<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Harken Energy Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Harken Energy Corporation
- --------------------------------------------------------------------------------
(Name of Persons(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
--------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
HARKEN ENERGY CORPORATION
16285 PARK TEN PLACE, SUITE 600
HOUSTON, TEXAS 77084
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 22, 1999
Notice is hereby given that the Annual Meeting of Stockholders (the
"Annual Meeting") of Harken Energy Corporation, a Delaware corporation
("Harken"), will be held at the Hyatt Regency - Houston, 1200 Louisiana Street,
Houston, Texas 77002, on Tuesday, June 22, 1999, at 7:00 a.m., local time, for
the following purposes:
(1) To elect four Class C Directors of Harken to hold office in
accordance with Harken's Certificate of Incorporation until
the 2002 Annual Meeting of Stockholders and until their
respective successors shall be duly elected and qualified; and
(2) To transact such other business as may properly be brought
before the Annual Meeting or any adjournment or postponement
thereof.
The Board of Directors has fixed the close of business on April 23,
1999 as the date of record for determining the stockholders entitled to notice
of and to vote, either in person or by proxy, at the Annual Meeting and any
adjournment or postponement thereof.
Harken's Annual Report on Form 10-K, a Proxy Statement containing
information relating to the matters to be acted upon at the Annual Meeting and a
form of Proxy accompany this Notice.
You are cordially invited to attend the Annual Meeting. WHETHER OR NOT
YOU PLAN TO ATTEND, YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN YOUR PROXY
SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND IN ORDER
THAT THE PRESENCE OF A QUORUM MAY BE ASSURED. Your vote is important. The giving
of such proxy does not affect your right to revoke it later or vote your shares
in person if you should attend the Annual Meeting.
By Order of the Board of Directors
Larry E. Cummings
Secretary
Irving, Texas
April 27, 1999
<PAGE> 3
HARKEN ENERGY CORPORATION
16285 PARK TEN PLACE, SUITE 600
HOUSTON, TEXAS 77084
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 22, 1999
SOLICITATION OF PROXIES
The accompanying proxy is solicited on behalf of the Board of Directors
of Harken Energy Corporation, a Delaware corporation ("Harken"), in connection
with the Annual Meeting of Stockholders (the "Annual Meeting"), which will be
held at the Hyatt Regency - Houston, 1200 Louisiana Street, Houston, Texas
77002, on Tuesday, June 22, 1999, at 7:00 a.m., local time, and at any
adjournments or postponements thereof, for the purposes set forth in the
accompanying notice. This Proxy Statement and the accompanying Proxy will first
be mailed to stockholders of record on or about May 15, 1999.
RECORD DATE AND VOTING SECURITIES
The Board of Directors has fixed the close of business on April 23,
1999 as the Record Date (herein so called) for determining the holders of common
stock, $.01 par value per share, of Harken ("Common Stock") entitled to notice
of and to vote, either in person or by proxy, at the Annual Meeting. The shares
of Common Stock are the only shares of capital stock entitled to vote at the
Annual Meeting. On April 23, 1999, Harken had 133,560,830 shares of Common Stock
outstanding.
QUORUM AND VOTING
The presence, in person or represented by proxy, of the holders of a
majority of the outstanding shares of Common Stock entitled to vote is necessary
to constitute a quorum at the Annual Meeting. Abstentions and broker non-votes
are counted for purposes of determining whether a quorum is present. If a quorum
is not present or represented by proxy, the stockholders entitled to vote
thereat, present in person or represented by proxy, have the power to adjourn
the meeting from time to time, without notice other than an announcement at the
meeting until a quorum is present or represented. At any such adjourned meeting
at which a quorum is present or represented, any business may be transacted that
might have been transacted at the meeting as originally called.
In the election of Directors, each holder of Common Stock will be
entitled to cumulate his or her votes by voting the total number of shares of
Common Stock held by such stockholder at the close of business on April 23, 1999
multiplied by the number of Directors to be elected, as such stockholder may see
fit. Any holder of Common Stock who intends to cumulate his or her votes is
required to give written notice of such intention to the Secretary of Harken on
or before the day preceding the election at which such holder intends to
cumulate his or her votes. Notice may be given on the Proxy. All holders of
Common Stock may cumulate their votes if any holder has given such written
notice. Discretionary authority to cumulate votes is not being solicited. On any
matters other than the election of directors submitted to a vote of the
stockholders at the Annual Meeting or any adjournment thereof, each stockholder
will be entitled to one vote for each share of Common Stock owned of record by
such stockholder at the close of business on April 23, 1999.
