
(h) For purposes of this Warrant, the "Market Price" of a share of the
Common Stock as of a particular date shall mean, if the Common Stock is traded
on a securities exchange or on the Nasdaq National Market or Nasdaq SmallCap
Market, the closing price of the Common Stock on such exchange or on the Nasdaq
National Market or Nasdaq SmallCap Market for the date in question. If at any
time the Common Stock is not traded on an exchange or on the Nasdaq National
Market or Nasdaq SmallCap Market or otherwise traded in the over-the-counter
market, the Market Price shall be deemed to be the higher of (i) the book value
thereof as
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<PAGE> 22
determined by any firm of independent public accountants of recognized standing
selected by the Board of Directors of the Company as of a date that is within 20
days of the date as of which the determination is to be made, or (ii) the fair
market values thereof determined in good faith by any firm of independent public
accountants or a nationally recognized independent investment banking firm
selected by the Board of Directors of the Company.
(i) Computation of Adjustments. Upon the occurrence of each event
requiring an adjustment of the Exercise Price and/or of the number of Shares
purchasable pursuant to this Warrant in accordance with, and as required by, the
terms of this Section 3, the Company shall compute, or if requested by the
Holder shall forthwith employ a firm of certified public accountants (who may be
the regular accountants for the Company) who shall compute, the adjusted
Exercise Price and the adjusted number of Shares purchasable at such adjusted
Exercise Price by reason of such event in accordance with the provisions of this
Section 3 and shall prepare a certificate setting forth such adjusted Exercise
Price and the adjusted number of Shares and showing in detail the facts upon
which such conclusions are based, including a statement of the consideration
received or to be received by the Company for any additional shares of Common
Stock issued or sold or deemed to have been issued or sold and of the number of
shares of Common Stock outstanding or deemed to be outstanding. All such
calculations shall be to the nearest ten-thousandths and any adjusted Exercise
Price shall be rounded to the nearest cent and any adjusted number of shares
shall be rounded to the nearest whole share. The Company shall mail forthwith to
the Holder of this Warrant a copy of such certificate, and thereafter said
certificate shall be conclusive and shall be binding upon such Holder unless
contested by such Holder by written notice to the Company within 10 days after
receipt of the certificate by such Holder.
(j) In case:
(i) of any classification, reclassification, or other
reorganization of the capital stock of the Company,
consolidation, or merger of the Company with or into another
entity where the Company is not the surviving entity, or
conveyance of all or substantially all of the assets of the
Company;
(ii) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(iii) of a proposal by the Company to take any action of the type
described in this Section 3 (but only if the action of the
type described in this Section 3 would result in an adjustment
in the Exercise Price or the number of Shares into which this
Warrant is exercisable or a change in the type of securities
or property to be delivered upon exercise of this Warrant),
8
<PAGE> 23
the Company shall give notice to the Holder, in the manner which notice shall
specify the record date, if any, with respect to any such action and the
approximate date on which such action is to take place. Such notice shall also
set forth the facts with respect thereto as shall be reasonably necessary to
indicate the effect on the Exercise Price and the number, kind or class of
shares or other securities or property which shall be deliverable upon exercise
of this Warrant. In the case of any action which would require the fixing of a
record date, such notice shall be given at least 10 days prior to the date so
fixed, and in case of all other action, such notice shall be given at least 15
days prior to the taking of such proposed action. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of any such
action then, and in any such case, the Company shall mail to the Holder of this
Warrant a brief statement of the event giving rise to such effect and a
description thereof.
4. Non-transferability. Except to an Accredited Investor or Qualified
Institutional Buyer, as defined in the Securities Act, and in compliance with
all applicable federal and state securities laws, this Warrant and any shares
issued upon exercise thereof 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. Any attempted assignment, transfer, pledge,
hypothecation, or other encumbrance of this Warrant and any shares issued upon
exercise thereof contrary to the provisions hereof, and any execution,
attachment, or similar process upon this Warrant, will be null, void, and of no
effect.
5. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the Holder hereof to any voting rights or other rights whatsoever as a
shareholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the Holder hereof to purchase the Shares, and no mere
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder for the Exercise Price or as a shareholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
6. Loss, Theft, Destruction, or Mutilation. Upon receipt by the Company
of evidence satisfactory to it (in the exercise of its reasonable discretion and
provided that an affidavit of the Holder shall be deemed to be satisfactory
evidence) of the ownership of and the loss, theft, destruction, or mutilation of
this Warrant and (in the case of loss, theft, or destruction) of an indemnity
from the Holder satisfactory to the Company (in the exercise of its reasonable
discretion), and (in the case of mutilation) upon surrender and cancellation
thereof, the Company, at the Company's expense, will execute and deliver to the
Holder, in lieu thereof, a new Warrant of like tenor.
7. Register. The Company shall maintain, at its principal office
located at 16285 Park Ten Place, Suite 600, Houston, Texas 77084 (or such other
office or agency of the Company as it may designate by notice to the Holder
hereof), a register for this Warrant, in which the Company shall record the name
and address of the person in whose name this Warrant
9
<PAGE> 24
has been issued, as well as the name and address of each transferee as may be
permitted under the terms of this Warrant and each prior owner of this Warrant.
8. Exercise or Transfer Without Registration. Anything in this Warrant
to the contrary notwithstanding if, at the time of the surrender of this Warrant
in connection with any exercise, transfer, or exchange of this Warrant, this
Warrant shall not be registered under the Act and under applicable state
securities laws, the Company may require, as a condition of allowing such
exercise, or exchange, that (i) the Holder of this Warrant, furnish to the
Company a written opinion of counsel, which opinion and counsel are acceptable
to the Company, to the effect that such exercise, or exchange may be made
without registration under said Act and under applicable state securities laws
and (ii) the Holder execute and deliver to the Company an investment letter in
form and substance acceptable to the Company. The Holder of this Warrant, by
taking and holding the same, hereby represents to the Company that such Holder
is an "accredited investor" as defined under the Act and is acquiring this
Warrant for investment and not with a view to the distribution thereof.
