| ·
|
the
payment of dividends, if any, on our common stock, and amendments
to our
certificate of incorporation and bylaws.
|
a material adverse effect on our financial
condition, results of operations and quantities of reserves recoverable on
an
economic basis. Any significant decline in prices of oil or gas could have
a
material adverse effect on our financial condition and results of operations.
Recently, the price of oil and natural gas has been volatile. For example,
during 2003, the price for a bbl of oil ranged from a high of $35.60 to a low
of
$28.07 and the price for a Mcf of gas ranged from a high of $9.13 to a low
of
$4.43. During 2004, based on NYMEX pricing, the price for a bbl of oil ranged
from a high of $55.46 to a low of $32.48 and the price for a Mcf of gas ranged
from a high of $8.725 to a low of $4.570.
6
Lyford’s
concentration of ownership may also have the effect of delaying, deferring
or
preventing a future change of control.
Risks
associated with market conditions:
Our
stock price is volatile and the value of any investment in our common stock
may
fluctuate.
Our
stock
price has been and is highly volatile, and we believe this volatility is due
to,
among other things:
| ·
|
the
results of our drilling,
|
| ·
|
current
expectations of our
future financial performance,
|
| ·
|
commodity
prices of oil and natural gas,
|
| ·
|
the
volatility of the market in
general.
|
For
example, the common stock price has fluctuated from a high of $1.30 per share
to
a low of $0.16 per share over the last three years ending December 31, 2004.
This volatility may affect the market value of our common stock in the future.
Future
sales of our common stock pursuant to outstanding registration statements may
affect the market price of our common stock.
There
are
currently several registration statements with respect to our common stock
that
are effective, pursuant to which certain of our stockholders may sell shares
of
common stock. Any such sale of stock may also decrease the market price of
our
common stock.
Any
conversions or redemptions of our 5% Notes, Series G1 Preferred, Series G2
Preferred, Series G4 Preferred, Series J Preferred and Series M Preferred or
exercise of warrants issued to holders of our Series L and Series M Preferred
Stock, involving a large issuance of shares of our common stock could result
in
a dilution of stockholders’ ownership percentage of our common stock and may
result in a decrease in the market value of our common stock. In addition,
we
may elect to issue a significant number of additional shares of common stock
for
financing or other purposes, which could result in a decrease in the market
price of our common stock.
We
have issued shares of preferred stock with greater rights than our common stock
and may issue additional shares of preferred stock in the future.
We
are
permitted under our charter to issue up to 10 million shares of preferred stock.
We can issue shares of our preferred stock in one or more series and can set
the
terms of the preferred stock without seeking any further approval from our
common stockholders. Any preferred stock that we issue may rank ahead of our
common stock in terms of dividend priority or liquidation premiums and may
have
greater voting rights than our common stock. At June 30, 2005, we had
outstanding 13,925 shares of Series G1 Preferred, 2,000 shares of Series G2
Preferred and 77,517 shares of Series G4 Preferred, 50,000 shares of Series
J
Preferred and 50,000 shares of Series M Preferred. These shares of preferred
stock have rights senior to our common stock with respect to dividends and
liquidation. In addition, such preferred stock may be converted into shares
of
common stock, which could dilute the value of common stock to current
stockholders and could adversely affect the market price of our common stock.
At
June 30, 2005, each share of Series G1 Preferred, Series G2 Preferred, Series
G4
Preferred, Series J Preferred and Series M Preferred, may be converted into
shares of common stock at conversion prices of $12.50, $3.00, $2.00, $0.85,
and
$0.59 per share of common stock, respectively, for each $100.00 liquidation
value of a share of such preferred stock, plus the amount of any accrued and
unpaid dividends.
Our
domestic operating strategic plan includes the acquisition of additional
reserves through business combinations.
Our
domestic operations have shifted from primarily an exploration and development
focus to an acquisition and exploitation growth strategy. We are seeking
acquisition opportunities to expand our domestic operations and increase our
oil
and gas reserves in North America. We may not be able to consummate future
acquisitions on favorable terms. Additionally, any such future transactions
may
not achieve favorable financial results. Inherent in any future acquisitions
are
certain risks, such as the difficulty of assimilating operations and facilities
of the acquired business, which could have a material adverse effect on our
operating results, particularly during the period immediately following such
acquisition.
Future
business combinations may also involve the issuance of shares of our common
stock, which could have a dilutive effect on stockholders’ percentage ownership.
We may not have a sufficient number of authorized shares to issue in any such
business combinations and we may need to obtain stockholder approval to
authorize additional shares for issuance. Further, the use of shares in business
combinations will reduce the number of shares available for the redemption
of
existing convertible notes and preferred stock.
In
addition, acquisitions may require substantial financial expenditures that
will
need to be financed through cash flow from operations or future debt and our
equity offerings, and we may not be able to acquire companies or oil and gas
properties using its equity as currency. In the case of cash acquisitions,
we
may not be able to generate sufficient cash flow from operations or obtain
debt
or equity financing sufficient to fund future acquisitions of reserves.
Risks
associated with our operations:
Oil
and gas price fluctuations in the market may adversely affect the results of
our
operations.
The
results of our operations are highly dependent upon the prices received for
our
oil and natural gas production. Substantially all of our sales of oil and
natural gas are made in the spot market, or pursuant to contracts based on
spot
market prices, and not pursuant to long-term, fixed-price contracts.
Accordingly, the prices received for our oil and natural gas production are
dependent upon numerous factors beyond our control. These factors include the
level of consumer product demand, governmental regulations and taxes, the price
and availability of alternative fuels, the level of foreign imports of oil
and
natural gas and the overall economic environment. Significant declines in prices
for oil and natural gas could have a material adverse effect on our financial
condition, results of operations and quantities of reserves recoverable on
an
economic basis. Any significant decline in prices of oil or gas could have
a
material adverse effect on our financial condition and results of operations.
Recently, the price of oil and natural gas has been volatile. For example,
during 2003, the price for a bbl of oil ranged from a high of $35.60 to a low
of
$28.07 and the price for a Mcf of gas ranged from a high of $9.13 to a low
of
$4.43. During 2004, based on NYMEX pricing, the price for a bbl of oil ranged
from a high of $55.46 to a low of $32.48 and the price for a Mcf of gas ranged
from a high of $8.725 to a low of $4.570.
Our
operations require significant expenditures of capital that may not be
recovered.
We
require significant expenditures of capital in order to locate and acquire
producing properties and to drill exploratory and exploitation wells. In
conducting exploration, exploitation and development activities from a
particular well, the presence of unanticipated pressure or irregularities in
formations, miscalculations or accidents may cause our exploration,
exploitation, development and production activities to be unsuccessful,
potentially resulting in abandoning the well. This could result in a total
loss
of our investment. In addition, the cost and timing of drilling, completing
and
operating wells is difficult to predict.
The
oil and gas we produce may not be readily marketable at the time of
production.
Crude
oil, natural gas, condensate and other oil and gas products are generally sold
to other oil and gas companies, government agencies and other industries. The
availability of ready markets for oil and gas that we might discover and the
prices obtained for such oil and gas depend on many factors beyond our control,
including:
| ·
|
the
extent of local production and imports
of
oil and gas,
|
| ·
|
the
proximity and capacity of pipelines and other transportation facilities,
|
| · |
Our
operations require significant expenditures of capital that may not be
recovered.
We
require significant expenditures of capital in order to locate and acquire
producing properties and to drill exploratory and exploitation wells. In
conducting exploration, exploitation and development activities from a
particular well, the presence of unanticipated pressure or irregularities in
formations, miscalculations or accidents may cause our exploration,
exploitation, development and production activities to be unsuccessful,
potentially resulting in abandoning the well. This could result in a total
loss
of our investment. In addition, the cost and timing of drilling, completing
and
operating wells is difficult to predict.
The
oil and gas we produce may not be readily marketable at the time of
production.
Crude
oil, natural gas, condensate and other oil and gas products are generally sold
to other oil and gas companies, government agencies and other industries. The
availability of ready markets for oil and gas that we might discover and the
prices obtained for such oil and gas depend on many factors beyond our control,
including:
| ·
|
the
extent of local production and imports
of
oil and gas,
|
| ·
|
the
proximity and capacity of pipelines and other transportation facilities,
|
| · |
fluctuating
demand for oil and gas,
|
| ·
|
the
marketing of competitive fuels, and
|
| ·
|
the
effects of governmental regulation of oil and gas production
and sales.
|
Natural
gas associated with oil production is often not marketable due to demand or
transportation limitations and is often flared at the producing well site.
Pipeline facilities do not exist in certain areas of exploration and, therefore,
any actual sales of discovered oil and gas might be delayed for extended periods
until such facilities are constructed.
We
may suffer losses through futures trading.
Through
our investment in International Business Associates, Ltd., we are investing
capital in the trading of energy futures contracts. The results of these
investments can be significantly impacted by factors such as the volatility
of
the relationship between the value of futures contracts and the cash prices
of
the underlying commodity, counterparty contract defaults, and general volatility
of the capital markets. The changes in the market value of such futures
contracts may fluctuate significantly from time to time, and gains or losses
on
any particular futures contract may contribute to fluctuations in our quarterly
results of operations.
We
may encounter operating hazards that may result in substantial losses.
fluctuating
demand for oil and gas,
|
| ·
|
the
marketing of competitive fuels, and
|
| ·
|
the
effects of governmental regulation of oil and gas production
and sales.
|
Natural
gas associated with oil production is often not marketable due to demand or
transportation limitations and is often flared at the producing well site.
Pipeline facilities do not exist in certain areas of exploration and, therefore,
any actual sales of discovered oil and gas might be delayed for extended periods
until such facilities are constructed.
We
may suffer losses through futures trading.
Through
our investment in International Business Associates, Ltd., we are investing
capital in the trading of energy futures contracts. The results of these
investments can be significantly impacted by factors such as the volatility
of
the relationship between the value of futures contracts and the cash prices
of
the underlying commodity, counterparty contract defaults, and general volatility
of the capital markets. The changes in the market value of such futures
contracts may fluctuate significantly from time to time, and gains or losses
on
any particular futures contract may contribute to fluctuations in our quarterly
results of operations.
We
may encounter operating hazards that may result in substantial losses.
We
are
subject to operating hazards normally associated with the exploration and
production of oil and gas, including blowouts, explosions, oil spills,
cratering, pollution, earthquakes, hurricanes, labor disruptions and fires.
The
occurrence of any such operating hazards could result in substantial losses
to
us due to injury or loss of life and damage to or destruction of oil and gas
wells, formations, production facilities or other properties. Our
operations in the Gulf Coast were affected by Hurricane Katrina, and to a lesser
extent, Hurricane Rita, and we are currently assessing their impact.
We
anticipate an increase in operating costs as a result of those hurricanes.
See
"Summary — Recent Developments."
We
do not maintain full insurance coverage for all matters that may adversely
affect our operations, including war, terrorism, nuclear reactions, government
fines, treatment of waste, blowout expenses and business interruptions. Losses
and liabilities arising from uninsured or underinsured events could reduce
our
revenues or increase our costs. There can be no assurance that any insurance
will be adequate to cover losses or liabilities associated with operational
hazards. We cannot predict the continued availability of insurance, or its
availability at premium levels that justify its purchase.
7
; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
are
subject to operating hazards normally associated with the exploration and
production of oil and gas, including blowouts, explosions, oil spills,
cratering, pollution, earthquakes, hurricanes, labor disruptions and fires.
The
occurrence of any such operating hazards could result in substantial losses
to
us due to injury or loss of life and damage to or destruction of oil and gas
wells, formations, production facilities or other properties. Our
operations in the Gulf Coast were affected by Hurricane Katrina, and to a lesser
extent, Hurricane Rita, and we are currently assessing their impact.
We
anticipate an increase in operating costs as a result of those hurricanes.
See
"Summary — Recent Developments."
We
do not maintain full insurance coverage for all matters that may adversely
affect our operations, including war, terrorism, nuclear reactions, government
fines, treatment of waste, blowout expenses and business interruptions. Losses
and liabilities arising from uninsured or underinsured events could reduce
our
revenues or increase our costs. There can be no assurance that any insurance
will be adequate to cover losses or liabilities associated with operational
hazards. We cannot predict the continued availability of insurance, or its
availability at premium levels that justify its purchase.
Drilling
oil and gas wells particularly in certain regions of the United States and
foreign countries could be hindered by hurricanes, earthquakes and other
weather-related operating risks.
Our
operations in the Texas and Louisiana Gulf Coast area and in Colombia, Peru
and
Panama are subject to risks from hurricanes and other natural disasters. Damage
caused by hurricanes, earthquakes or other operating hazards could result in
substantial losses to us. For example, during 2004 our domestic operations
were
affected by Hurricane Ivan resulting in reduced oil and gas volumes in the
fourth quarter of 2004.
We
face strong competition from larger oil and gas companies, which could result
in
adverse effects on our business.
The
exploration, exploitation and production business is highly competitive. Many
of
our competitors have substantially larger financial resources, staffs and
facilities. Our competitors in the United States include numerous major oil
and
gas exploration and production companies and in Colombia, Peru and Panama
include such major oil and gas companies as BP Amoco, Exxon/Mobil, Texaco/Shell
and Conoco/Phillips. These major oil and gas companies are often better
positioned to obtain the rights to exploratory acreage for which we compete.
Our
operations are subject to various litigation that could have an adverse effect
on our business.
From
time
to time our subsidiaries are defendants in various litigation matters. The
nature of our and our subsidiaries’ operations expose us to further possible
litigation claims in the future.
There
is
risk that any matter in litigation could be adversely decided against us or
our
subsidiaries, regardless of our belief, opinion and position, which could have
a
material adverse effect on our financial condition and results of operations.
Litigation is highly costly and the costs associated with defending litigation
could also have a material adverse effect on our financial condition.
Compliance
with, or breach of, environmental laws can be costly and could limit our
operations.
Our
operations are subject to numerous and frequently changing laws and regulations
governing the discharge of materials into the environment or otherwise relating
to environmental protection. We own or lease, and have in the past owned or
leased, properties that have been used for the exploration and production of
oil
and gas and these properties and the wastes disposed on these properties may
be
subject to the Comprehensive Environmental Response, Compensation and Liability
Act, the Oil Pollution Act of 1990, the Resource Conservation and Recovery
Act,
the Federal Water Pollution Control Act and analogous state laws. Under such
laws, we could be required to remove or remediate previously released wastes
or
property contamination. Laws and regulations protecting the environment have
generally become more stringent and, may in some cases, impose “strict
liability” for environmental damage. Strict liability means that we may be held
liable for damage without regard to whether we were negligent or otherwise
at
fault. Environmental laws and regulations may expose us to liability for the
conduct of or conditions caused by others or for acts that were in compliance
with all applicable laws at the time they were performed. Failure to comply
with
these laws and regulations may result in
the
imposition of administrative, civil and criminal penalties.
Drilling
oil and gas wells particularly in certain regions of the United States and
foreign countries could be hindered by hurricanes, earthquakes and other
weather-related operating risks.
Our
operations in the Texas and Louisiana Gulf Coast area and in Colombia, Peru
and
Panama are subject to risks from hurricanes and other natural disasters. Damage
caused by hurricanes, earthquakes or other operating hazards could result in
substantial losses to us. For example, during 2004 our domestic operations
were
affected by Hurricane Ivan resulting in reduced oil and gas volumes in the
fourth quarter of 2004.
We
face strong competition from larger oil and gas companies, which could result
in
adverse effects on our business.
The
exploration, exploitation and production business is highly competitive. Many
of
our competitors have substantially larger financial resources, staffs and
facilities. Our competitors in the United States include numerous major oil
and
gas exploration and production companies and in Colombia, Peru and Panama
include such major oil and gas companiesY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">Although
we believe that our operations are in substantial compliance with existing
requirements of governmental bodies, our ability to conduct continued operations
is subject to satisfying applicable regulatory and permitting controls. Our
current permits and authorizations and ability to get future permits and
authorizations, particularly in foreign countries, may be susceptible, on a
going forward basis, to increased scrutiny, greater complexity resulting in
increased costs, or delays in receiving appropriate authorizations. In
particular, we have experienced and may continue to experience delays in
obtaining permits and authorization in Colombia necessary for our operations.