Abstentions and broker non-votes will have no effect on the election of
nominees to the Board of Directors.
<PAGE> 4
ACTIONS TO BE TAKEN UNDER THE PROXY
Proxies which are properly executed and returned will be voted at the
meeting and any adjournment thereof in accordance with the instructions thereon.
Any proxy upon which no instructions have been indicated will be voted FOR
election of management's four Class C Director nominees.
Each of the nominees for election as directors has agreed to serve if
elected. Harken knows of no reason why any of the nominees for election as
directors would be unable to serve. Should any of the nominees be unable to
serve, all proxies returned to Harken will be voted in accordance with the best
judgement of the persons named as proxies except where a contrary instruction is
given.
Harken knows of no other matters, other than those stated above, to be
presented for consideration at the Annual Meeting. If, however, other matters
properly come before the meeting or any adjournments thereof, it is the
intention of the persons named in the accompanying proxy to vote such proxy in
accordance with their judgement on any such matters. The persons named in the
accompanying proxy may also, if it is deemed advisable, vote such proxy to
adjourn the meeting from time to time.
PROXY SOLICITATION
The expense of the solicitation of proxies will be borne by Harken.
Solicitation of proxies may be made in person or by mail, telephone or telegraph
by directors, executive officers and other employees of Harken. Harken will
request banking institutions, brokerage firms, custodians, nominees and
fiduciaries to forward solicitation material to the beneficial owners of Common
Stock held of record by such persons, and Harken will reimburse such entities
for their reasonable out-of-pocket expenses. Harken has retained the services of
ChaseMellon Shareholder Services to solicit proxies by mail, telephone,
telegraph or personal contact. The estimated cost of the professional
solicitation will be approximately $5,000 plus out-of-pocket expenses.
REVOCATION OF PROXY
Any stockholder returning the accompanying proxy may revoke such proxy
at any time prior to its exercise (a) by giving written notice to the Secretary
of Harken of such revocation; (b) by voting in person at the meeting; or (c) by
executing and delivering to the Secretary of Harken a later dated proxy.
2
<PAGE> 5
PROPOSAL ONE: ELECTION OF DIRECTORS
The number of directors constituting the full Board of Directors of
Harken has been established as ten (10) in accordance with Harken's Bylaws. The
Certificate of Incorporation provides that the Board of Directors be divided
into Classes A, B and C, with staggered terms of three (3) years each. Four
Class C Directors will be elected at the Annual Meeting to hold office until the
2002 Annual Meeting of Stockholders and until their respective successors are
duly elected and qualified.
NOMINEES FOR ELECTION AS CLASS C DIRECTORS:
<TABLE>
<CAPTION>
DIRECTOR
NAME, AGE AND BUSINESS EXPERIENCE SINCE
- --------------------------------------------------------------------------- --------
<S> <C>
DONALD W. RAYMOND (Age - 61) - Consultant to Harken from February 1993 to 1993
August 1995; Chairman, CFO and Treasurer of Chuska Resources Corporation
from 1988 to February 1993; President and Director of Sireen Oil, Inc. from
1990 to present.
RICHARD H. SCHROEDER (Age - 55) - Vice Chairman of Harken since March 1998; 1994
President of Harken from March 1994 to March 1998; President and owner of
RHS Management, a consulting firm, from November 1990 to March 1994;
President of Rosewood Resources, Inc. from January 1983 to November 1990.
STEPHEN C. VOSS (Age - 50) - Executive Vice President and Chief Operating 1997
Officer of Harken since September 1998, Senior Vice President of Harken
from 1990 to September 1998.
GARY B. WOOD, PH.D. (Age - 49) - Founder and Chief Executive Officer of 1995
Concorde Financial Corporation, a registered investment advisor from 1981
to the present; Founder and Chairman of OmniMed Corporation, a health care
and medical technology investment and management company from 1982 to the
present; Chairman of Positron Corporation, and President and Director of
Concorde Funds, Inc.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RE-ELECTION OF MESSRS.
RAYMOND, SCHROEDER, VOSS, AND WOOD TO THE BOARD OF DIRECTORS.