9. Notices. All notices requests and other communications required or
permitted to be given or delivered hereunder to the Holder of this Warrant or to
the Holder of shares acquired upon exercise of this Warrant shall be in writing,
and shall be personally delivered or shall be sent by first class mail,
certified or registered mail, postage prepaid and addressed, to such Holder at
the address shown for such Holder on the books of the Company, or at such other
address as shall have been furnished to the Company by notice from such Holder.
All notices, requests and other communications required or permitted to be given
or delivered hereunder to the Company shall be in writing, and shall be
personally delivered (including courier or express service), or shall be sent by
first class mail, certified or registered mail, postage prepaid and addressed,
to the office of the Company at 16285 Park Ten Place, Suite 600, Houston, Texas
77084, Attention: Corporate Secretary, or at such other address as shall have
been furnished to the Holder of this Warrant or to the Holder of shares acquired
upon exercise of this Warrant by notice from the Company. Any such notice,
request, or other communication may be sent by telegram, facsimile or telex, but
shall in such case be subsequently confirmed by a writing personally delivered
or sent by first class mail or by certified or registered mail as provided
above. All notices, requests, and other communications shall be deemed to have
been given either at the time of the delivery thereof to (or the receipt by, in
the case of a telegram, facsimile or telex) the person entitled to receive such
notice at the address of such person for purposes of this Paragraph 9, or, if
mailed, at the completion of the third full business day following the time of
such mailing thereof to such address, as the case may be.
10. Governing Law. This Warrant shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware.
11. Net Issuable Exchange.
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(a) In addition to and without limiting the rights of the Holder under
the terms of this Warrant, the Holder shall have the right (the "Conversion
Right") to convert this Warrant or any portion thereof into shares of Common
Stock as provided in this Section 11 at any time or from time to time prior to
the Expiration Date. Upon exercise of the Conversion Right with respect to a
particular number of shares subject to this Warrant (the "Converted Warrant
Shares"), the Company shall deliver to the Holder, without payment by the Holder
of any exercise price or any cash or consideration other than the surrender of
the right to exercise this Warrant as to the Converted Warrant Shares, a number
of shares of Common Stock determined by multiplying the number of Converted
Warrant Shares by the following:
FMV - Exercise Price
---------------------
FMV
FMV shall be determined using the Market Price as of the Conversion
Date and Exercise Price shall be determined as of the close of business on the
Conversion Date (as defined below).
(b) The Conversion Right may be exercised by the Holder by surrendering
this Warrant Certificate at the principal office of the Company together with a
written statement specifying that the Holder thereby intends to exercise the
Conversion Right and indicating the number of shares subject to this Warrant
which are being surrendered (referred to in subsection (a) above as the
Converted Warrant Shares) in exercise of the Conversion Right. Such conversion
shall be effective upon receipt by the Company of this Warrant Certificate
together with the aforesaid written statement or on such later date as is
specified therein (the "Conversion Date"), but not later than the Expiration
Date. Certificates for the shares of Common Stock issuable upon exercise of the
Conversion Right and, in the case of a partial exercise, a new warrant
certificate evidencing the shares remaining subject to this Warrant shall be
issued as of the Conversion Date and shall be delivered to the Holder within 15
days following the Conversion Date.
12. Optional Redemption. Notwithstanding anything to the contrary
herein, within five (5) business days after the exercise of this Warrant by the
holder in accordance with Section 1 above, the Company shall have the right to
deliver to the holder in full satisfaction of all of its obligations pursuant to
the Warrant, cash, in an amount equal to the product of the Market Price on the
day of exercise and number of the Shares which would otherwise be delivered
pursuant to such exercise.
13. Miscellaneous.
(a) Amendments. This Warrant or any provision hereof may not be
changed, waived, or discharged, or terminated orally, but only by an instrument
in writing signed by the party (or any predecessor in interest thereof) against
which enforcement of the same is sought.
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(b) Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
(c) Successors and Assigns. This Warrant shall be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all the Company's assets.
(d) Limitation of Liability. In no event shall any direct or indirect
member, stockholder, officer, director, partner or other representative of
Holder or any of its affiliates be personally liable for any obligation of
Holder under this Agreement. In no event shall recourse with respect to the
obligations under this Agreement of Holder be had to the assets or business of
any person other than Holder.
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<PAGE> 27
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer under its corporate seal, attested by its duly
authorized officer, on this 19th day of August, 1999.
HARKEN ENERGY CORPORATION
By:
--------------------------------
[Seal] Name: Larry E. Cummings
Title: Vice President and Secretary
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<PAGE> 28
FORM OF SUBSCRIPTION
Dated:
----------, ----
To:
-------------------------------
The undersigned, pursuant to the provisions set forth in the within
Warrant Number ________ hereby agrees to purchase ______ shares of Common Stock
covered by such Warrant, and makes payment herewith in full therefor at the
price per share provided by such Warrant in cash or by certified or official
bank check in the amount of $_______________. Please issue a certificate of
certificates for such shares of Common Stock in the following name:
Name:
-------------------------------------
Address:
----------------------------------
----------------------------------
Signature:
--------------------------------
Title of Signing Officer of Agent (if any):
Note: The above signature should correspond exactly with the name on
the face of the within Warrant or with the name of the assignee
appearing in the assignment form.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said Holder covering the balance of the shares purchasable thereunder.
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