We
are required to obtain an environmental permit or approval from the governments
in Colombia, Peru and Panama prior to conducting seismic operations, drilling
a
well or constructing a pipeline in such foreign locations. Our operations in
foreign countries have been delayed in the past and could be delayed in the
future through the process of obtaining an environmental permit. Compliance
as BP Amoco, Exxon/Mobil, Texaco/Shell
and Conoco/Phillips. These major oil and gas companies are often better
positioned to obtain the rights to exploratory acreage for which we compete.
Our
operations are subject to various litigation that could have an adverse effect
on our business.
From
time
to time our subsidiaries are defendants in various litigation matters. The
nature of our and our subsidiaries’ operations expose us to further possible
litigation claims in the future.
There
is
risk that any matter in litigation could be adversely decided against us or
our
subsidiaries, regardless of our belief, opinion and position, which could have
a
material adverse effect on our financial condition and results of operations.
Litigation is highly costly and the costs associated with defending litigation
could also have a material adverse effect on our financial condition.
Compliance
with, or breach of, environmental laws can be costly and could limit our
operations.
Our
foreign operations involve substantial costs and are subject to certain risks
because the oil and gas industries in such countries are less developed.
The
oil
and gas industries in Colombia, Peru and Panama are not as developed as the
oil
and gas industry in the United States. As a result, our drilling and development
operations in many instances take longer to complete and often cost more than
similar operations in the United States. The availability of technical
expertise, specific equipment and supplies is more limited in Colombia, Peru
and
Panama than in the United States. We expect that such factors will continue
to
subject our international operations to economic and operating risks not
experienced in our domestic operations. We follow the full cost method of
accounting for exploration and development of oil and gas reserves in which
all
of our acquisition, exploration and development costs are capitalized. Costs
related to the acquisition, holding and initial exploration of oil and gas
associated with our contracts in countries with no proved reserves are initially
capitalized, including internal costs directly identified with acquisition,
exploration and development activities. If we abandon all exploration efforts
in
a country where no proved reserves are assigned, all acquisition and exploration
costs associated with the country are expensed. From time to time, we make
assessments as to whether our investment within a country is impaired and
whether exploration activities within a country will be abandoned based on
our
analysis of drilling results, seismic data and other information we believe
to
be relevant. Due to the unpredictable nature of exploration drilling activities,
the amount and timing of impairment expenses are difficult to predict.
If
we fail to comply with the terms of certain contracts related to our foreign
operations, we could lose our rights under each of those contracts.
The
terms
of each of the Colombian Association and Exploration and Production Contracts,
the Peruvian Exploration and Development Concession Agreement and the
anticipated Panamanian Concession Contract require that we perform certain
activities, such as seismic interpretations and the drilling of required wells,
in accordance with thoseY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
operations are subject to numerous and frequently changing laws and regulations
governing the discharge of materials into the environment or otherwise relating
to environmental protection. We own or lease, and have in the past owned or
leased, properties that have been used for the exploration and production of
oil
and gas and these properties and the wastes disposed on these properties may
be
subject to the Comprehensive Environmental Response, Compensation and Liability
Act, the Oil Pollution Act of 1990, the Resource Conservation and Recovery
Act,
the Federal Water Pollution Control Act and analogous state laws. Under such
laws, we could be required to remove or remediate previously released wastes
or
property contamination. Laws and regulations protecting the environment have
generally become more stringent and, may in some cases, impose “strict
liability” for environmental damage. Strict liability means that we may be held
liable for damage without regard to whether we were negligent or otherwise
at
fault. Environmental laws and regulations may expose us to liability for the
conduct of or conditions caused by others or for acts that were in compliance
with all applicable laws at the time they were performed. Failure to comply
with
these laws and regulations may result in
the
imposition of administrative, civil and criminal penalties.
Although
we believe that our operations are in substantial compliance with existing
requirements of governmental bodies, our ability to conduct continued operations
is subject to satisfying applicable regulatory and permitting controls. Our
current permits and authorizations and ability to get future permits and
authorizations, particularly in foreign countries, may be susceptible, on a
going forward basis, to increased scrutiny, greater complexity resulting in
increased costs, or delays in receiving appropriate authorizations. In
particular, we have experienced and may continue to experience delays in
obtaining permits and authorization in Colombia necessary for our operations.
We
are required to obtain an environmental permit or approval from the governments
in Colombia, Peru and Panama prior to conducting seismic operations, drilling
a
well or constructing a pipeline in such foreign locations. Our operations in
foreign countries have been delayed in the past and could be delayed in the
future through the process of obtaining an environmental permit. Compliance
with
these laws and regulations may increase our costs of operations, as well contracts and agreements. Our failure to timely perform
those activities as required could result in the loss of our rights under a
particular contract, which would likely result in a significant loss to us.
As
of August 1, 2005, we were in compliance with the requirements of each of the
existing Association and Concession Contracts.
We
require significant additional financing for our foreign operations, which
financing may not be available.
We
anticipate that full development of our existing and future oil and gas
discoveries and prospects in Colombia, Peru and Panama may take several years
and require significant additional capital expenditures. If we are unable to
timely obtain adequate funds to finance these investments, our ability to
develop oil and gas reserves in these countries may be severely limited or
substantially delayed. Such limitations or delay would likely result in
substantial losses.
Our
foreign operations involve substantial costs and are subject to certain risks
because the oil and gas industries in such countries are less developed.
The
oil
and gas industries in Colombia, Peru and Panama are not as developed as the
oil
and gas industry in the United States. As a result, our drilling and development
operations in many instances take longer to complete and often cost more than
similar operations in the United States. The availability of technical
expertise, specific equipment and supplies is more limited in Colombia, Peru
and
Panama than in the United States. We expect that such factors will continue
to
subject our international operations to economic and operating risks not
experienced in our domestic operations. We follow the full cost method of
accounting for exploration and development of oil and gas reserves in which
all
of our acquisition, exploration and development costs are capitalized. Costs
related to the acquisition, holding and initial exploration of oil and gas
associated with our contracts in countries with no proved reserves are initially
capitalized, including internal costs directly identified with acquisition,
exploration and development activities. If we abandon all exploration efforts
in
a country where no proved reserves are assigned, all acquisition and exploration
costs associated with the country are expensed. From time to time, we make
assessments as to whether our investment within a country is impaired and
whether exploration activities within a country will be abandoned based on
our
analysis of drilling results, seismic data and other information we believe
to
be relevant. Due to the unpredictable nature of exploration drilling activities,
the amount and timing of impairment expenses are difficult to predict.
If
we fail to comply with the terms of certain contracts related to our foreign
operations, we could lose our rights under each of those contracts.
The
terms
of each of the Colombian Association and Exploration and Production Contracts,
the Peruvian Exploration and Development Concession Agreement and the
anticipated Panamanian Concession Contract require that we perform certain
activities, such as seismic interpretations and the drilling of required wells,
in accordance with those contracts and agreements. Our failure to timely perform
those activities as required could result in the loss of our rights under a
particular contract, which would likely result in a significant loss to us.
As
of August 1, 2005, we were in compliance with the requirements of each of the
existing Association and Concession Contracts.
We
require significant additional financing for our foreign operations, which
financing may not be available.
We
anticipate that full development of our existing and future oil and gas
discoveries and prospects in Colombia, Peru and Panama may take several years
and require significant additional capital expenditures. If we are unable to
timely obtain adequate funds to finance these investments, our ability to
develop oil and gas reserves in these countries may be severely limited or
substantially delayed. Such limitations or delay would likely result in
substantial losses.
.25; MARGIN-RIGHT: 0pt" align="justify">
We
anticipate that amounts required to fund our foreign activities, conducted
primarily through our ownership of Global, will be funded from existing cash
balances, operating cash flows, third-party financing and from joint venture
partners. The exact usage of other future funding sources is unknown at this
time, and there can be no assurance that Global will have adequate funds
available to finance our foreign operations.
Our
foreign operations are subject to political, economic and other uncertainties.
Our
subsidiary, Global, currently conducts significant operations in Colombia,
Peru
and Panama and may also conduct operations in other foreign countries in the
future. At December 31, 2004, approximately 54% of our consolidated proved
reserve volumes and 37% of our consolidated revenues were related to Global’s
Colombian operations. Exploration and production operations in foreign countries
are subject to political, economic and other uncertainties, including:
| ·
|
the
risk of war, revolution, border disputes, expropriation, renegotiation
or
modification of existing contracts, import,
|
| ·
|
export
and transportation regulations and tariffs resulting in loss of revenue,
property and equipment,
|
| ·
|
taxation
policies, including royalty and tax increases and retroactive tax
claims,
|
| ·
|
exchange
controls, currency fluctuations and other uncertainties arising out
of
foreign government sovereignty over international operations,
|
| ·
|
laws
and policies of the United States affecting foreign trade, taxation
and
investment, and
|
|
We
anticipate that amounts required to fund our foreign activities, conducted
primarily through our ownership of Global, will be funded from existing cash
balances, operating cash flows, third-party financing and from joint venture
partners. The exact usage of other future funding sources is unknown at this
time, and there can be no assurance that Global will have adequate funds
available to finance our foreign operations.
Our
foreign operations are subject to political, economic and other uncertainties.
Our
subsidiary, Global, currently conducts significant operations in Colombia,
Peru
and Panama and may also conduct operations in other foreign countries in the
future. At December 31, 2004, approximately 54% of our consolidated proved
reserve volumes and 37% of our consolidated revenues were related to Global’s
Colombian operations. Exploration and production operations in foreign countries
are subject to political, economic and other uncertainties, including:
| ·
|
the
risk of war, revolution, border disputes, expropriation, renegotiation
or
modification of existing contracts, import,
|
| ·
|
export
and transportation regulations and tariffs resulting in loss of revenue,
property and equipment,
|
| ·
|
taxation
policies, including royalty and tax increases and retroactive tax
claims,
|
| ·
|
exchange
controls, currency fluctuations and other uncertainties arising out
of
foreign government sovereignty over international operations,
|
| ·
|
laws
and policies of the United States affecting foreign trade, taxation
and
investment, and
|
| ·
|
the
possibility of being subjected to the jurisdiction of foreign courts
in
connection with legal disputes and the possible inability to subject
foreign persons to the jurisdiction of courts in the United States.
|
Central
and South America have a history of political and economic instability. This
instability could result in new governments or the adoption of new policies,
laws or regulations that might assume a substantially more hostile attitude
toward foreign investment. In an extreme case, such a change could result in
termination of contract rights and expropriation of foreign-owned assets. Any
such activity could result in a significant loss to Global.
Guerrilla
activity in Colombia could disrupt or delay Global’s operations, and we are
concerned about safeguarding Global’s operations and personnel in Colombia.
Colombia’s
40-year armed conflict between the government and leftist guerrilla groups
has
escalated in recent years. The current government has taken a strong approach
against the guerilla movement after peace overtures by the preceding Colombian
administration
failed. The increased military action by the Colombian government directed
against the rebel groups operating in Colombia may result in escalated guerilla
activity. Also, the increased activity of right-wing paramilitary groups, formed
in opposition to the left-wing guerilla groups, has contributed to the
escalation in violence. The increase in violence has affected business interests
in Colombia. Targeting such enterprises as symbols of foreign exploitation,
particularly in the North of the country, the rebel groups have attempted to
hamper production of hydrocarbons. The cumulative effect of escalation in the
armed conflict and the resulting unstable political and security situation
has
led to increased risks and costs and the downgrading of Colombia’s country risk
rating. Guerilla activity has increased over the last few years, causing delays
in the development of our fields in Colombia. Guerilla activity, such as road
blockades, has also from="WIDTH: 45pt">·
|
the
possibility of being subjected to the jurisdiction of foreign courts
in
connection with legal disputes and the possible inability to subject
foreign persons to the jurisdiction of courts in the United States.
|
Central
and South America have a history of political and economic instability. This
instability could result in new governments or the adoption of new policies,
laws or regulations that might assume a substantially more hostile attitude
toward foreign investment. In an extreme case, such a change could result in
termination of contract rights and expropriation of foreign-owned assets. Any
such activity could result in a significant loss to Global.
Guerrilla
activity in Colombia could disrupt or delay Global’s operations, and we are
concerned about safeguarding Global’s operations and personnel in Colombia.
Colombia’s
40-year armed conflict between the government and leftist guerrilla groups
has
escalated in recent years. The current government has taken a strong approach
against the guerilla movement after peace overtures by the preceding Colombian
administration
failed. The increased military action by the Colombian government directed
against the rebel groups operating in Colombia may result in escalated guerilla
activity. Also, the increased activity of right-wing paramilitary groups, formed
in opposition to the left-wing guerilla groups, has contributed to the
escalation in violence. The increase in violence has affected business interests
in Colombia. Targeting such enterprises as symbols of foreign exploitation,
particularly in the North of the country, the rebel groups have attempted to
hamper production of hydrocarbons. The cumulative effect of escalation in the
armed conflict and the resulting unstable political and security situation
has
le time to time slowed our deployment of workers in the
field and affected our operations. In addition, guerillas could attempt to
disrupt the flow of our production through pipelines. In addition to these
security issues, we have also become the subject of media focus in Colombia
that
may further compromise our security position in the country.
There
can
be no assurance that attempts to reduce or prevent guerilla activity will be
successful or that guerilla activity will not disrupt Global’s operations in the
future. There can also be no assurance that Global can maintain the safety
of
its operations and personnel in Colombia or that this violence will not affect
its operations in the future. Continued or heightened security concerns in
Colombia could also result in a significant loss to us.
The
United States government may impose economic or trade sanctions on Colombia
that
could result in a significant loss to us.
Colombia
is among several nations whose progress in stemming the production and transit
of illegal drugs is subject to annual certification by the President of the
United States. Although Colombia was so certified in 2004, there can be no
assurance that, in the future, Colombia will receive certification or a national
interest waiver. The failure to receive certification or a national interest
waiver may result in any of the following:
| ·
|
all
bilateral aid, except anti-narcotics and humanitarian aid, would
be
suspended,
|
| ·
|
the
Export-Import Bank of the United States and the Overseas Private
Investment Corporation would not approve financing for new projects
in
Colombia,
|
There
can
be no assurance that attempts to reduce or prevent guerilla activity will be
successful or that guerilla activity will not disrupt Global’s operations in the
future. There can also be no assurance that Global can maintain the safety
of
its operations and personnel in Colombia or that this violence will not affect
its operations in the future. Continued or heightened security concerns in
Colombia could also result in a significant loss to us.
The
United States government may impose economic or trade sanctions on Colombia
that
could result in a significant loss to us.
| ·
|
United
States representatives at multilateral lending institutions would
be
required to vote against all loan requests from Colombia,
although such votes would not constitute vetoes, and
|
| ·
|
the
President of the United States and Congress would retain the right
to
apply future trade sanctions.
|
Each
of
these consequences could result in adverse economic consequences in Colombia
and
could further heighten the political and economic risks associated with our
operations there. Any changes in the holders of significant government offices
could have adverse consequences on our relationship with the Colombian national
oil company and the Colombian government’s ability to control guerrilla
activities and could exacerbate the factors relating to our foreign operations
discussed above. Any sanctions imposed on Colombia by the United States
government could threaten our ability to obtain necessary financing to develop
the Colombian properties or cause Colombia to retaliate against us, including
by
nationalizing our Colombian assets. Accordingly, the imposition of the foregoing
economic and trade sanctions on Colombia would likely result in a substantial
loss and a decrease in the price of our common stock. There can be no assurance
that the United States will not impose sanctions on Colombia in the future
or
predict the effect in Colombia that these sanctions might cause.