3
<PAGE> 6
DIRECTORS CONTINUING IN OFFICE:
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME, AGE AND BUSINESS EXPERIENCE SINCE EXPIRES
- ------------------------------------------------------------------------- -------- -------
<S> <C> <C>
MICHAEL M. AMEEN, JR. (Age - 75) - From 1989 to the present Mr. Ameen 1994 2001
has served as a part time consultant to Harken with regard to Middle
Eastern exploration projects; Independent Consultant on Middle East
Affairs for the past seven years; Director of America Near East
Refugee Aid (a charitable organization).
MICHAEL R. EISENSON (Age - 43) - From 1986 to the present, a Managing 1987 2001
Director and Chief Executive Officer of Charlesbank Capital Partners,
LLC, the successor to Harvard Private Capital Group, Inc., which
manages the private equity and real estate portfolios of the Harvard
University endowment fund. Director of ImmunoGen, Inc., a
biopharmaceutical company; Director of Playtex Products, Inc., a
consumer products company; Director of United Auto Group, Inc., an
auto dealership consolidator and retailer; Director of The WMF Group,
Ltd., an independent commercial mortgage banker; and Director of CCC
Information Services Group Inc., a computer software and data
processing company.
MIKEL D. FAULKNER (Age - 49) - Chairman of the Board of Harken since 1982 2000
February 1991; CEO of Harken since 1982, and President of Harken from
1982 until February 1993.
BRUCE N. HUFF (Age - 48) - President of Harken since March 1998 and 1996 2000
Chief Financial Officer since January 1999; Senior Vice President and
Chief Financial Officer of Harken from 1990 to March 1998.
GARY R. PETERSEN (Age - 52) - Managing Director of EnCap Investments 1997 2000
LC for the last five years; Director of Nuevo Energy Company and
Energy Capital Investment Company.
HOBART A. SMITH (Age - 62) - From June 1991 to the present, Mr. Smith 1997 2001
has served as a consultant to Smith International Inc., an oil field
service company; previously Mr. Smith served as Vice President
Customer Relations for Smith International, Inc.
</TABLE>
VOTE REQUIRED TO BE ELECTED AS A DIRECTOR
To be elected a Director, each nominee must receive the affirmative
vote of a plurality of the votes duly cast at the Annual Meeting.
DIRECTORS' MEETINGS AND COMMITTEES
During 1998, the Board of Directors held four meetings, which included
two regularly scheduled meetings and two special meetings. The Board of
Directors also acted by written consent seven times. The Board of Directors has
standing Audit, Compensation, Finance and Technology Committees. During 1998,
the Audit Committee, comprised of Messrs. Ameen, Wood and Smith, held two
meetings and reviewed the financial statements of Harken and received reports
and other communications from Harken's independent auditors. During 1998, the
Compensation Committee, comprised of Messrs. Raymond, Petersen and Ameen, held
three meetings, and acted by written consent once. The Compensation Committee is
responsible for selecting parties eligible for grants of stock options, for
making and setting terms for such grants and for setting compensation for the
executive officers of Harken and its subsidiaries. During 1998, the Finance
Committee, comprised of Messrs. Wood, Eisenson, Petersen, and Huff, held one
meeting. During 1998, the Technology Committee, comprised of Messrs. Smith,
Schroeder, Voss and Raymond, held one meeting.
4
<PAGE> 7
Harken does not have a Nominating Committee. Nominations for directors
of Harken are considered by the entire Board. Stockholders wishing to recommend
a candidate for consideration by the Board can do so in writing to the Secretary
of Harken at its corporate offices in Houston, Texas, giving the candidate's
name, biographical data and qualifications. Any such recommendation must be
accompanied by a written statement from the individual of his or her consent to
be named as a candidate and, if nominated and elected, to serve as a director.
During 1998, each current member of the Board of Directors (other than
Mr. Eisenson) attended or acted upon at least seventy-five percent (75%) of (i)
the meetings of the Board of Directors (held during the period during which he
was a Director), and (ii) the meetings of the committees on which he served
(held during the periods that he served on such committees).