We
may suffer losses from exchange rate fluctuations.
Colombia
is among several nations whose progress in stemming the production and transit
of illegal drugs is subject to annual certification by the President of the
United States. Although Colombia was so certified in 2004, there can be no
assurance that, in the future, Colombia will receive certification or a national
interest waiver. The failure to receive certification or a national interest
waiver may result in any of the following:
| ·
|
all
bilateral aid, except anti-narcotics and humanitarian aid, would
be
suspended,
|
| ·
|
the
Export-Import Bank of the United States and the Overseas Private
Investment Corporation would not approve financing for new projects
in
Colombia,
|
We
account for our Colombian, Peruvian and Panamanian operations using the U.S.
dollar as the functional currency. The costs associated with our exploration
efforts in Colombia, Peru and Panama have typically been denominated in U.S.
dollars. A portion of Colombian revenues are denominated in Colombian pesos.
To
the extent that the amount of our revenues denominated in Colombian pesos is
greater than the amount of costs denominated in Colombian pesos, we could suffer
a loss if the value of the Colombian peso were to drop relative to the value
of
the U.S. dollar. Any substantial currency fluctuations could have a material
adverse effect on our results of operations.
| ·
|
United
States representatives at multilateral lending institutions would
be
required to vote against all loan requests from Colombia,
although such votes would not constitute vetoes, and
|
| ·
|
the
President of the United States and Congress would retain the right
to
apply future trade sanctions.
|
Each
of
these consequences could result in adverse economic consequences in Colombia
and
could further heighten the political and economic risks associated with our
operations there. Any changes in the holders of significant government offices
could have adverse consequences on our relationship with the Colombian national
oil company and the Colombian government’s ability to control guerrilla
activities and could exacerbate the factors relating to our foreign operations
discussed above. Any sanctions imposed on Colombia by the United States
government could threaten our ability to obtain necessary financing to develop
the Colombian properties or cause Colombia to retaliate against us, including
by
nationalizing our Colombian assets. Accordingly, the imposition of the foregoing
economic and trade sanctions on Colombia would likely result in a substantial
loss and a decrease in the price of our common stock. There can be no assurance
that the United States will not impose sanctions on Colombia in the future
or
predict the effect in Colombia that these sanctions might cause.
We
may suffer losses from exchange rate fluctuations.
We
account for our Colombian, Peruvian and Panamanian operations using the U.S.
dollar as the functional currency. The costs associated with our exploration
efforts in Colombia, Peru and Panama have typically been denominated in U.S.
dollars. A portion of Colombian revenues are denominated in Colombian pesos.
To
the extent that the amount of our revenues denominated in Colombian pesos is
greater than the amount of costs denominated in Colombian pesos, we could suffer
a loss if the value of the Colombian peso were to drop relative to the value
of
the U.S. dollar. Any substantial currency fluctuations could have a material
adverse effect on our results of operations.
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We
are
exposed to market risk from movements in commodity prices, interest rates and
foreign currency exchange rates. As part of an overall risk management strategy,
we use derivative financial instruments to manage and reduce risks associated
with these factors.
Commodity
Price Risk—
We are
a producer of hydrocarbon commodities, including crude oil, condensate and
natural gas. We use oil and gas derivative financial instruments, limited to
collars and floors with maturities of 24 months or less, to mitigate our
exposure of fluctuations in oil and gas commodity prices on future crude oil
and
natural gas production. We have evaluated the potential effect that near term
changes in commodity prices would have had on the fair value of its commodity
price risk sensitive financial instruments at year end 2004.
In
September 2004, we purchased a crude oil floor contract with a strike price
of
$30.00 per barrel for a notional amount of 6,000 barrels per month over a
contract period from January 1, 2005 through December 31 2005. We designated
the
above derivative as a hedge of the exposure to variability of cash flows related
to forecasted sales of specified production from certain of our domestic
property operations. Such crude oil floor contract was reflected in Prepaid
Expenses and Other Assets on our Consolidated Balance Sheet at December 31,
2004
with a fair value of approximately $40,000.
In
October 2004, we purchase a natural gas floor contract with a strike price
of
$5.00 per MMBTU for a notional amount of 70,000 MMBTUs per month over a period
of the contract from January 1, 2005 to December 31, 2005. We designated this
derivative as a hedge under SFAS 133. At December 31, 2004, this hedge no longer
qualified for hedge accounting treatment under SFAS 133. This natural gas floor
contract was reflected in Prepaid Expenses and Other Assets in the Consolidated
Balance Sheet at December 31, 2004 with a market value of approximately
$63,000.
Interest
Rate Risk —
Consistent with the prior year, we invest cash in interest-bearing temporary
investments of high quality issuers. Due to the short time the investments
are
outstanding and their general liquidity, these instruments are classified as
cash equivalents in the consolidated balance sheet and do not represent a
significant interest rate risk to us. Consistent with the prior year, we
consider our interest rate risk exposure related to long-term debt obligations
to not be material. At December 31, 2004 all of our financing obligations carry
a fixed interest rate per annum. We have no open interest rate swap agreements.
Foreign
Currency Exchange Rate Risk—
Consistent with the prior year, Global conducts international business in
Colombia and is subject to foreign currency exchange rate risk on cash flows
related to sales, expenses and capital expenditures that are denominated in
Colombian pesos. However, because predominately all material transactions in
Global’s existing foreign operations are denominated in U.S. dollars, the U.S.
dollar is the functional currency for all operations. Consistent with the prior
year, exposure from transactions in currencies other than U.S. dollars is not
considered material.
FORWARD-LOOKING
STATEMENTS
Certain
information in this prospectus is “forward-looking information” as defined by
the Private Securities Litigation Reform Act of 1995. Examples include
discussions as to our expectations, beliefs, plans, goals, objectives and future
financial or other performance or assumptions. This information, by its nature,
involves estimates, projections, forecasts and uncertainties that could cause
actual results or outcomes to differ substantially from those expressed in
the
forward-looking statement.
Our
business is influenced by many factors that are difficult to predict, involve
uncertainties that may materially affect actual results and are often beyond
our
ability to control. A number of these factors have been identified herein under
“Risk Factors” beginning on page 2. Factors that may affect us include weather
conditions; governmental regulations; cost of environmental compliance; inherent
risk in the operation of drilling; production risks; fluctuations in
energy-related commodities prices and the effect these could have on our
earnings, liquidity position and the underlying value of our assets; capital
market conditions; changes in accounting standards; the risks of operating
businesses in regulated industries that are in the process of becoming
deregulated or increasingly regulated; and political and economic conditions
in
Eastern Europe, Middle America and South America (including inflation rates).
Any
forward-looking statement speaks only as of the date on which it is made, and
we
undertake no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which it is made.
USE
OF PROCEEDS
We
will
not receive any proceeds from the sale of the shares of common stock offered
by
this prospectus.
CAPITALIZATION
The
following table sets forth our capitalization as of June 30, 2005. You should
read this table in conjunction with our audited financial statements contained
in our Annual Report on Form 10-K/A, as amended, for the period ended December
31, 2004 and our unaudited financial statements contained in our Quarterly
Report on Form 10-Q for the period ended June 30, 2005. See “Where You Can Find
Additional Information”.
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We
are
exposed to market risk from movements in commodity prices, interest rates and
foreign currency exchange rates. As part of an overall risk management strategy,
we use derivative financial instruments to manage and reduce risks associated
with these factors.
Commodity
Price Risk—
We are
a producer of hydrocarbon commodities, including crude oil, condensate and
natural gas. We use oil and gas derivative financial instruments, limited to
collars and floors with maturities of 24 months or less, to mitigate our
exposure of fluctuations in oil and gas commodity prices on future crude oil
and
natural gas production. We have evaluated the potential effect that near term
changes in commodity prices would have had on the fair value of its commodity
price risk sensitive financial instruments at year end 2004.
In
September 2004, we purchased a crude oil floor contract with a strike price
of
$30.00 per barrel for a notional amount of 6,000 barrels per month over a
contract period from January 1, 2005 through December 31 2005. We designated
the
above derivative as a hedge of the exposure to variability of cash flows related
to forecasted sales of specified production from certain of our domestic
property operations. Such crude oil floor contract was reflected in Prepaid
Expenses and Other Assets on our Consolidated Balance Sheet at December 31,
2004
with a fair value of approximately $40,000.
In
October 2004, we purchase a natural gas floor contract with a strike price
of
$5.00 per MMBTU for a notional amount of 70,000 MMBTUs per month over t">
| |
|
June
30, 2005
|
|
| |
|
(unaudited)
|
|
| |
|
(in
thousands)
|
|
|
Total
long-term liabilities, less current portion
|
|
|
|
|
$
|
52,880
|
|
|
Interest
Rate Risk —
Consistent with the prior year, we invest cash in interest-bearing temporary
investments of high quality issuers. Due to the short time the investments
are
outstanding and their general liquidity, these instruments are classified as
cash equivalents in the consolidated balance sheet and do not represent a
significant interest rate risk to us. Consistent with the prior year, we
consider our interest rate risk exposure related to long-term debt obligations
to not be material. At December 31, 2004 all of our financing obligations carry
a fixed interest rate per annum. We have no open interest rate swap agreements.
Foreign
Currency Exchange Rate Risk—
Consistent with the prior year, Global conducts international business in
Colombia and is subject to foreign currency exchange rate risk on cash flows
related to sales, expenses and capital expenditures that are denominated in
Colombian pesos. However, because predominately all material transactions in
Global’s existing foreign operations are denominated in U.S. dollars, the U.S.
dollar is the functional currency for all operations. Consistent with the prior
year, exposure from transactions in currencies other than U.S. dollars is not
considered material.
FORWARD-LOOKING
STATEMENTS
Certain
information in this prospectus is “forward-looking information” as defined by
the Private Securities Litigation Reform Act of 1995. Examples include
discussions as to our expectations, beliefs, plans, goals, objectives and future
financial or other performance or assumptions. This information, by its nature,
involves estimates, projections, forecasts and uncertainties that could cause
actual results or outcomes to differ substantially from those expressed in
the
forward-looking statement.
Our
business is influenced by many factors that are difficult to predict, involve
uncertainties that may materially affect actual results and are often beyond
our
ability to control. A number of these factors have been identified herein under
“Risk Factors” beginning on page 2. Factors that may affect us include weather
conditions; governmental regulations; cost of environmental compliance; inherent
risk in the operation of drilling; production risks; fluctuations in
energy-related commodities prices and the effect these could have on our
earnings, liquidity position and the underlying value of our assets; capital
market conditions; changes in accounting standards; the risks of operating
businesses in regulated industries that are in the process of becoming
deregulated or increasingly regulated; and political and economic conditions
in
Eastern Europe, Middle America and South America (including inflation rates).
Any
forward-looking statement speaks only as of the date on which it is made, and
we
undertake no obligation to update any forward-looking statement to reflect
events or circumst">Total
current liabilities
|
|
|
|
|
|
11,103
|
|
|
Total
liabilities
|
|
|
|
|
$
|
63,983
|
|
|
Temporary
Equity:
|
|
|
|
|
|
|
|
|
Series
J Preferred Stock, $1.00 par value; $5,000,000 liquidation
value;
65,000
shares authorized; 50,000 shares outstanding
|
|
|
|
|
$
|
4,675
|
|
| |
|
|
|
|
|
|
|
|
Stockholders
Equity:
|
|
|
|
|
|
|
|
|
Series
G1 Preferred Stock, $1.00 par value; $1,393,000 liquidation
value;
700,000
shares authorized; 13,925 shares outstanding
|
|
|
|
|
|
14
|
|
|
Series
G2 Preferred Stock, $1.00 par value; $200,000 liquidation
value;
100,000
shares authorized; 2,000 shares outstanding
|
|
|
|
|
|
2
|
|
|
Series
G4 Preferred Stock, $1.00 par value; $7,752,000 liquidation value;
150,000
shares authorized; 77,517 shares outstanding
|
|
|
|
|
|
78
|
|
|
Series
M Preferred Stock, $1.00 par value; $5,000,000 liquidation value;
50,000
shares authorize; 50,000 shares outstanding
|
|
|
|
|
|
50
|
|
| Common
stock, $0.01 par value; 325,000,000 shares authorized;
221,680,677
shares issued
|
|
|
|
|
USE
OF PROCEEDS
We
will
not receive any proceeds from the sale of the shares of common stock offered
by
this prospectus.
CAPITALIZATION
The
following table sets forth our capitalization as of June 30, 2005. You should
read this table in conjunction with our audited financial statements contained
in our Annual Report on Form 10-K/A, as amended, for the period ended December
31, 2004 and our unaudited financial statements contained in our Quarterly
Report on Form 10-Q for the period ended June 30, 2005. See “Where You Can Find
Additional Information”.
| |
|
June
30, 2005
|
|
| |
|
(unaudited)
|
|
| |
|
(in
thousands)
|
|
|
Total
long-term liabilities, less current portion
|
|
|
|
|
$
|
52,880
|
|
|
Total
current liabilities
|
|
|
|
|
|
11,103
|
|
|
Total
liabilities
|
|
|
|
|
$
|
63,983
|
|
|
Temporary
Equity:
|
|
|
|
|
|
|
|
|
Series
J Preferred Stock, $1.00 par value; $5,000,000 liquidation
value;
65,000
shares authorized; 50,000 shares outstanding
|
|
|
|
|
$
|
4,675
|
|
| |
|
|
|
|
|
|
|
|
Stockholders
Equity:
|
|
|
|
|
|
|
|
|
Series
G1 Preferred Stock, $1.00 par value; $1,393,000 liquidation
value;
700,000
shares authorized; 13,925 shares outstanding
|
|
|
|
|
|
/td>
|
2,192
|
|
| Additional
paid-in capital |
|
|
|
|
|
449,674
|
|
| Accumulated
deficit |
|
|
|
|
|
(390,200
14
|
|
|
Series
G2 Preferred Stock, $1.00 par value; $200,000 liquidation
value;
100,000
shares authorized; 2,000 shares outstanding
|
|
|
|
|
|
2
|
|
|
Series
G4 Preferred Stock, $1.00 par value; $7,752,000 liquidation value;
|
| Accumulated
other comprehensive income |
|
|
|
|
|
119
|
|
| Treasury
stock, at cost, 2,605,700 shares held |
|
|
|
|
|
(933
|
ARGIN-RIGHT: 0pt" align="left">150,000
shares authorized; 77,517 shares outstanding
|
|
|
|
|
78
|
|
)
|
|
Total
stockholders equity
|
|
|
|
|
$
|
60,996
|
|
|
Total
capitalization
|
|
|
|
|
$
|
129,654
|
|
As
of
June 30, 2005, we had 38,000,000 shares of our common stock reserved for
issuance upon conversion of our Series J, Series G1, Series G2, Series G4 and
Series M Preferred Stock, as well as our 5% Senior Convertible Notes. The
38,000,000 shares of common stock reserved for issuance represent in
approximately 104% of the shares of common stock required for conversion of
our
outstanding convertible securities if the convertible securities had been
converted on June 30, 2005.
We
are an
independent oil and gas exploration, exploitation, development and production
company operating both internationally and domestically. Our operations are
divided into three operating segments. Our domestic operations are conducted
through our wholly-owned subsidiary, Gulf Energy Management Company. Gulf Energy
Management’s operations consist of exploration, exploitation, development,
production and acquisition efforts in the United States, principally in the
onshore and offshore Gulf Coast regions of South Texas and Louisiana. Our
international crude oil exploration and production operations are conducted
through our approximately 62% owned subsidiary, Global Energy Development plc
with activities in Colombia, Panama and Peru. During 2004, we invested in
International Business Associates, Ltd. which comprises our third segment.
International Business Associates is in the initial stages of operations and
focuses primarily on opportunities created by the recent deregulation of the
energy markets in Eastern Europe by trading energy futures or other energy
based
contracts, principally in Hungary and the United States.
Our
revenues are primarily derived from production from our oil and gas properties.
Gulf Energy Management operates approximately 40% of its natural gas and crude
oil properties which are all located in the United States. Global operates
100%
of its crude oil producing properties, all located in Colombia. Our revenues
are
a function of the oil and gas volumes produced and the prevailing commodity
price at the time of production, and certain quality and transportation
discounts. The commodity prices for crude oil and natural gas as well as the
timing of production volumes have a significant impact on our operating income.
From time-to-time we enter into hedging contracts to achieve more predictable
cash flows and to reduce our exposure to declines in market prices.
As
of
December 31, 2004 Gulf Energy Management had approximately 22 BCFe of proved
oil
and gas reserves net to our interest with discounted future net cash flows,
discounted at 10%, of approximately $59 million. At December 31, 2004, Gulf
Energy Management represented 46% of our consolidated oil and gas proved reserve
volumes, and in 2004, Gulf Energy Management represented approximately 63%
of
our consolidated oil and gas revenues. In 2004, Gulf Energy Management’s oil and
gas revenues were comprised of approximately 40% oil sales and 60% natural
gas
sales. Substantially all of Gulf Energy Management’s production is concentrated
in four oil and gas fields along the onshore and offshore Texas and Louisiana
Gulf Coast.
Revenues
from Global are derived solely from Global’s Colombian oil production. As of
December 31, 2004 we had approximately 4.2 million barrels of international
proved oil reserve volumes net to our interest with discounted future net cash
flows, discounted at 10%, of approximately $66 million. Approximately 615,000
barrels of proved oil reserve volumes and $9.7 million of discounted future
net
cash flows are attributable to a 14.65% minority interest of a consolidated
subsidiary. All of Global’s proved reserve volumes are located in Colombia.
During 2004, Global produced 366,000 net barrels of oil in Colombia generating
oil revenues of approximately $11 million. Global represented 54% of our total
proved reserves at December 31, 2004 and approximately 37% of our consolidated
oil and gas revenues in 2004. Global’s activities in Panama and Peru, thus far,
have been limited to technical evaluations of potential exploration areas.
We
were
incorporated in 1973 in the state of California and reincorporated in 1979
in
the state of Delaware. Our principal offices are located at 180 State Street,
Suite 200, Southlake, Texas 76092, and our telephone number is (817) 424-2424.
SELLING
STOCKHOLDERS
The
selling stockholders may from time to time offer and sell pursuant to this
prospectus any or all of the shares of common stock to be issued upon conversion
of the Series M Convertible Preferred Shares and issuable upon the declaration
of dividends on those shares or to be issued upon exercise of warrants issued
in
connection with the Series M Convertible Preferred Shares and the Series L
Convertible Preferred Shares or issued as bonus dividends to participating
holders of our Series G1 and G2 Convertible Preferred Shares.
|
Series
M Preferred Stock, $1.00 par value; $5,000,000 liquidation value;
50,000
shares authorize; 50,000 shares outstanding
|
|
|
|
|
|
50
|
|
|
| Common
stock, $0.01 par value; 325,000,000 shares authorized;
221,680,677
shares issued
|
|
|
|
|
|
2,192
|
|
| Additional
paid-in capital |
|
|
|
|
|
449,674
|
|
| Accumulated
deficit |
|
|
|
|
|
(390,200
|
)
|
| Accumulated
other comprehensive income |
|
|
|
|
|
119
|
|
| Treasury
stock, at cost, 2,605,700 shares held |
|
|
|
|
|
(933
|
)
|
|
Total
stockholders equity
|
|
|
|
|
$
|
The
table
below sets forth the name of the selling stockholder and the number of shares
of
common stock that each selling stockholder may offer pursuant to this
prospectus. Unless set forth below, to our knowledge, none of the selling
stockholders has, or within the past three years has had, any material
relationship with us or any of our predecessors or affiliates.
The
selling stockholders may from time to time offer and sell any or all of the
shares under this prospectus. Because the selling stockholders may offer all
or
some of the common stock offered pursuant to this prospectus, we cannot estimate
how may shares of common stock that the selling stockholders will hold upon
consummation of any such sales.
Based
upon the information provided to us by the selling stockholders, none of
the
selling stockholders is a broker-dealer or affiliated with a broker-dealer.
None
of the selling stockholders have agreements, arrangements or understandings
with
any other persons, either directly or indirectly to dispose of the common
stock
being registered. Each of the selling stockholders has represented to us
that
the common stock being registered was acquired for the selling stockholder’s own
account and not as nominee or agent, and that such selling stockholder was
not a
t" valign="bottom" width="11%" style="BORDER-BOTTOM: #000000 thin solid">
60,996
|
|
|
Total
capitalization
|
|
|
|
|
$
|
129,654
|
|
As
of
June 30, 2005, we had 38,000,000 shares of our common stock reserved for
issuance upon conversion of our Series J, Series G1, Series G2, Series G4 and
registered broker-dealer or an entity engaged in the business of being a
broker-dealer.
|
Name
and Address of Beneficial
Owner
|
Shares
Beneficially
Owned
Before
the
Offering
|
We
are an
independent oil and gas exploration, exploitation, development and production
company operating both internationally and domestically. Our operations are
divided into three operating segments. Our domestic operations are conducted
through our wholly-owned subsidiary, Gulf Energy Management Company. Gulf Energy
Management’s operations consist of exploration, exploitation, development,
production and acquisition efforts in the United States, principally in the
onshore and offshore Gulf Coast regions of South Texas and Louisiana. Our
international crude oil exploration and production operations are conducted
through our approximately 62% owned subsidiary, Global Energy Development plc
with activities in Colombia, Panama and Peru. During 2004, we invested in
International Business Associates, Ltd. which comprises our third segment.
International Business Associates is in the initial stages of operations and
focuses primarily on opportunities created by the recent deregulation of the
energy markets in Eastern Europe by trading energy futures or other energy
based
contracts, principally in Hungary and the United States.
Our
revenues are primarily derived from production from our oil and gas properties.
Gulf Energy Management operates approximately 40% of its natural gas and crude
oil properties which are all located in the United States. Global operates
100%
of its crude oil producing properties, all located in Colombia. Our revenues
are
a function of the oil and gas volumes produced and the prevailing commodity
price at the time of production, and certain quality and transportation
discounts. The commodity prices for crude oil and natural gas as well as the
timing of production volumes have a significanblock; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">
Number
of
Shares
Being
Offered
|
Shares
Beneficially
Owned
After The
Offering(1)
|
| |
Number
|
Percent(2)
|
Number(3)
|
Number
|
Percent
|
|
Solomon
Strategic Holdings, Inc. (4)
c/o
Andrew P. MacKellar
Greenlands
The
Red Gap
Castletown
IM9
1HB British Isles
|
|
*
|
1,574,351
|
0
|
*
|
|
As
of
December 31, 2004 Gulf Energy Management had approximately 22 BCFe of proved
oil
and gas reserves net to our interest with discounted future net cash flows,
discounted at 10%, of approximately $59 million. At December 31, 2004, Gulf
Energy Management represented 46% of our consolidated oil and gas proved reserve
volumes, and in 2004, Gulf Energy Management represented approximately 63%
of
our consolidated oil and gas revenues. In 2004, Gulf Energy Management’s oil and
gas revenues were comprised of approximately 40% oil sales and 60% natural
gas
sales. Substantially all of Gulf Energy Management’s production is concentrated
in four oil and gas fields along the onshore and offshore Texas and Louisiana
Gulf Coast.
Revenues
from Global are derived solely from Global’s Colombian oil production. As of
December 31, 2004 we had approximately 4.2 million barrels of international
proved oil reserve volumes net to our interest with discounted future net cash
flows, discounted at 10%, of approximately $66 million. Approximately 615,000
barrels of proved oil reserve volumes and $9.7 million of discounted future
net
cash flows are attributable to a 14.65% minority interest of a consolidated
subsidiary. All of Global’s proved reserve volumes are located in Colombia.
During 2004, Global produced 366,000 net barrels of oil in Colombia generating
oil revenues of approximately $11 million. Global represented 54% of our total
proved reserves at December 31, 2004 and approximately 37% of our consolidated
oil and gas revenues in 2004. Global’s activities in Panama and Peru, thus far,
have been limited to technical evaluations of potential exploration areas.
|
|
|
|
|
|
|
The
Tail Wind Fund Ltd. (5)
c/o
Bank
of Nova Scotia Trust Company
40/font>
We
were
incorporated in 1973 in the state of California and reincorporated in 1979
in
the state of Delaware. Our principal offices are located at 180 State Street,
Suite 200, Southlake, Texas 76092, and our telephone number is (817) 424-2424.
SELLING
STOCKHOLDERS
The
selling stockholders may from time to time offer and sell pursuant to this
prospectus any or all of the shares of common stock to be issued upon conversion
of the Series M Convertible Preferred Shares and issuable upon the declaration
of dividends on those shares or to be issued upon exercise of warrants issued
in
connection with the Series M Convertible Preferred Shares and the Series L
Convertible Preferred Shares or issued as bonus dividends to participating
holders of our Series G1 and G2 Convertible Preferred Shares.
The
table
below sets forth the name of the selling stockholder and the number of shares
of
common stock that each selling stockholder may offer pursuant to this
prospectus. Unless set forth below, to our knowledge, none of the selling
stockholders has, or within the past three years has had, any material
relationship with us or any of our predecessors or affiliates.
The
selling stockholders may from time to time offer and sell any or all of the
shares under this prospectus. Because the selling stockholders may offer all
or
some of the common stock offered pursuant to this prospectus, we cannot estimate
how may shares of common stock that the selling stockholders will hold upon
consummation of any such sales.
Based
upon the information provided to us by the selling stockholders, none of
the
selling stockholders is a broker-dealer or affiliated with a broker-dealer.
None
of the selling stockholders have agreements, arrangements or understandings
with
any other persons, either directly or indirectly to dispose of the common
stock
being registered. Each of the selling stockholders has represented to us
that
the common stock being registered was acquired for the selling stockholder’s own
account and not as nominee or agent, and that such selling stockholder was
not a
registered broker-dealer or an entity engaged in the business of being a
broker-dealer.
|
Name
and Address of Beneficial
Owner
|
Shares
Beneficially
Owned
Before
the
Offering
|
Number
of
Shares
Being
Offered
|
Nassau,
Bahamas
|
15,472,852
|
6.62%
|
|
|
*
|
| |
|
|
|
|
|
|
Frost
National Bank (6)
FBO
Renaissance US Growth Investment Trust PLC
100
W. Houston Street
San
Antonio, TX 78205
|
718,336
|
*
|
117,760
|
600,576
|
*
|
| |
|
|
|
|
|
|
Frost
National Bank (7)
FBO
BFS US Special Opportunities Trust PLC
100
W. Houston Street
San
Antonio, TX 78205
|
538,752
|
*
|
88,320
|
450,432
|
*
|
|
Name
and Address of Beneficial
Owner
|
Shares
Beneficially
Owned
Before
the
Offering
|
Shares
Beneficially
Owned
After The
Offering(1)
|
| |
Number
|
Percent(2)
|
Number(3)
|
Number
|
Percent
|
|
Solomon
Strategic Holdings, Inc. (4)
c/o
Andrew P. MacKellar
Greenlands
The
Red Gap
Castletown
IM9
1HB British Isles
|
1,322,962
<0pt; FONT-FAMILY: Times New Roman"> Number
of
Shares
Being
Offered
|
Shares
Beneficially
|
1,574,351
|
0
|
*
|
| |
|
|
|
|
|
|
The
Tail Wind Fund Ltd. (5)
c/o
Bank
of Nova Scotia Trust Company
404
E. Bay Street
Nassau,
Bahamas
|
15,472,852
|
6.62%
|
|
|
*
|
| |
|
|
|
|
|
|
Frost
National Bank (6)
FBO
Renaissance US Growth Investment Trust PLC
100
W. Houston Street
San
Antonio, TX 78205
|
718,336
|
*
|
117,760
|
600,576
|
*
|
| |
|
|
|
|
|
|
Frost
National Bank (7)
FBO
BFS US Special Opportunities Trust PLC
100
W. Houston Street
San
Antonio, TX 78205
|
538,752
|
*
|
88,320
|
450,432
|
*
|
|
Name
and Address of Beneficial
Owner
|
Shares
Beneficially
Owned
Before
the
Offering
|
Number
of
Shares
Being
Offered
|
Shares
Beneficially
Owned
After The
Offering(1)
|
| |
Number
|
Percent(2) |
Number(3)
|
Number |
Percent
|
|
Sreedeswar
Holdings Inc. (8)
P.O.
Box 1961
Al
Futtain Tower
Suite
304
Owned
After The
Offering(1)
|
| |
Number
|
Percent(2) |
Number(3)
|
Number |
Percent
|
|
Sreedeswar
Holdings Inc. (8)
P.O.
Box 1961
Al
Futtain Tower
Suite
304
Dubai
United
Arab Emirates
|
344,733
|
*
|
45,296
|
299,437
|
*
|
| |
|
|
|
|
|
|
Concordia
Partners LP (9)
Unit
12, First Floor
Harbour
Yard, Chelsea Harbour
London
SW10 OXO
|
92,761
|
*
|
66,723
|
26,038
|
*
|
| |
|
|
|
|
|
|
Hana
Grove
Rye
House, Catesby Lane
Lapworth
Solihull
West
pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">Dubai
United
Arab Emirates
|
344,733
|
*
|
45,296
|
299,437
|
*
|
| |
|
|
|
|
|
|
Concordia
Partners LP (9)
Unit
12, First Floor
Harbour
Yard, Chelsea Harbour
London
SW10 OXO
|
92,761
|
*
|
66,723
|
26,038
|
*
|
| |
|
|
|
|
|
|
Hana
Grove
Rye
House, Catesby Lane
Lapworth
Solihull
B94
5QY United Kingdome
|
88,718
|
*
|
14,544
|
74,174
|
*
|
| |
|
|
|
|
|
|
Louise
Francesca Briscoe
Foxbrook
Cottage
Old
Warwick Road
Rowington,
Warwickshire, GB
CB35
7AA
|
44,359
|
*
|
7,272
|
37,087
|
*
|
| |
|
|
|
|
|
|
Anglo
Irish Bank (SUISSE) SA (10)
7
Rue des Alpes
CH
1211
Geneve
1 Switzerland
|
125,213
|
*
|
125,213
|
0
|
*
|
| |
|
|
|
|
|
|
Centrum
Bank AG (11)
Kirchstrasse
3
9490
Vaduz
Principality
of Liechtenstein
|
64,057
|
*
|
4,093
|
59,964
|
*
|
| |
|
|
|
|
|
|
Franz
Horhager
Kohlmarkt
5/6
A-101
Vienna, Austria
|
3,904
|
*
|
640
|
3,264
|
*
|
| |
|
|
|
|
|
|
Bank
Julius Baer & Co. Ltd. (12)
Bahnhofstrasse
36
P.O.
Box
CH-8010
Zurich
Switzerland
|
195,200
|
*
|
32,000
|
163,200
|
*
|
| |
|
|
|
|
|
|
Hassan
Nemazee
West
Midlands
B94
5QY United Kingdome
|
88,718
|
*
|
14,544
|
74,174
|
*
|
| |
|
|
|
|
|
|
Louise
Francesca Briscoe
Foxbrook
Cottage
Old
Warwick Road
Rowington,
Warwickshire, GB
CB35
7AA
|
44,359
|
*
|
7,272
|
37,087
|
*
|
| |
t; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">720
Fifth Avenue
9th
Floor
New
York, NY 10268
97,600
|
|
|
|
|
|
|
Anglo
Irish Bank (SUISSE) SA (10)
7
Rue des Alpes
CH
1211
Geneve
1 Switzerland
|
125,213
|
*
|
125,213
|
0
|
*
|
| |
|
|
|
|
|
|
Centrum
Bank AG (11)
Kirchstrasse
3
9490
Vaduz
Principality
of Liechtenstein
|
64,057
|
*
|
4,093
|
59,964
|
*
|
| |
|
|
|
|
|
|
Franz
Horhager
Kohlmarkt
5/6
A-101
Vienna, Austria
|
3,904
|
*
|
640
|
3,264
|
*
|
| |
|
|
|
|
|
|
Bank
Julius Baer & Co. Ltd. (12)
Bahnhofstrasse
36
P.O.