COMPENSATION OF DIRECTORS
In 1998, each non-employee Director of Harken received an annual
retainer of $10,000 plus $2,500 for each committee on which the Director serves,
except for Mr. Eisenson, who is unable to accept personally such Director
compensation in accordance with the internal policies of Harvard Management
Company. Mr. Eisenson's director fees of $12,500 were paid directly to Harvard
Management Company. Non-employee Directors do not receive any additional fees
for meetings attended. In addition, each non-employee Director was granted
options to purchase 75,000 shares of Common Stock at an exercise price of $6.25
on January 5, 1998, and options to purchase 100,000 shares of Common Stock at an
exercise price of $3.6875 on August 26, 1998, except for Mr. Eisenson, whose
options were issued directly to Aeneas Venture Corporation. The exercise price
of all options granted in 1998 was equal to the market price of the Common Stock
on the date of grant.
CERTAIN MATTERS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
In July 1997, Gary R. Petersen was elected to the Board of Directors of
Harken. Mr. Petersen is also a Managing Director of EnCap Investments L.C.
("EnCap"). On May 19, 1998, pursuant to an Asset Purchase and Sale Agreement,
Harken purchased working interests in oil and gas properties located in southern
Louisiana from St. Martinville Partners, Ltd. and Bargo Energy Company. EnCap
has a significant equity interest in St. Martinville Partners. Harken issued an
aggregate of 2,716,483 shares of Common Stock to St. Martinville Partners, Ltd.
and Bargo Energy Company, which had an approximate value of $16,250,000 at the
time the transaction was consummated. Harken may be required to pay up to an
aggregate of $4,000,000 in additional consideration to St. Martinville Partners,
Ltd. and Bargo Energy Company upon the resolution of certain contingencies. The
amount of the additional consideration is currently being negotiated with St.
Martinville Partners, Ltd. and Bargo Energy Company, and it is payable at
Harken's option in the form of additional shares of Common Stock or cash. Harken
believes that the terms of the transaction were no less favorable to Harken than
those which could have been obtained from an unaffiliated party.
In the second half of 1997, Harken made loans to Richard H. Schroeder,
Bruce N. Huff, and Stephen C. Voss, each a Director and executive officer of
Harken, in the amount of $90,000, $50,000, and $80,000, respectively. During
1998, Harken made additional loans to Messrs. Schroeder and Voss, in the amount
of $160,000 and $15,000, respectively. Each loan is evidenced by a promissory
note which bears interest at the rate of 7 percent per annum and is due and
payable upon 30 days notice from Harken. Each of the promissory notes is secured
by options to purchase shares of Common Stock held by such officers and
Directors.
5
<PAGE> 8
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
compensation paid during fiscal years 1998, 1997 and 1996 to Harken's Chief
Executive Officer and Harken's four most highly compensated executive officers
other than the Chief Executive Officer (the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------------------- --------------------------------
Securities
Name and Principal Fiscal Other Annual Underlying All Other
Position Year Salary Bonus Compensation Options/SAR's(#) Compensation
- -------------------------- ------ -------- -------- ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mikel D. Faulkner 1998 $295,000 $200,000 $ 23,917(1) 350,000 --
Chairman and Chief 1997 $215,000 $130,000 $ 20,050 850,000 --
Executive Officer 1996 $170,000 $ 60,000 $186,175 550,000 --
Richard H. Schroeder 1998 $225,000 $120,000 $17,000(2) 205,000 --
Vice Chairman 1997 $204,000 $100,000 $15,285 500,000 --
1996 $170,000 $ 60,000 $ 9,875 350,000 --
Bruce N. Huff 1998 $225,000 $120,000 $21,327(3) 205,000 --
President and Chief 1997 $180,000 $ 75,000 7,962 500,000 --
Financial Officer 1996 $150,000 $ 27,000 $ 8,266 150,000 --
Stephen C. Voss 1998 $225,000 $120,000 $17,000(2) 205,000 --
Executive Vice President 1997 $180,000 $ 75,000 $14,853 500,000 --
1996 $110,667 $ 20,000 $ 9,921 150,000 --
Guillermo Sanchez 1998 $156,250 $ 40,000 $ 8,005(4) 100,000 --
President of Harken de 1997 $125,000 $ 25,000 $ 7,159 250,000 --
Colombia, Ltd. 1996 $100,000 $ 12,000 $ 4,750 125,000 --
</TABLE>
- -------------
(1) Includes $13,244 relating to use of a company car, $5,673 for unused sick
leave and vacation time, and $5,000 of 401(k) matching.
(2) Includes $12,000 related to a car allowance and $5,000 of 401(k) matching.