Box
CH-8010
Zurich
Switzerland
|
195,200
|
*
|
32,000
|
163,200
|
*
|
| |
|
|
|
|
|
|
Hassan
Nemazee
720
Fifth Avenue
9th
Floor
New
York, NY 10268
|
97,600
|
*
|
16,000
|
81,600
|
*
|
*
Less
than 1.0%
(1)
Assumes
all shares of common stock offered hereby are sold.
(2)
Based on
the number of shares outstanding on August 15, 2005.
|
16,000
|
81,600
|
*
|
*
Less
than 1.0%
(1)
Assumes
all shares of common stock offered hereby are sold.
(2)
Based on
the number of shares outstanding on August 15, 2005.
(3)
Includes
shares issuable as dividends in connection with the Series M Convertible
Preferred Shares.
(4) Mr.
Andrew P. MacKeller, a director of Solomon Strategic Holdings, Inc., has
the
power to vote and dispose of the common shares being registered on behalf
of the
selling stockholder.
(5) Tailwind
Advisory & Management Ltd., a UK corporation, is the investment manager for
The Tail Wind Fund, Ltd., with the power to vote and dispose of the common
shares being registered on behalf of the selling stockholder. David Crook
is the
Chief Executive Officer and controlling shareholder of Tailwind Advisory
&
Management Ltd. and possesses the power to act on its behalf. David Crook
disclaims beneficial ownership of the shares of common stock being
registered.
(6) Russell
Cleveland has the power to vote and dispose of the common shares being
registered on behalf of Renaissance US Growth Investment Trust PLC, as
well as
BFS US Special Opportunities Trust PLC. Under Rule 13d-3 of the Securities
Exchange Act of 1934, each of the selling security holders would
be deemed
to be the beneficial owner oustify">(3)
Includes
shares issuable as dividends in connection with the Series M Convertible
Preferred Shares.
(4) Mr.
Andrew P. MacKeller, a director of Solomon Strategic Holdings, Inc., has
the
power to vote and dispose of the common shares being registered on behalf
of the
selling stockholder.
(5) Tailwind
Advisory & Management Ltd., a UK corporation, is the investment manager for
The Tail Wind Fund, Ltd., with the power to vote and dispose of the common
shares being registered on behalf of the selling stockholder. David Crook
is the
Chief Executive Officer and controlling shareholder of Tailwind Advisory
&
Management Ltd. and possesses the power to act on its behalf. David Crook
disclaims beneficial ownership of the shares of common stock being
registered.
(6) Russell
Cleveland has the power to vote and dispose of the common shares being
registered on behalf of Renaissance US Growth Investment Trust PLC, as
well as
BFS US Special Opportunities Trust PLC. Under Rule 13d-3 of the Securities
f 1,257,088 shares of common stock prior to
the
offering of the shares being registered on behalf of the selling stockholders
and 1,051,008 after such offering.
(7) Russell
Cleveland has the power to vote and dispose of the common shares being
registered on behalf of BFS US Special Opportunites Trust PLC, as well
as
Rennaisance US Growth Investment Trust PLC. Under Rule 13d-3 of the Securities
Exchange Act of 1934, each of the selling security holders would
be deemed
to be the beneficial owner of 1,257,088 shares of common stock prior to
the
offering of the shares being registered on behalf of the selling stockholders
and 1,051,008 after such offering.
(8)
Mr. Vallipuram Gireesa Venkit Eswaran may be deemed the control person
of the
shares owned by Sreedeswar Holdings Inc. and has the power to vote and
dispose
of the common shares being registered on behalf of the selling
stockholder.
(9)Concordia
Advisors are the investment managers for Concordia Partners LP. Lawrie
Stobbs of
Concordia Advisors has the power to vote and dispose of the common shares
on the
selling stockholder's behalf.
(10)
Anglo Irish Bank is a subsidiary of Anglo Irish Bank (Suisse) SA, a bank
organized under the laws of Switzerland. Anglo Irish Bank (Suisse) SA has
the
power to vote and dispose of the common shares being registered on behalf
of the
selling stockholder. Neville L.A. Cook and Tom Browne are the President/Chairman
and Vice President/Vice Chairman of Anglo Irish Bank (Suisse) SA, and the
power
to vote and dispose of the common shares rests with a group of asset managers
and other executive officers reporting to Messrs. Cook and Browne.
(11)
Centrum Bank, a bank organized under the laws of Switzerland, has the power
to
vote and dispose of the common shares being registered on behalf of the
selling
stockholder. Marxer Peter and Oberhuber Hubert are the President/Chairman
and
Vice President/Vice Chairman of Centrum Bank, and the power to vote and
dispose
of the common shares rests with a group of asset managers and other executive
officers reporting to Messrs. Peter and Hubert.
(12)
Bank Julius Baer & Co. Ltd., a bank organized under the laws of Switzerland,
has the power to vote and dispose of the common shares being registered
on
behalf of the selling stockholder. Jean - Marc Mallard is the Senior Vice
President of Bank Julius Baer & Co. Ltd, and the power to vote and
dispose of the common shares rests with a group of asset managers and other
executive officers reporting to Messr. Mallard.
DESCRIPTION
OF CAPITAL STOCK
General
The
following descriptions are summaries of material terms of our common stock,
preferred stock, certificate of incorporation and amended and restated bylaws.
This summary is qualified by reference to our restated certificate of
incorporation and amended and restated bylaws, copies of which have been filed
as exhibits to the registration statement of which this prospectus is a part,
and by the provisions of applicable law.
Our
authorized capital stock consists of 325,000,000 shares of common stock, par
value $0.01 per share, and 10,000,000 shares of preferred stock, par value
$1.00
per share. Of the 10,000,000 shares of preferred stock, 700,000 shares have
been
designated Series G1 Convertible Preferred Stock, 100,000 shares have been
designated Series G2 Convertible Preferred Stock, 150,000 shares have been
designated Series G4 Convertible Preferred Stock, 65,000 shares have been
designated Series J Convertible Preferred Stock, 65,000 have been designated
Series L Convertible Preferred Stock and 50,000 have been designated Series
M
Convertible Preferred Stock.
Common
Stock
Each
share of common stock entitles the holder to one vote on all matters submitted
to a vote of stockholders. Subject to preferences that may be applicable to
any
outstanding preferred stock, the holders of our common stock are entitled to
dividends when, as and if declared by our board of directors out of funds
legally available for that purpose. If we are liquidated, dissolved or wound
up,
the holders of our common stock will be entitled to a pro rata share in any
distribution to stockholders, but only after satisfaction of all of our
liabilities and of the prior rights of any outstanding series of our preferred
stock. The common stock has no preemptive or conversion rights. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of our common stock are fully paid and nonassessable.
Preferred
Stock
Our
board
of directors has the authority, without stockholder approval, to issue shares
of
Exchange Act of 1934, each of the selling security holders would
be deemed
to be the beneficial owner of 1,257,088 shares of common stock prior to
the
offering of the shares being registered on behalf of the selling stockholders
and 1,051,008 after such offering.
(7) Russell
Cleveland has the power to vote and dispose of the common shares being
registered on behalf of BFS US Special Opportunites Trust PLC, as well
as
Rennaisance US Growth Investment Trust PLC. Under Rule 13d-3 of the Securities
Exchange Act of 1934, each of the selling security holders would
be deemed
to be the beneficial owner of 1,257,088 shares of common stock prior to
the
offering of the shares being registered on behalf of the selling stockholders
and 1,051,008 after such offering.
(8)
Mr. Vallipuram Gireesa Venkit Eswaran may be deemed the control person
of the
shares owned by Sreedeswar Holdings Inc. and has the power to vote and
dispose
of the common shares being registered on behalf of the selling
stockholder.
(9)Concordia
Advisors are the investment managers for Concordia Partners LP. Lawrie
Stobbs of
Concordia Advisors has the power to vote and dispose of the common shares
on the
selling stockholder's behalf.
(10)
Anglo Irish Bank is a subsidiary of Anglo Irish Bank (Suisse) SA, a bank
organized under the laws of Switzerland. Anglo Irish Bank (Suisse) SA has
the
power to vote and dispose of the common shares being registered on behalf
of the
selling stockholder. Neville L.A. Cook and Tom Browne are the President/Chairman
and Vice President/Vice Chairman of Anglo Irish Bank (Suisse) SA, and the
power
to vote and dispose of the common shares rests with a group of asset managers
and other executive officers reporting to Messrs. Cook and Browne.
(11)
Centrum Bank, a bank organized under the laws of Switzerland, has the power
to
vote and dispose of the common shares being registered on behalf of the
selling
stockholder. Marxer Peter and Oberhuber Hubert are the President/Chairman
and
Vice President/Vice Chairman of Centrum Bank, and the power to vote and
dispose
of the common shares rests with a group of asset managers and other executive
officers reporting to Messrs. Peter and Hubert.
(12)
Bank Julius Baer & Co. Ltd., a bank organized under the laws of Switzerland,
has the power to vote and dispose of the common shares being registered
on
behalf of the selling stockholder. Jean - Marc Mallard is the Senior Vice
President of Bank Julius Baer & Co. Ltd, and the power to vote and
dispose of the common shares rests with a group of asset managers and other
executive officers reporting to Messr. Mallard.
DESCRIPTION
OF CAPITAL STOCK
General
The
following descriptions are summaries of material terms of preferred stock from time to time in one or more series, and to fix the number
of shares and terms of each such series. The board may determine the designation
and other terms of each series, including:
| ·
|
sinking
fund provisions,
|
| ·
|
any
other designations,
preferences, rights, qualifications,
limitations, or restrictions.
|
Series
G1 Convertible Preferred Stock
The
Series G1 Convertible Preferred Stock (the “Series G1 Preferred”), which was
our common stock,
preferred stock, certificate of incorporation and amended and restated bylaws.
This summary is qualified by reference to our restated certificate of
incorporation and amended and restated bylaws, copies of which have been filed
as exhibits to the registration statement of which this prospectus is a part,
and by the provisions of applicable law.
Our
authorized capital stock consists of 325,000,000 shares of common stock, par
value $0.01 per share, and 10,000,000 shares of preferred stock, par value
$1.00
per share. Of the 10,000,000 shares of preferred stock, 700,000 shares have
been
designated Series G1 Convertible Preferred Stock, 100,000 shares have been
designated Series G2 Convertible Preferred Stock, 150,000 shares have been
designated Series G4 Convertible Preferred Stock, 65,000 shares have been
designated Series J Convertible Preferred Stock, 65,000 have been designated
Series L Convertible Preferred Stock and 50,000 have been designated Series
M
Convertible Preferred Stock.
Common
Stock
Each
share of common stock entitles the holder to one vote on all matters submitted
to a vote of stockholders. Subject to preferences that may be applicable to
any
outstanding preferred stock, the holders of our common stock are entitled to
dividends when, as and if declared by our board of directors out of funds
legally available for that purpose. If we are liquidated, dissolved or wound
up,
the holders of our common stock will be entitled to a pro rata share in any
distribution to stockholders, but only after satisfaction of all of our
liabilities and of the prior rights of any outstanding series of our preferred
stock. The common stock has no preemptive or conversion rights. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of our common stock are fully paid and nonassessable.
Preferred
Stock
Our
board
of directors has the authority, without stockholder approval, to issue shares
of
preferred stock from time to time in one or more series, and to fix the number
of shares and terms of each such series. The board may determine the designation
and other terms of each series, including:
| ·
|
sinking
fund provisions,
|
| ·
|
any
other designations,
preferences, rights, qualifications,
limitations, or restrictions.
|
Series
G1 Convertible Preferred Stock
The
Series G1 Convertible Preferred Stock (the “Series G1 Preferred”), which was
issued in October 2000, has a liquidation value of $100 per share, is
non-voting, and is convertible at the holder’s option into Harken common stock
at a conversion price of $12.50 per share, subject to adjustment in certain
circumstances.
The
Series G1 Preferred holders are entitled to receive dividends at an annual
rate
equal to $8 per share when, as and if declared by Harken’s Board of Directors.
All dividends on the Series G1 Preferred are cumulative and payable
semi-annually in arrears, payable on June 30 and December 30. At Harken’s
option, dividends may also be payable in Harken common stock valued at $12.50
per share. The dividend and liquidation rights of the Series G1 Preferred rank
junior to all claims of creditors, including holders of outstanding debt
securities, but senior to Harken common stockholders and to any subsequent
series of Harken preferred stock, unless otherwise provided, except for Harken’s
Series G2 Convertible Preferred Stock (the “Series G2 Preferred”), Series G4
Convertible Preferred Stock (the “Series G4 Preferred”), the Series J Preferred,
the Series L Preferred, and the Series M Preferred which rank equal to the
Series G1 Preferred.
During
the year ended December 31, 2004, holders of 28,940 shares of the Series G1
Preferred elected to exercise their conversion option, and such holders were
issued 231,651 shares of Harken common stock. In October 2004, in order to
induce the holders to convert their preferred stock into common stock, we
entered into agreements with the holders of the Series G1 and Series G2
Preferred which provided a 20% increase in the number of shares of our common
stock each Series G1 and Series G2 Preferred holder would receive upon voluntary
conversion under the original terms of the Series G1 and G2 Preferred
agreements. In November 2004, holders of approximately 281,447 shares of Series
G1 Preferred out of the total of 295,375 Series G1 Preferred outstanding,
elected to exercise their conversion option under the revised agreement, and
such holders were issued approximately 2.7 million shares of our common stock.
At June 30, 2005, there were 13,925 shares of Series G1 Preferred outstanding.
Series
G2 Convertible Preferred Stock
In
July
2001, Harken issued 95,800 shares of a new series of convertible preferred
stock, the Series G2 Preferred, in exchange for 5% European Notes in the face
amount of $9,580,000. Harken’s Board of Directors approved the authorization and
issuance of up to 100,000 shares of the Series G2 Preferred, which has a
liquidation value of $100 per share, is non-voting, and is convertible at the
holder’s option into Harken common stock at a conversion price of $3.00 per
share, subject to adjustment in certain circumstances. The Series G2 Preferred
is also convertible by Harken into shares of Harken common stock if for any
period of twenty consecutive calendar days, the average of the closing prices
of
Harken common stock during such per
issued in October 2000, has a liquidation value of $100 per share, is
non-voting, and is convertible at the holder’s option into Harken common stock
at a conversion price of $12.50 per share, subject to adjustment in certain
circumstances.
The
Series G1 Preferred holders are entitled to receive dividends at an annual
rate
equal to $8 per share when, as and if declared by Harken’s Board of Directors.
All dividends on the Series G1 Preferred are cumulative and payable
semi-annually in arrears, payable on June 30 and December 30. At Harken’s
option, dividends may also be payable in Harken common stock valued at $12.50
per share. The dividend and liquidation rights of the Series G1 Preferred rank
junior to all claims of creditors, including holders of outstanding debt
securities, but senior to Harken common stockholders and to any subsequent
series of Harken preferred stock, unless otherwise provided, except for Harken’s
Series G2 Convertible Preferred Stock (the “Series G2 Preferred”), Series G4
Convertible Preferred Stock (the “Series G4 Preferred”), the Series J Preferred,
the Series L Preferred, and the Series M Preferred which rank equal to the
Series G1 Preferred.