(3) Includes $12,000 related to a car allowance, $5,000 of 401(k) matching, and
$4,327 for unused sick leave and vacation time.
(4) Includes $5,000 of 401(k) matching and $3,005 for unused sick leave and
vacation time.
6
<PAGE> 9
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SAR's
Underlying Granted to Exercise Grant Date
Options/SAR's Employees in Basis Price Expiration Present
Name Granted Fiscal Year ($/sh) Date Value(1)
- -------------------- ------------- ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Mikel D Faulkner 350,000 11.8% $3.69 08/26/08 $700,000
Richard H. Schroeder 205,000 6.9% $3.69 08/26/08 $410,000
Bruce N. Huff 205,000 6.9% $3.69 08/26/08 $410,000
Stephen C. Voss 205,000 6.9% $3.69 08/26/08 $410,000
Guillermo Sanchez 100,000 3.3% $3.69 08/26/08 $200,000
</TABLE>
- ---------
(1) The grant date present value of these options was calculated based upon the
Black-Scholes valuation method which calculated such present value as $2.00
per option. This analysis took into consideration the grant date market
price of the Common Stock of $3.6875 per share on August 26, 1998, an
assumed four year life of such options and a risk free rate of return of
5.0%.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Number of Options/SAR's at Option/SAR's at
Shares/SAR's Fiscal Year End Fiscal Year End (1)
Acquired on Value ---------------------------- ---------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- -------------------- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mikel D. Faulkner --- --- 1,372,492 1,343,750 $ 473,524 $ 0
Richard H. Schroeder --- --- 906,250 823,750 $ 250,000 $ 0
Bruce N. Huff --- --- 550,000 680,000 $ 140,625 $ 0
Stephen C. Voss --- --- 540,000 680,000 $ 140,625 $ 0
Guillermo Sanchez --- --- 325,000 375,000 $ 15,625 $ 0
</TABLE>
- ----------
(1) The closing price for the Common Stock as reported on the American Stock
Exchange as of December 31, 1998 was $2.00. Value was calculated on the
basis of the difference between the option exercise price and such closing
price multiplied by the number of shares of Common Stock underlying the
option.
7
<PAGE> 10
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"),
which is composed of three independent non-employee directors, develops and
oversees Harken's executive compensation strategy. The strategy is implemented
through policies and programs designed to support the achievement of Harken's
business objectives and the enhancement of stockholder value. The Committee
reviews on an ongoing basis all aspects of executive compensation. The Committee
regularly reports to the Board of Directors on all items of compensation.
The Committee's executive compensation policies and programs support
the following objectives:
o To offer compensation opportunities that attract high quality
individuals to Harken, motivates them to perform at their highest
levels and rewards them for outstanding achievement.
o To align management's compensation with the annual and long-term
performance of Harken.
o To maintain a significant portion of management's total
compensation at risk, tied primarily to the creation of
stockholder value.
The basic elements of Harken's executive compensation strategy are:
Base salary. The Committee annually reviews each executive's base
salary. In establishing annual compensation for executive officers, the
Compensation Committee takes into consideration many factors in making a
determination of aggregate compensation. Such factors during 1998 included: (i)
the financial results of Harken during the prior year; (ii) the performance of
the Common Stock in the public market; (iii) prior compensation paid to such
executives over the past five years; (iv) compensation of executive officers
employed by companies comparable to Harken; (v) the achievements of management
in completing significant projects during the year; and (vi) management's
dedication and commitment in support of Harken. Although the Committee compares
the compensation paid to Harken's executive officers with compensation paid by
comparable companies, the Committee uses such comparison only as one factor in
determining compensation levels for Harken's executive officers and the
Committee does not set a target compensation level in comparison to the range of
compensation paid by comparable companies. The Committee exercises its judgement
based upon the above criteria and does not apply a specific formula or assign a
weight to each factor considered. Upon review of the factors described above,
the Committee concluded that the management exhibited great dedication and
commitment in support of Harken and made significant achievements in 1997
including the acquisition of oil and gas interest which substantially increased
the Company's domestic oil and gas reserve base, the significant progress toward
Harken's Colombian exploration efforts, and an increase in Harken's stock price
in 1997 of 133%. After reviewing the above described factors and taking into
account the recommendations of the Chief Executive Officer, the Committee set
salary levels for 1998. Cash compensation for 1998 was set, on average, 25%
higher than 1997 levels.
Cash bonuses. The Committee annually determines cash bonus levels based
upon the same factors considered when setting each executive's base salary. In
1998, cash bonuses ranged from 28% of base salary to 67% of base salary.
Long-term incentive compensation. Harken's long-term incentive
compensation consists of Harken's Stock Option Plans.
The Committee views the granting of stock options and restricted stock
awards as a significant method of aligning management's long-term interests with
those of the stockholders. The Committee encourages executives, individually and
collectively, to maintain a long-term ownership position in Harken's Common
Stock. The Committee determines awards to executives based on its evaluation of
criteria that include responsibilities, compensation, past and expected
contributions to the achievement of Harken's long-term performance goals, and
current practices of comparable companies. The exercise price of all stock
options granted in 1998 was at or above
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<PAGE> 11
the closing price of Common Stock on the date of grant and all stock options
vest incrementally over a four year period. Restricted stock grants may be used
selectively to attract and retain executives and to recognize outstanding
performance, however, no restricted stock awards were made in 1998.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Mikel D. Faulkner is the Chief Executive Officer and Chairman of
the Board of Harken. The Committee considered Harken's strong performance in
1997 in its annual review of Mr. Faulkner's compensation.
The Committee took note of the fact that Harken made significant
progress in 1997 towards implementing its overall business strategy.
Specifically, Harken completed several acquisitions of oil and gas properties in
1997 which increased Harken's domestic oil and gas reserve base, made
significant progress in its Colombian exploration efforts, and Harken's stock
price rose 133% in 1997.
The Committee increased Mr. Faulkner's base salary for 1998 37% over
his base salary for 1997, and a cash bonus of $200,000 was granted to Mr.
Faulkner. The Committee also granted Mr. Faulkner options to purchase 350,000
shares of Common Stock, which vest in equal increments over a four year period.
In granting options to Mr. Faulkner, the Committee took into consideration the
amount and terms of the options already held by Mr.
Faulkner.
FEDERAL INCOME TAX CONSIDERATIONS
In 1993, the Internal Revenue Code was amended to place a $1 million
cap on the deductibility on compensation paid to individual executives of
publicly held corporations. The Committee took this into account, however, upon
review of the available regulations and interpretations, decided that it would
not make the deductibility of Harken's compensation for federal income tax
purposes a criterion to be used in establishing compensation of the named
executives during the present review cycle. The Committee took into
consideration the belief that the current compensation levels of these
executives would not be subject to the cap. The Committee continues to recognize
that compensation should meet standards of reasonableness and necessity, which
have been part of the Internal Revenue Code for many years.
By: Donald W. Raymond
Gary R. Petersen
Michael M. Ameen, Jr.
This foregoing report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, except to the extent it shall be
specifically incorporated by reference; and shall not otherwise be deemed filed
under such Acts.
9
<PAGE> 12
PERFORMANCE OF THE COMMON STOCK
The following performance graph shall not be deemed incorporated by
reference by any general statement incorporating by reference the proxy
statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that Harken specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts.
The graph below compares the cumulative total stockholder return on the
Common Stock for the last five fiscal years with the cumulative total return on
the S&P 500 Index and the Dow Jones Secondary Oils Stock Index over the same
period (assuming the investment of $100 in the Common Stock, the S&P 500 Index
and the Dow Jones Secondary Oils Stock Index on December 31, 1993 and
reinvestment of all dividends).
COMPARISON OF CUMULATIVE SHAREHOLDER RETURN
DECEMBER 31, 1993 - DECEMBER 31, 1998
[GRAPH]
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------
1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Harken Energy Corp $100 $170 $140 $240 $560 $160
S&P 500 Index 100 101 139 171 229 294
Dow Jones Secondary Oils
Stock Index 100 97 112 138 147 107
</TABLE>
10
<PAGE> 13
OWNERSHIP OF COMMON STOCK
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding each person who is
known by Harken to beneficially own five percent (5%) or more of the outstanding
shares of Common Stock as of April 23, 1999. Unless otherwise indicated, such
persons have sole voting and investment power with respect to such shares and
all such shares are owned beneficially and of record by the person indicated.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASS
------------------------------------ -------------------- ----------------
<S> <C> <C>
EnCap Investments L.C. 15,832,217 (1) 11.85%
1100 Louisiana Street
Suite 3150
Houston, Texas 77002
Ryback Management Corporation 11,017,700 (2) 8.22%
7711 Carondelet Avenue
Box 16900
St. Louis, Missouri 63105
Abdullah Taha Bakhsh 7,124,464 (3) 5.31%
c/o Traco International, N.V.