During
the year ended December 31, 2004, holders of 28,940 shares of the Series G1
Preferred elected to exercise their conversion option, and such holders were
issued 231,651 shares of Harken common stock. In October 2004, in order to
induce the holders to convert their preferred stock into common stock, we
entered into agreements with the holders of the Series G1 and Series G2
Preferred which provided a 20% increase in the number of shares of our common
stock each Series G1 and Series G2 Preferred holder would receive upon voluntary
conversion under the original terms of the Series G1 and G2 Preferred
agreements. In November 2004, holders of approximately 281,447 shares of Series
G1 Preferred out of the total of 295,375 Series G1 Preferred outstanding,
elected to exercise their conversion option under the revised agreement, and
such holders were issued approximately 2.7 million shares of our common stock.
At June 30, 2005, there were 13,925 shares of Series G1 Preferred outstanding.
The
Series G2 Preferred holders are entitled to receive dividends at an annual
rate
equal to $8 per share when, as and if declared by the Harken Board of Directors.
All dividends on the Series G2 Preferred are cumulative and payable
semi-annually in arrears, payable on June 30 and December 30. At Harken’s
option, dividends may also be payable in Harken common stock at $3.00 per share
of Harken common stock. The Series G2 Preferred dividend and liquidation rights
rank junior to all claims of creditors, including holders of outstanding debt
securities, but senior to Harken common stockholders and to any subsequent
series of Harken preferred stock, unless otherwise provided.
During
the year ended December 31, 2004, holders of 14,500 shares of the Series G2
Preferred elected to exercise their conversion option, and such holders were
issued 487,697 shares of our common stock. In October 2004, in order to induce
the holders to convert their preferred stock into common stock, we entered
into
agreements with the holders of the Series G1 and Series G2 Preferred which
provided a 20% increase in the number of shares of our common stock each Series
G1 and Series G2 Preferred holder would receive upon voluntary conversion under
the original terms of the Series G1 and G2 Preferred agreements. In November
2004, holders of approximately 21,650 shares of G2 Preferred out of the total
of
24,150 Series G2 Preferred outstanding, elected to exercise their conversion
option under the revised agreement, and such holders were issued approximately
900,000 shares of our common stock. In March 2005, 500 shares of our Series
G2
Preferred were converted to common stock pur block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">Series
G2 Convertible Preferred Stock
In
July
2001, Harken issued 95,800 shares of a new series of convertible preferred
stock, the Series G2 Preferred, in exchange for 5% European Notes in the face
amount of $9,580,000. Harken’s Board of Directors approved the authorization and
issuance of up to 100,000 shares of the Series G2 Preferred, which has a
liquidation value of $100 per share, is non-voting, and is convertible at the
holder’s option into Harken common stock at a conversion price of $3.00 per
share, subject to adjustment in certain circumstances. The Series G2 Preferred
is also convertible by Harken into shares of Harken common stock if for any
period of twenty consecutive calendar days, the average of the closing prices
of
Harken common stock during such period shall have equaled or exceeded $3.75
per
share.
The
Series G2 Preferred holders are entitled to receive dividends at an annual
rate
equal to $8 per share when, as and if declared by the Harken Board of Directors.
All dividends on the Series G2 Preferred are cumulative and payable
semi-annually in arrears, payable on June 30 and December 30. At Harken’s
option, dividends may also be payable in Harken common stock at $3.00 per share
of Harken common stock. The Series G2 Preferred dividend and liquidation rights
rank junior to all claims of creditors, including holders of outstanding debt
securities, but senior to Harken common stockholders and to any subsequent
series of Harken preferred stock, unless otherwise provided.
Series
G3 Convertible Preferred Stock
During
the nine months ended September 30, 2004, holders of the remaining 77,000 shares
of our Series G3 Preferred stock elected to exercise their conversion option,
and these remaining holders were issued a total of approximately 15.5 million
shares of our common stock. At December 31, 2004, the Series G3 Preferred is
no
longer outstanding.
Series
G4 Convertible Preferred Stock
In
March
2004, our Board of Directors approved the authorization and issuance of up
to
150,000 shares of a new series of convertible preferred stock, the Series G4
Preferred. In April 2004, we issued 77,517 shares of the Series G4 Preferred
in
exchange for approximately 1,000 shares of the Series G1 Preferred and 23,000
shares of the Series G2 Preferred and $2.4 million in cash. The Series G4
Preferred has a liquidation value of $100 per share, is non-voting and is
convertible at the holders’ option into our common stock at a conversion price
of $2.00 per share, subject to adjustments in certain circumstances. The Series
G4 Preferred is also convertible by us into freely tradable shares of our common
stock if for any period of twenty consecutive calendar days the average of
the
closing prices of our common stock has equaled or exceeded $2.20 per share,
initially. This target price will be reduced by 10 percent of the immediately
preceding target price in December of each year, commencing December 31, 2004.
The
holders of the Series G4 Preferred are entitled to receive dividends, when
as
and if declared by the Board of Directors, at an annual rate equal to $8.00
per
share. All dividends on the Series G4 Preferred are payable semi-annually in
arrears, in cash or, at our option, in shares of our common stock, payable
on
June 30 and December 31, commencing December 31, 2004. At our option, the
dividends can be paid in shares of common stock valued at $2.00 per share.
="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">During
the year ended December 31, 2004, holders of 14,500 shares of the Series G2
Preferred elected to exercise their conversion option, and such holders were
issued 487,697 shares of our common stock. In October 2004, in order to induce
the holders to convert their preferred stock into common stock, we entered
into
agreements with the holders of the Series G1 and Series G2 Preferred which
provided a 20% increase in the number of shares of our common stock each Series
G1 and Series G2 Preferred holder would receive upon voluntary conversion under
the original terms of the Series G1 and G2 Preferred agreements. In November
2004, holders of approximately 21,650 shares of G2 Preferred out of the total
of
24,150 Series G2 Preferred outstanding, elected to exercise their conversion
option under the revised agreement, and such holders were issued approximately
900,000 shares of our common stock. In March 2005, 500 shares of our Series
G2
Preferred were converted to common stock pursuant to the terms of the original
issuance. At June 30, 2005, there were 2,000 shares of Series G2 Preferred
outstanding.
Series
G3 Convertible Preferred Stock
During
the nine months ended September 30, 2004, holders of the remaining 77,000 shares
of our Series G3 Preferred stock elected to exercise their conversion option,
and these remaining holders were issued a total of approximately 15.5 million
shares of our common stock. At December 31, 2004, the Series G3 Preferred is
no
longer outstanding.
Series
G4 Convertible Preferred Stock
In
March
2004, our Board of Directors approved the authorization and issuance of up
to
150,000 shares of a new series of convertible preferred stock, the Series G4
Preferred. In April 2004, we issued 77,517 shares of the Series G4 Preferred
in
exchange for approximately 1,000 shares of the Series G1 Preferred and 23,000
shares of the Series G2 Preferred and $2.4 million in cash. The Series G4
Preferred has a liquidation value of $100 per share, is non-voting and is
convertible at the holders’ option into our common stock at a conversion price
of $2.00 per share, subject to adjustments in certain circumstances. The Series
G4 Preferred is also convertible by us into freely tradable shares of our common
stock if for any period of twenty consecutive calendar days the average of
the
closing prices of our common stock has equaled or exceeded $2.20 per share,
initially. This target price will be reduced by 10 percent of the immediately
preceding target price in December of each year, commencing December 31, 2004.
The
holders of the Series G4 Preferred are entitled to receive dividends, when
as
and if declared by the Board of Directors, at an annual rate equal to $8.00
per
share. All dividends on the Series G4 Preferred are payable semi-annually in
arrears, in cash or, at our option, in shares of our common stock, payable
on
June 30 and December 31, commencing December 31, 2004. At our option, the
dividends can be paid in shares of common stock valued at $2.00 per share.
The
Series G4 Preferred dividend and liquidation rights rank junior to all claims
of
creditors, including holders of outstanding debt securities, but senior to
our
common stockholders and pari passu to any other series of our preferred stock,
unless otherwise provided.
We
may
also redeem the Series G4 Preferred in whole or in part for cash at any time
at
$100 per share plus any accrued and unpaid dividends. In addition, on or after
January 1, 2006, we may further elect, in any six month period, to redeem up
to
50% of the outstanding Series G4 Preferred with shares of our common stock
valued at an average market price, and using a redemption value of the Series
G4
Preferred that includes a 5% premium based on our market capitalization at
the
time of redemption.
We
may
also redeem the Series G4 Preferred in whole or in part for cash at any time
at
$100 per share plus any accrued and unpaid dividends. In addition, on or after
January 1, 2006, we may further elect, in any six month period, to redeem up
to
50% of the outstanding Series G4 Preferred with shares of our common stock
valued at an average market price, and using a redemption value of the Series
G4
Preferred that includes a 5% premium based on our market capitalization at
the
time of redemption.
Accounting
for the Series G4 Preferred Stock Issuance—
In
April 2004 upon the issuance of the Series G4 Preferred, we reflected the
difference between the face amount of the Series G1 Preferred and the Series
G2
Preferred, plus the $2.4 million in cash, less transaction fees, and the fair
value of the Series G4 Preferred shares issued as Exchange on Preferred Stock
of
approximately $337,000 in the Consolidated Condensed Statement of Operations
for
the nine months ended September 30, 2004, as an increase to Net Income
Attributed to Common Stock. The valuation of the Series G4 Preferred stock
is
supported by an appraisal, performed by RP&C International Inc.
(“RP&C”), and is based on the market value of the underlying conversion
shares of Harken common stock as of the date of the exchange along with a
discounted value associated with an assumed dividend yield.
Series
J Convertible Preferred Stock and Warrants
In
March
2004, Harken’s Board of Directors approved the authorization and issuance of up
to 65,000 shares of a new series of convertible preferred stock, the Series
J
Preferred. In April 2004, in exchange for $5.0 million in cash, Harken issued
| ·
|
50,000
shares of Series J Preferred Stock,
|
| ·
|
2,873,563
warrants to purchase Harken common stock; and
|
| ·
|
10,000
unit purchase warrants
|
The
Series J Preferred has a liquidation value of $100 per share, is non-voting
and
was convertible at the holders’ option into common stock at an original
conversion price of $0.87 per share, subject to adjustments in certain
circumstances. In May 2004, as a result of the issuance of the Series L
Preferred, the conversion price of Series J Preferred was adjusted from $0.87
to
$0.85. The Series J Preferred is also convertible by Harken, into freely
tradable shares of Harken common stock at the conversion price, if for any
period of twenty consecutive calendar days the average closing price of Harken
common stock has equaled or exceeded 150% of the conversion price.
Dividends
- The
holders of the Series J Preferred are entitled to receive dividends at an annual
rate equal to 5% per share. All dividends on the Series J Preferred stock are
payable quarterly in arrears, beginning on September 30, 2004 in cash or, at
Harken’s option, in shares of Harken common stock. The Series J Preferred
dividend and liquidation rights rank junior to all claims of creditors,
including holders of outstanding debt securities, but senior to the holders
of
Harken common stock and pari passu to the holders of any other series of Harken
preferred stock, unless otherwise provided.
Additional
Dividend Feature -
If an
additional dividend event occurs while the Series J Preferred is outstanding,
the holders will have the right to an annual additional dividend calculated
at a
rate of 6.0% per annum of the issue price of any outstanding Series J Preferred,
payable in cash, until such additional dividend event has been remedied.
Additional dividend events include the failure of Harken common stock to be
listed for trading on any principal market, Harken’s failure to declare or pay
in full any dividend payable on the shares of Series J Preferred on the
applicable dividend payment date, as well as other additional dividend events
that are defined in the terms of the Series J Preferred.
Optional
Redemption Event
- If an
optional redemption event occurs while the Series J Preferred is outstanding,
each holder will have the right to require Harken to repurchase all or any
portion of such holder’s Series J Preferred at the greater of (x) 115% of the
stated value of the Series J Preferred, or (y) the market value of Harken common
stock as if the Series J Preferred were converted at the then prevailing
conversion price at the time of redemption. An optional redemption event
includes the failure to declare and pay dividends on the Series J Preferred,
voluntary liquidation, a fundamental change in the ownership of Harken, failure
of Harken to generally pay its debts as they become due, as well as other events
defined in the terms of the Series J Preferred.
Accounting
for the Series J Preferred Stock and Warrants
- In
accordance with EITF Topic D-98 “Classification and Measurement of Redeemable
Securities” (“EITF D-98”), the Series J Preferred contain certain provisions
whereby redemption is deemed to be out of our control.
Those
optional redemption events for the Series J Preferred Shares include the
following:
| ·
|
Our
failure to declare or pay in full any dividend payable on the shares
of
Series J Preferred on the dividend payment date and the failure is
not
cured within 30 days, or we fail to pay any redemption price when
due; and
|
| ·
|
Our
commencement of a voluntary or other proceeding seeking liquidation,
reorganization or other relief with respect to our debts under any
bankruptcy, insolvency or other similar law not or hereafter in effect
or
seeking the appointment of a trustee receiver, liquidator, custodian
or
other similar official of us or any substantial part of our property,
or
we consent to any similar relief or to the appointment of or taking
possession by any similar official in an involuntary case or other
proceeding commenced against us, or we make a general assignment
for the
benefit of creditors, or fail generally to pay our debts as they
become
due or admit in writing our inability to pay our debts as they become
due.
|
Therefore
the fair value of the Series J Preferred of approximately $4.7 million, is
classified as temporary equity in the Consolidated
Balance Sheet at December 31, 2004.
In
accordance with EITF 00-19 “Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Company’s Own Stock” (“EITF 00-19”),
the common stock warrants were initially measured at fair value of $287,000
by
an independent third party and classified as permanent equity in the
Consolidated Balance Sheet at December 31, 2004. The fair value allocated to
the
unit purchase warrants is also classified as permanent equity in the
Consolidated Condensed Balance Sheet at December 31, 2004.
After
allocating the net proceeds between the Series J Preferred, the common stock
warrants, and the unit purchase warrants, Harken determined no beneficial
conversion feature existed.
Adjustment
of Series J Conversion Price and Warrant Exercise Price -
In May
2004, as a result of our issuance of our Series L Convertible Preferred Stock,
the conversion price of the Series J Preferred was adjusted from $0.87 to $0.85.
In accordance with EITF Issue 00-27, Issue 7, the number of the additional
shares issuable upon conversion of the Series J Preferred multiplied by our
stock price on the date of the original transaction is recorded as a Payment
of
Preferred Stock Dividends of approximately $135,000 which is included as a
decrease to Net Income Attributed to Common Stock in the Consolidated Statement
of Operations for the year ended December 31, 2004. In addition, the original
exercise price of the common stock warrants issued with the Series J Preferred
was adjusted from $0.98 to $0.95. In August and October 2004, as a result of
our
issuance of the 5% Notes and the Series M Convertible Preferred Stock, the
exercise price of the common stock warrants issued with the Series J Preferred
was adjusted from $0.95 to $0.92. In conjunction with SFAS 123 “Accounting
for Stock Based Compensation”
(SFAS
123), the incremental increase in the fair value of the warrant of approximately
$26,000, is recorded as a Payment of Preferred Stock Dividends which is included
as a decrease to Net Income Attributed to Common Stock in the Consolidated
Statement of Operations for the year ended December 31, 2004. If we issue any
additional shares of our common stock or any common stock equivalent at a price
per share less than the exercise price of the common stock warrants issued
with
the Series J Preferred, the exercise price of the common stock warrants is
subject to additional adjustment.
Series
L Convertible Preferred Stock and Warrants
In
March
2004, our Board of Directors approved the authorization and issuance of up
to
65,000 shares of a new series of convertible preferred stock, the Series L
Preferred. In May 2004, we issued 50,000 shares of Series L Preferred stock
and
3,676,471 warrants to purchase shares of our common stock in exchange for $5
million in cash. Shares of the Series L Preferred have a liquidation value
of
$100 per share, are non-voting and were convertible at the holders’ option into
our common stock.