P. O. Box 459
Jeddah, Saudi Arabia
</TABLE>
- ------------
(1) Includes an aggregate of 15,632,217 shares of Common Stock deemed to be
beneficially owned by EnCap Energy Capital Fund III, L.P., EnCap Energy
Capital Fund III-B, L.P., BOCP Energy Partners, L.P., and Energy
Capital Investment Company PLC, each of which are affiliates of EnCap
Investments L.C. The EnCap affiliates own a net profits interest in
three prospects of Harken de Colombia, Ltd., a wholly-owned subsidiary
of Harken. The EnCap affiliates have the right to convert the net
profits interest into shares of Common Stock, at a conversion price
based upon the market price of the Common Stock at the time of
conversion. In addition, Harken has the right to pay cash instead of
issuing Common Stock upon any conversion of the net profits interest.
The exact number of shares of Common Stock which may be acquired if the
net profits interest is converted into Common Stock, if any, is not
currently known. The number of shares deemed to be beneficially held by
the EnCap affiliates was calculated by assuming conversion of the net
profits interest into Common Stock at a conversion price equal to
$2.00, the closing sales price of the Common Stock on the American
Stock Exchange on April 23, 1999.
Also includes 75,169 shares issuable upon exercise of warrants held by
EnCap Equity 1994 Limited Partnership, 24,831 shares issuable upon
exercise of warrants held by Energy Capital Investment Company PLC, and
100,000 shares issuable upon exercise of warrants held by EnCap
Investments L.C, each of which are affiliates of EnCap.
(2) Includes 7,020,000 shares of Common Stock held by the Lindner Dividend
Fund and 3,997,700 shares of Common Stock managed by Ryback Management
Corporation. The basis for certain of this information is Amendment No.
3 to Schedule 13G filed with the Securities and Exchange Commission
(the "Commission") on January 28, 1999 by Ryback Management
Corporation.
(3) Includes shares of Common Stock owned of record by Traco International,
NV ("Traco") and Atherstone Corporation NV ("Atherstone"). Traco is
wholly-owned by Mr. Bakhsh, and Atherstone is indirectly owned by Mr.
Bakhsh. The basis for certain of this information is Amendment 8 to
Schedule 13D filed with the Commission on August 7, 1992 by Abdullah
Taha Bakhsh.
11
<PAGE> 14
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the number of
shares of Common Stock beneficially owned by each Director, each named executive
officer, and all of Harken's Directors and executive officers as a group as of
April 23, 1999.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
BENEFICIALLY OF
NAME OWNED CLASS
--------------------------------- ---------------- -------
<S> <C> <C>
Michael M. Ameen, Jr. 51,000 (1) (2)
Michael R. Eisenson 3,799,264 (3) 2.84%
Mikel D. Faulkner 1,461,079 (4) 1.08%
Bruce N. Huff 575,000 (5) (2)
Gary R. Petersen 30,000 (6) (2)
Donald W. Raymond 153,750 (7) (2)
Guillermo Sanchez 350,000 (5) (2)
Richard H. Schroeder 975,000 (5) (2)
Hobart A. Smith 80,950 (7) (2)
Stephen C. Voss 565,000 (5) (2)
Gary B. Wood 213,231 (8) (2)
All Directors and Executive 8,682,513 (9) 6.29%
Officers as a Group (16 Persons)
</TABLE>
- --------------------------
(1) Includes 30,000 shares issuable upon exercise of currently exercisable
options issued by Harken.
(2) Less than one percent (1%).
(3) Includes 3,780,514 shares held by Aeneas Venture Corporation ("Aeneas")
and 18,750 shares issuable upon exercise of options held by Aeneas
which are currently exercisable. Although Mr. Eisenson has no direct
pecuniary interest in the shares held by Aeneas, Mr. Eisenson may be
deemed to be the beneficial owner of such shares as a result of his
position as a Managing Director and Chief Executive Officer of
Charlesbank Capital Partners, LLC, the investment advisor for Aeneas.