On
October 7, 2004, we entered into a Conversion/Redemption Agreement with the
holders of the Series L Preferred, pursuant to which we reduced the conversion
price of the Series L Preferred in order to induce the holders to convert their
Series L Preferred into common stock. Pursuant to that agreement, each holder
of
the Series L Preferred agreed to convert at least 20% of its holdings of Series
L Preferred on each of October 8, 2004, November 2, 2004, December 1, 2004,
December 30, 2004 and February 1, 2005, provided we met certain conditions.
We
agreed that the conversion price would be the volume weighted average price
of
the our common stock for the twenty consecutive trading days immediately
preceding the applicable conversion date. In 2004, a total of $4 million, plus
accrued dividends, of the liquidation value of the Series L Preferred was
converted into 7.4 million shares of our common stock. In February 2005, the
remaining $1 million, plus accrued dividends, of the liquidation value of the
Series L Preferred was converted into 2.1 million shares of our common stock.
As
of March 31, 2005, the Series L Preferred is no longer outstanding.
Dividends
- The
holders of the Series L Preferred were entitled to receive dividends at an
increasing rate starting at 4% per share. All dividends on the Series L
Preferred were payable semi-annually on June 30 and December 30, beginning
on
June 30, 2004 and were payable in cash or, at our option, in freely tradable
shares of our common stock.
The
dividend and liquidation rights of the Series L Preferred ranked junior to
all
claims of creditors, including holders of outstanding debt securities, but
senior to holders of our common stock and pari passu to any other series of
our
preferred stock, unless otherwise provided.
Series
M Convertible Preferred Stock and Warrants
In
September 28, 2004, our Board of Directors approved the authorization and
issuance of up to 50,000 shares of a new series of convertible preferred stock,
the Series M Preferred. In September 2004, we issued 50,000 shares of Series
M
Preferred stock and warrants to purchase 4,385,965 shares of our common stock
in
exchange for $5 million in cash. Shares of the Series M Preferred have a
liquidation value of $100 per share, are non-voting and were convertible at
the
holders’ option into our common stock.
The
Series M Preferred has a liquidation value of $100 per share, is non-voting
and
is convertible at the holders’ option into common stock at a conversion price of
$0.59 per share, subject to adjustments in certain circumstances. If for any
period of thirty consecutive days the average closing price of our common stock
during such period trades above $0.74 per share for 30 consecutive days, up
to
25,000 shares of the Series M Preferred is convertible by us into freely
tradable shares of common stock at $0.59 per share. If the average daily volume
weighted average price of our common stock during a period of thirty trading
days equals or exceeds $0.89, we may convert all the Series M Preferred into
freely tradable shares of our common stock at $0.59 per share.
Accounting
for the Classification of the Series M Preferred Stock and
Warrants—
In
accordance with EITF Topic D-98, the Series M Preferred does not contain
provisions whereby redign="justify">
Accounting
for the Series G4 Preferred Stock Issuance—
In
April 2004 upon the issuance of the Series G4 Preferred, we reflected the
difference between the face amount of the Series G1 Preferred and the Series
G2
Preferred, plus the $2.4 million in cash, less transaction fees, and the fair
value of the Series G4 Preferred shares issued as Exchange on Preferred Stock
of
approximately $337,000 in the Consolidated Condensed Statement of Operations
for
the nine months ended September 30, 2004, as an increase to Net Income
Attributed to Common Stock. The valuation of the Series G4 Preferred stock
is
supported by an appraisal, performed by RP&C International Inc.
(“RP&C”), and is based on the market value of the underlying conversion
shares of Harken common stock as of the date of the exchange along with a
discounted value associated with an assumed dividend yield.
Series
J Convertible Preferred Stock and Warrants
In
March
2004, Harken’s Board of Directors approved the authorization and issuance of up
to 65,000 shares of a new series of convertible preferred stock, the Series
J
Preferred. In April 2004, in exchange for $5.0 million in cash, Harken issued
| ·
|
50,000
shares of Series J Preferred Stock,
|
| ·
|
2,873,563
warrants to purchase Harken common stock; and
|
| ·
|
10,000
unit purchase warrants
|
The
Series J Preferred has a liquidation value of $100 per share, is non-voting
and
was convertible at the holders’ option into common stock at an original
conversion price of $0.87 per share, subject to adjustments in certain
circumstances. In May 2004, as a result of the issuance of the Series L
Preferred, the conversion price of Series J Preferred was adjusted from $0.87
to
$0.85. The Series J Preferred is also convertible by Harken, into freely
tradable shares of Harken common stock at the conversion price, if for any
period of twenty consecutive calendar days the average closing price of Harken
common stock has equaled or exceeded 150% of the conversion price.
Dividends
- The
holders of the Series J Preferred are entitled to receive dividends at an annual
rate equal to 5% per share. All dividends on the Series J Preferred stock are
payable quarterly in arrears, beginning on September 30, 2004 in cash or, at
Harken’s option, in shares of Harken common stock. The Series J Preferred
dividend and liquidation rights rank junior to all claims of creditors,
including holders of outstanding debt securities, but senior to the holders
of
Harken common stock and pari passu to the holders of any other series of Harken
preferred stock, unless otherwise provided.
Additional
Dividend Feature -
If an
additional dividend event occurs while the Series J Preferred is outstanding,
the holders will have the right to an annual additional dividend calculated
at a
rate of 6.0% per annum of the issue price of any outstanding Series J Preferred,
payable in cash, until such additional dividend event has been remedied.
Additional dividend events include the failure of Harken common stock to be
listed for trading on any principal market, Harken’s failure to declare or pay
in full any dividend payable on the shares of Series J Preferred on the
applicable dividend payment date, as well as other additional dividend events
that are defined in the terms of the Series J Preferred.
Optional
Redemption Event
- If an
optional redemption event occurs while the Series J Preferred is outstanding,
each holder will have the right to require Harken to repurchase all or any
portion of such holder’s Series J Preferred at the greater of (x) 115% of the
stated value of the Series J Preferred, or (y) the market value of Harken common
stock as if the Series J Preferred were converted at the then prevailing
conversion price at the time of redemption. An optional redemption event
includes the failure to declare and pay dividends on the Series J Preferred,
voluntary liquidation, a fundamental change in the ownership of Harken, failure
of Harken to generally pay its debts as they become due, as well as other events
defined in the terms of the Series J Preferred.
Accounting
for the Series J Preferred Stock and Warrants
- In
accordance with EITF Topic D-98 “Classification emption is deemed to be out of Harken’s control. Therefore
the Series M Preferred is classified as permanent equity in the Consolidated
Balance Sheet at December 31, 2004 and March 31, 2005. In accordance with EITF
00-19, the common stock warrants were initially measured at fair value and
are
classified as permanent equity in the Consolidated Balance Sheet at December
31,
2004 and March 31, 2005.
Adjustment
of Series M Conversion Price—
In
March 2005, as a result of a default under the Registration Rights Agreement
of
the Series M Preferred, the original conversion price of the Series M Preferred
was adjusted from $0.60 to $0.59. In accordance with EITF Issue 00-27, Issue
7,
approximately $90,000 is recorded as a Payment of Preferred Stock Dividends
which is presented as an increase to Net Loss Attributed to Common Stock in
the
Consolidated Condensed Statement of Operations for the period ended March 31,
2005. As of May 10, 2005, this default under the Series M Preferred Registration
Rights Agreement has not yet been cured. None of our other debt or equity
instruments are affected by this Registration Rights Agreement default.
Dividends
- The
holders of the Series M Preferred are entitled to receive dividends at an
increasing rate starting at 4% per share. On the third anniversary from the
date
of issuance (October 7, 2007), the dividend rate increases to 8% per share
with
1% annual increases thereafter to a maximum of 12% annually. All dividends
on
the Series M Preferred are payable semi-annually on June 30 and December 30,
beginning on June 30, 2004. Dividends may be paid in cash or, at our option,
in
freely tradable shares of our common stock, until October 7, 2007 and in cash
thereafter. The dividend rate may escalate to 12% under certain events of
default, including failure to declare and pay dividends.
The
dividend and liquidation rights of the Series M Preferred shall rank junior
to
all claims of creditors, including holders of outstanding debt securities,
but
senior to holders of our common stock and pari passu to any other series of
our
preferred stock, unless otherwise provided.
Warrants
-
The
common stock warrants issued in connection with the Series M Preferred are
exercisable for two years from issuance and had an original exercise price
of
$0.57.
Those
optional redemption events for the Series J Preferred Shares include the
following:
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Our
failure to declare or pay in full any dividend payable on the shares
of
Series J Preferred on the dividend payment date and the failure is
not
cured within 30 days, or we fail to pay any redemption price when
due; and
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Our
commencement of a voluntary or other proceeding seeking liquidation,
reorganization or other relief with respect to our debts under any
bankruptcy, insolvency or other similar law not or hereafter in effect
or
seeking the appointment of a trustee receiver, liquidator, custodian
or
other similar official of us or any substantial part of our property,
or
we consent to any similar relief or to the appointment of or taking
possession by any similar official in an involuntary case or other
proceeding commenced against us, or we make a general assignment
for the
benefit of creditors, or fail generally to pay our debts as they
become
due or admit in writing our inability to pay our debts as they become
due.
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Therefore
the fair value of the Series J Preferred of approximately $4.7 million, is
classified as temporary equity in the Consolidated
Balance Sheet at December 31, 2004.
In
accordance with EITF 00-19 “Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Company’s Own Stock” (“EITF 00-19”),
the common stock warrants were initially measured at fair value of $287,000
by
an independent third party and classified as permanent equity in the
Consolidated Balance Sheet at December 31, 2004. The fair value allocated to
the
unit purchase warrants is also classified as permanent equity in the
Consolidated Condensed Balance Sheet at December 31, 2004.
After
allocating the net proceeds between the Series J Preferred, the common stock
warrants, and the unit purchase warrants, Harken determined no beneficial
conversion feature existed.
Adjustment
of Series J Conversion Price and Warrant Exercise Price -
In May
2004, as a result of our issuance of our Series L Convertible Preferred Stock,
the conversion price of the Series J Preferred was adjusted from $0.87 to $0.85.
In accordance with EITF Issue 00-27, Issue 7, the number of the additional
shares issuable upon conversion of the Series J Preferred multiplied by our
stock price on the date of the original transaction is recorded as a Payment
of
Preferred Stock Dividends of approximately $135,000 which is included as a
decrease to Net Income Attributed to Common Stock in the Consolidated Statement
of Operations for the year ended December 31, 2004. In addition, the original
exercise price of the common stock warrants issued with the Series J Preferred
was adjusted from $0.98 to $0.95. In August and October 2004, as a result of
our
issuance of the 5% Notes and the Series M Convertible Preferred Stock, the
exercise price of the common stock warrants issued with the Series J Preferred
was adjusted from $0.95 to $0.92. In conjunction with SFAS 123 “Accounting
for Stock Based Compensation”
(SFAS
123), the incremental increase in the fair value of the warrant of approximately
$26,000, is recorded as a Payment of Preferred Stock Dividends which is included
as a decrease to Net Income Attributed to Common Stock in the Consolidated
Statement of Operations for the year ended December 31, 2004. If we issue any
additional shares of our common stock or any common stock equivalent at a price
per share less than the exercise price of the common stock warrants issued
with
the Series J Preferred, the exercise price of the common stock warrants is
subject to additional adjustment.
Series
L Convertible Preferred Stock and Warrants
In
March
2004, our Board of Directors approved the authorization and issuance of up
to
65,000 shares of a new series of convertible preferred stock, the Series L
Preferred. In May 2004, we issued 50,000 shares of Series L Preferred stock
and
3,676,471 warrants to purchase shares of our common stock in exchange for $5
million in cash. Shares of the Series L Preferred have a liquidation value
of
$100 per share, are non-voting and were convertible at the holders’ option into
our common stock.
On
October 7, 2004, we entered into a Conversion/Redemption Agreement with the
holders of the Series L Preferred, pursuant to which we reduced the conversion
price of the Series L Preferred in order to induce the holders to convert their
Series L Preferred into common stock. Pursuant to that agreement, each holder
of
the Series L Preferred agreed to convert at least 20% of its holdings of Series
L Preferred on each of October 8, 2004, November 2, 2004, December 1, 2004,
December 30, 2004 and February 1, 2005, provided we met certain conditions.
We
agreed that the conversion price would be the volume weighted average price
of
the our common stock for the twenty consecutive trading days immediately
preceding the applicable conversion date. In 2004, a total of $4 million, plus
accrued dividends, of the liquidation value of the Series L Preferred was
converted into 7.4 million shares of our common stock. In February 2005, the
remaining $1 million, plus accrued dividends, of the liquidation value of the
Series L Preferred was converted into 2.1 million shares of our common stock.
As
of March 31, 2005, the Series L Preferred is no longer outstanding.
Dividends
- The
holders of the Series L Preferred were entitled to receive dividends at an
increasing rate starting at 4% per share. All dividends on the Series L
Preferred were payable semi-annually on June 30 and December 30, beginning
on
June 30, 2004 and were payable in cash or, at our option, in freely tradable
shares of our common stock.
The
dividend and liquidation rights of the Series L Preferred ranked junior to
all
claims of creditors, including holders of outstanding debt securities, but
senior to holders of our common stock and pari passu to any other series of
our
preferred stock, unless otherwise provided.
Series
M Convertible Preferred Stock and Warrants
In
September 28, 2004, our Board of Directors approved the authorization and
issuance of up to 50,000 shares of a new series of convertible preferred stock,
the Series M Preferred. In September 2004, we issued 50,000 shares of Series
M
Preferred stock and warrants to purchase 4,385,965 shares of our common stock
in
exchange for $5 million in cash. Shares of the Series M Preferred have a
liquidation value of $100 per share, are non-voting and were convertible at
the
holders’ option into our common stock.
The
Series M Preferred has a liquidation value of $100 per share, is non-voting
and
is convertible at the holders’ option into common stock at a conversion price of
$0.59 per share, subject to adjustments in certain circumstances. If for any
period of thirty consecutive days the average closing price of our common stock
during such period trades above $0.74 per share for 30 consecutive days, up
to
25,000 shares of the Series M Preferred is convertible by us into freely
tradable shares of common stock at $0.59 per share. If the average daily volume
weighted average price of our common stock during a period of thirty trading
days equals or exceeds $0.89, we may convert all the Series M Preferred into
freely tradable shares of our common stock at $0.59 per share.
Accounting
for the Classification of the Series M Preferred Stock and
Warrants—
In
accordance with EITF Topic D-98, the Series M Preferred does not contain
provisions whereby redemption is deemed to be out of Harken’s control. Therefore
the Series M Preferred is classified as permanent equity in the Consolidated
Balance Sheet at December 31, 2004 and March 31, 2005. In accordance with EITF
00-19, the common stock warrants were initially measured at fair value and
are
classified as permanent equity in the Consolidated Balance Sheet at December
31,
2004 and March 31, 2005.
Adjustment
of Series M Conversion Price—
In
March 2005, as a result of a default under the Registration Rights Agreement
of
the Series M Preferred, the original conversion price of the Series M Preferred
was adjusted from $0.60 to $0.59. In accordance with EITF Issue 00-27, Issue
7,
approximately $90,000 is recorded as a Payment of Preferred Stock Dividends
which is presented as an increase to Net Loss Attributed to Common Stock in
the
Consolidated Condensed Statement of Operations for the period ended March 31,
2005. As of May 10, 2005, this default under the Series M Preferred Registration
Rights Agreement has not yet been cured. None of our other debt or equity
instruments are affected by this Registration Rights Agreement default.
Redemption
Feature -
We may
redeem the Series M Preferred stock for cash, in whole or in part, anytime
after
October 7, 2007, for liquidation value of $100 per share.
Anti-Takeover
Effects Of Delaware Laws And Our Charter And Bylaw
Provisions
Certificate
of Incorporation and Bylaws.