(4) Includes 1,453,742 shares issuable upon exercise of currently
exercisable options issued by Harken.
(5) Represents shares issuable upon exercise of currently exercisable
options issued by Harken.
(6) Includes 25,000 shares issuable upon exercise of currently exercisable
options issued by Harken. In addition, Mr. Petersen is a Managing
Director of EnCap. EnCap is a significant stockholder of Harken. See
"Security Ownership of Certain Beneficial Owners." Mr. Petersen
disclaims beneficial ownership of the shares beneficially owned by
EnCap.
(7) Includes 31,250 shares issuable upon exercise of currently exercisable
options issued by Harken.
(8) Includes 48,588 shares owned by Concorde Financial Corporation which is
90% owned by Dr. Wood, 62,946 shares owned by Partners Trust, a trust
established for the benefit of Dr. Wood's children, 5000 shares held by
J&L Trust, of which Dr. Wood is the primary beneficiary, 5000 shares
held by Wood Management Trust, of which Dr. Wood is a potential
beneficiary, and 33,750 shares issuable upon exercise of currently
exercisable options issued by Harken.
(9) Includes 4,485,306 shares issuable upon exercise of currently
exercisable options issued by Harken.
12
<PAGE> 15
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has served as independent public accountants for
Harken since fiscal year 1979. A representative of Arthur Andersen LLP will be
invited to attend the Annual Meeting and to make a statement if such
representative desires to do so, and, if in attendance, will be available to
respond to appropriate questions.
Harken has not selected independent public accountants for fiscal year
1999. Selection of independent public accountants for fiscal year 1999 will be
made by the Board of Directors, based upon the recommendations of the Audit
Committee.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Harken's Directors and executive officers, and persons
who own more than ten percent of a registered class of Harken's equity
securities, to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of Harken. Directors, executive officers and greater
than ten-percent stockholders are required by SEC regulations to furnish Harken
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms and written
representations from certain reporting persons, Harken believes that all filing
requirements applicable to its Directors, executive officers and persons who own
more than 10% of a registered class of Harken's equity securities have been
complied with during 1998.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Any stockholder desiring to present a proposal to the stockholders at
the 2000 Annual Meeting of Stockholders, which currently is expected to be
scheduled in June 2000, must transmit such proposal to Harken so that it is
received by Harken at its principal executive offices to the attention of the
Secretary of Harken on or before January 3, 2000. All such proposals should be
in compliance with applicable Securities and Exchange Commission regulations.
By Order of the Board of Directors
Larry E. Cummings,
Secretary
Irving, Texas
April 27, 1999
13
<PAGE> 16
HARKEN ENERGY CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 22, 1999
The undersigned hereby (1) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Harken Energy Corporation ("Harken") to be held June
22, 1999, and (2) constitutes and appoints Mikel D. Faulkner, Bruce N. Huff and
Larry E. Cummings, and each of them, attorneys and proxies of the undersigned,
with full power of substitution to each, for and in the name, place, and stead
of the undersigned, to vote, and to act in accordance with the instructions set
forth below with respect to, all of the shares of Common Stock of Harken
standing in the name of the undersigned or with respect to which the undersigned
is entitled to vote and act at that meeting and at any meetings to which that
meeting is adjourned. In their discretion, the proxies may vote upon such other
matters as may properly come before the meeting.
PROPOSAL ONE: Election of four Class C directors of Harken, to hold
office in accordance with Harken's Certificate of Incorporation and
Bylaws until the 2002 Annual Meeting of Stockholders.
Nominees: Donald W. Raymond, Richard H. Schroeder, Stephen C. Voss and
Gary B Wood.
[ ] FOR each of the nominees listed [ ] WITHHOLD AUTHORITY to vote
above, except marked to the for each of the nominees
contrary below. listed above.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY ONE NOMINEE, WRITE
THE NAME OF SUCH NOMINEE IN THE SPACE PROVIDED BELOW.)
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<PAGE> 17
You are encouraged to specify your choices by marking the appropriate
boxes (SEE REVERSE SIDE), but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. This Proxy will be
voted as specified. If no specification is made this Proxy will be voted FOR the
proposal. Your shares cannot be voted unless you sign and return this card.
- ----------------------------- --------------------------- --------------
(Signature) (Signature) (Date)
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON, JOINT OWNERS SHOULD EACH
SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH.