Certain
provisions in our Certificate of Incorporation and Bylaws summarized below
may
be deemed to have an anti-takeover effect and may delay, deter or prevent a
tender offer or takeover attempt that a stockholder might consider to be in
its
best interests, including attempts that might result in a premium being paid
over the market price for the shares held by stockholders.
Our
Certificate of Incorporation and Bylaws contain provisions that
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Dividends
- The
holders of the Series M Preferred are entitled to receive dividends at an
increasing rate starting at 4% per share. On the third anniversary from the
date
of issuance (October 7, 2007), the dividend rate increases to 8% per share
with
1% annual increases thereafter to a maximum of 12% annually. All dividends
on
the Series M Preferred are payable semi-annually on June 30 and December 30,
beginning on June 30, 2004. Dividends may be paid in cash or, at our option,
in
freely tradable shares of our common stock, until October 7, 2007 and in cash
thereafter. The dividend rate may escalate to 12% under certain events of
default, including failure to declare and pay dividends.
The
dividend and liquidation rights of the Series M Preferred shall rank junior
to
all claims of creditors, including holders of outstanding debt securities,
but
senior to holders of our common stock and pari passu to any other series of
our
preferred stock, unless otherwise provided.
Warrants
-
The
common stock warrants issued in connection with the Series M Preferred are
exercisable for two years from issuance and had an original exercise price
of
$0.57.
permit
us to issue, without any further vote or action by the stockholders,
up to
10,000,000 shares of preferred stock in one or more series and, with
respect to each such series, to fix the number of shares constituting
the
series and the designation of the series, the voting powers (if any)
of
the shares of the series, and the preferences and relative, participating,
optional and other special rights, if any, and any qualification,
limitations or restrictions, of the shares of such series; and
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limit
stockholders’ ability to call special meetings.
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The
foregoing provisions of our Certificate of Incorporation and Bylaws could
discourage potential acquisition proposals and could delay or prevent a change
in control. These provisions are intended to enhance the likelihood of
continuity and stability in the composition of the board of directors and in
the
policies formulated by the board of directors and to discourage certain types
of
transactions that may involve an actual or threatened change of control. These
provisions are designed to reduce our vulnerability to an unsolicited
acquisition proposal. The provisions also are intended to discourage certTimes New Roman">Redemption
Feature -
We may
redeem the Series M Preferred stock for cash, in whole or in part, anytime
after
October 7, 2007, for liquidation value of $100 per share.
Anti-Takeover
Effects Of Delaware Laws And Our Charter And Bylaw
Provisions
Certificate
of Incorporation and Bylaws
Delaware
Takeover Statute. We
are
subject to Section 203 of the Delaware General Corporation Law, which, subject
to certain exceptions, prohibits a Delaware corporation from engaging in any
“business combination” (as defined below) with any “interested stockholder” (as
defined below) for a period of three years following the date that such
stockholder became an interested stockholder, unless: (i) prior to such date,
the board of directors of the corporation approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder; (ii) on consummation of the transaction that resulted
in
the stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the number
of shares outstanding those shares owned (x) by persons who are directors and
also officers and (y) by employee stock plans in which employee participants
do
not have the right to determine confidentially whether shares held subject
to
the plan will be tendered in a tender or exchange offer; or (iii) on or
subsequent to such date, the business combination is approved by the board
of
directors and authorized at an annual or special meeting of the stockholders,
and not by written consent, by the affirmative vote of at least 66 2/3% of
the
outstanding voting stock that is not owned by the interested stockholder.
Section
203 of the Delaware General Corporation Law defines “business combination” to
include: (i) any merger or consolidation involving the corporation and the
interested stockholder; (ii) any sale, transfer, pledge or other disposition
of
10% or more of the assets of the corporation involving the interested
stockholder; (iii) subject to certain exceptions, any transaction that results
in the issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder; (iv) any transaction involving the corporation
that has the effect of increasing the proportionate share of the stock of any
class or series of the corporation beneficially owned by the interested
stockholder; or (v) the receipt by the interested stockholder of the benefit
of
any loans, advances, guarantees, pledges or other financial benefits provided
by
or through the corporation. In general, Section 203 defines an “interested
stockholder” as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or person affiliated
with or controlling or controlled by such entity or person.
Limitation
On Liability Of Directors
Our
certificate of incorporation and by-laws indemnify our directors to the fullest
extent permitted by the Delaware General Corporation Law. The Delaware laws
permit a corporation to limit or eliminate a director’s personal liability to
the corporation or the holders of its capital stock for breach of duty. This
limitation is generally unavailable for acts or omissions by a director which
were (i) in bad faith, (ii) were the result of active and deliberate dishonesty
and were material to the cause of action so adjudicated or (iii) involved a
financial profit or other advantage to which such director was not legally
entitled. The Delaware laws also prohibit limitations on director liability
for
acts or omissions which resulted in a violation of a statute prohibiting certain
dividend declarations, certain payments to stockholders after dissolution and
particular types of loans. The effect of these provisions is to eliminate the
rights of our company and our stockholders (through stockholders’ derivative
suits on behalf of our company) to recover monetary damages against a director
for breach of fiduciary duty as a director (including breaches resulting from
grossly negligent behavior), except in the situations described above. These
provisions will not limit the liability of directors under the federal
securities laws of the United States.
Stockholder
Rights Plan
Each
share of common stock includes one right to purchase from us one one-thousandth
of a share of Series E Junior Roman">.
Certain
provisions in our Certificate of Incorporation and Bylaws summarized below
may
be deemed to have an anti-takeover effect and may delay, deter or prevent a
tender offer or takeover attempt that a stockholder might consider to be in
its
best interests, including attempts that might result in a premium being paid
over the market price for the shares held by stockholders.
Our
Certificate of Incorporation and Bylaws contain provisions that
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permit
us to issue, without any further vote or action by the stockholders,
up to
10,000,000 shares of preferred stock in one or more series and, with
respect to each such series, to fix the number of shares constituting
the
series and the designation of the series, the voting powers (if any)
of
the shares of the series, and the preferences and relative, participating,
optional and other special rights, if any, and any qualification,
limitations or restrictions, of the shares of such series; and
|
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limit
stockholders’ ability to call special meetings.
|
The
foregoing provisions of our Certificate of Incorporation and Bylaws could
discourage potential acquisition proposals and could delay or prevent a change
in control. These provisions are intended to enhance the likelihood of
continuity and stability in the composition of the board of directors and in
the
policies formulated by the board of directors and to discourage certain types
of
transactions that may involve an actual or threatened change of control. These
provisions are designed to reduce our vulnerability to an unsolicited
acquisition proposal. The provisions also are intended to discourage certain
tactics that may be used in proxy fights. However, such provisions could have
the effect of discouraging others from making tender offers for our shares
and,
as a consequence, they also may inhibit fluctuations in the market price of
our
common stock that could result from actual or rumored takeover attempts. Such
provisions also may have the effect of preventing changes in our management.
Delaware
Takeover Statute. We
are
subject to Section 203 of the Delaware General Corporation Law, which, subject
to certain exceptions, prohibits a Delaware corporation from engaging in any
“business combination” (as defined below) with any “interested stockholder” (as
defined below) for a period of three years following the date that such
stockholder became an interested stockholder, unless: (i) prior to such date,
the board of directors of the corporation approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder; (ii) on consummation of the transaction that resulted
in
the stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the number
of shares outstanding those shares owned (x) by persons who are directors and
also officers and (y) by employee stock plans in which employee participants
do
not have the right to determine confidentially whether shares held subject
to
the plan will be tendered in a tender or exchange offer; or (iii) on or
subsequent to such date, the business combination is approved by the board
of
directors and authorized at an annual or special meeting of the stockholders,
and not by written consent, by the affirmative vote of at least 66 2/3% of
the
outstanding voting stock that is not owned by the interested stockholder.
The
rights are evidenced by the certificates representing our currently outstanding
common stock and all common stock certificates we issue prior to the
“distribution date”. That date will occur, except in some cases, on the earlier
of:
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ten
days following a public announcement that a person or group of affiliated
or associated persons, who we refer to collectively as an “acquiring
person”, has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of our common
stock, or
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25
TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
Section
203 of the Delaware General Corporation Law defines “business combination” to
include: (i) any merger or consolidation involving the corporation and the
interested stockholder; (ii) any sale, transfer, pledge or other disposition
of
10% or more of the assets of the corporation invol
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ten
business days following the start of a tender offer or exchange
offer that
would result in a person becoming an acquiring person. Our board
of
directors may defer the distribution date in some circumstances.
Also,
some inadvertent acquisitions of our common stock will not result
in a
person becoming an acquiring person if the person promptly divests
itself
of sufficient common stock.
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Until
the
distribution date:
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common
stock certificates will evidence the rights,
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the
rights will be transferable only with those certificates,
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new
common stock certificates will contain a notation incorporating
the rights
agreement by reference, and
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the
surrender for transfer of any common stock certificate will also
constitute the transfer of the rights associated with the common
stock
represented by the certificate.
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The
rights are not exercisable until the distribution date and will expire at the
close of business on April 6, 2008, unless we redeem or exchange them at an
earlier date as described below or we extend the expiration date prior to April
6, 2008.
As
soon
as practicable after the distribution date, the rights agent will mail
certificates representing the rights to holders of record of common stock as
of
the close of business on the distribution date. From that date on, only separate
rights certificates will represent the rights. We will issue rights with all
shares of common stock issued prior to the distribution date. We will also
issue
rights with shares of common stock issued after the distribution date in
connection with some employee benefit plans or upon conversion of some
securities. Except as otherwise determined by our board of directors, we will
not issue rights with any other shares of common stock issued after the
distribution date.
Shares
of
preferred stock purchasable upon exercise of the rights will not be redeemable.
Each share of preferred stock will be entitled, when and if declared, to a
minimum preferential quarterly dividend payment of $10.00 per share but will
be
entitled to an aggregate dividend of 1,000 times the dividend declared per
share
of common stock. In the event of our liquidation, dissolution or winding up,
the
holders of the preferred stock will be entitled to a minimum preferential
liquidation payment of $1,000.00 per share (plus any accrued but unpaid
dividends) but will be entitled to an aggregate payment of 1,000 times the
payment made per share of common stock. Each share of preferred stock will
have
1,000 votes, voting together with the common stock. Finally, in the event of
any
merger, consolidation or other transaction in which outstanding shares of common
stock are converted or exchanged, each share of preferred stock will be entitled
to receive 1,000 times the amount received per share of common stock. These
rights are protected by customary antidultion provisions.
Because
of the nature of the preferred stock’s dividend, liquidation and voting rights,
the value of the one one-thousandth interest in a share of preferred stock
purchasable upon exercise of each right should approximate the value of one
share of common stock.
In
the
event that any person or group of affiliated or associated persons becomes
an
acquiring person, each holder of a right, other than rights beneficially owned
by the acquiring person (which will become void), will thereafter have the
right
to receive upon exercise of a right that number of shares of common stock having
a market value of two times the exercise price of the right.
In
the
event that, after a person or group has become an acquiring person, we are
acquired in a merger or other business combination transaction or 50% or more
of
our consolidated assets or earning power are sold, proper provisions will be
made so that each holder of a right (other than rights beneficially owned by
an
acquiring person) will have the right to receive upon the exercise of a right
that number of shares of common stock of the person with whom we have engaged
in
the foregoing transaction (or its parent) which at the time of such transaction
have a market value of two times the exercise price of the right.
At
any
time after any person or group becomes an acquiring person and prior to the
earlier of one of the events described in the pervious paragraph or the
acquisition by such acquiring person of 50% or more of the outstanding shares
of
common stock, the board of directors may exchange the rights (other than rights
owned by the acquiring person), in whole or in part, for shares of common stock
or preferred stock (or a series of preferred stock having equivalent rights,
preferences and privileges), at an exchange ratio of one share of common stock,
or a fractional share of preferred stock (or other preferred stock) equivalent
in value thereto, per right.
With
certain exceptions, no adjustment in the purchase price will be required until
cumulative adjustments require an adjustment of at least 1% in that purchase
price. No fractional shares of preferred stock or common stock will be issued
(other than fractions of preferred stock which are integral multiples of one
one-thousandth of a share of preferred stock, which may, at our election, be
evidenced by depositary receipts), and in lieu thereof an adjustment in cash
will be made based on the current market price of the preferred stock or the
common stock.
At
any
time until the time a person becomes an acquiring person, we may redeem the
rights in whole, but not in part, at a price of $.01 per right, payable, at
our
option, in cash, shares of common stock or such other consideration as our
board
of directors may determine. Upon such redemption, the rights will terminate
and
the only right of the holders of rights will be to receive the $.01 redemption
price.
Until
a
right is exercised, a holder of rights will have no rights to vote or receive
dividends or any other rights as a stockholder of our common stock. Stockholders
may, depending upon the circumstances, recognize taxable income in the event
that the rights become exercisable for our common stock, or other consideration,
or for the common stock of the acquiring company or are exchanged as described
above.
ChaseMellon
Shareholder Services serves as rights agent with regard to the rights.
The
rights will have anti-takeover effects. They will cause substantial dilution
to
any person or group that attempts to acquire us without the approval of our
board of directors. As a result, the overall effect of the rights may be to
make
more difficult or discourage any attempt to acquire us even if such acquisition
may be favorable to the interests of our stockholders. Because our board of
directors can redeem the rights or approve a permitted offer, the rights should
not interfere with a merger or other business combination approved by our board
of directors.
PLAN
OF DISTRIBUTION
Limitation
On Liability Of Directors
Our
certificate of incorporation and by-laws indemnify our directors to the fullest
extent permitted by the Delaware General Corporation Law. The Delaware laws
permit a corporation to limit or eliminate a director’s personal liability to
the corporation or the holders of its capital stock for breach of duty. This
limitation is generally unavailable for acts or omissions by a director which
were (i) in bad faith, (ii) were the result of active and deliberate dishonesty
and were material to the cause of action so adjudicated or (iii) involved a
financial profit or other advantage to which such director was not legally
entitled. The Delaware laws also prohibit limitations on director liability
for
acts or omissions which resulted in a violation of a statute prohibiting certain
dividend declarations, certain payments to stockholders after dissolution and
particular types of loans. The effect of these provisions is to eliminate the
rights of our company and our stockholders (through stockholders’ derivative
suits on behalf of our company) to recover monetary damages against a director
for breach of fiduciary duty as a director (including breaches resulting from
grossly negligent behavior), except in the situations described above. These
provisions will not limit the liability of directors under the federal
securities laws of the United States.
Stockholder
Rights Plan
Each
share of common stock includes one right to purchase from us one one-thousandth
of a share of Series E Junior Participating Preferred Stock at a price of $35.00
per unit, subject to adjustment. The rights are issued pursuant to a rights
agreement between us and ChaseMellon Shareholder Services L.L.C., as rights
agent. We have summarized selected portions of the rights agreement and the
rights below. For a complete description of the rights, we encourage you to
read
the summary below and the rights agreement, as amended, filed as an exhibit
to
the registration statement of which this prospectus is a part.
The
rights are evidenced by the certificates representing our currently outstanding
common stock and all common stock certificates we issue prior to the
“distribution date”. That date will occur, except in some cases, on the earlier
of:
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ten
days following a public announcement that a person or group of affiliated
or associated persons, who we refer to collectively as an “acquiring
person”, has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of our common
stock, or
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We
are
registering the common stock covered by this prospectus on behalf of the selling
stockholders. As used herein, “selling stockholders” include donees and pledgees
selling shares received from a named selling stockholder after the date of
this
prospectus. We will bear all costs, expenses and fees in connection with the
registration of the common stock offered hereby. Brokerage commissions and
similar selling expenses, if any, attributable to the sale of shares of common
stock will be borne by the selling shareholders.
Each
of
the selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which
the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. Each of the selling stockholders may use any one or more
of
the following methods when selling shares:
| ·
|
ordinary
brokerage
transactions and transactions in which the broker dealer solicits
purchasers;
|
| ·
|
block
trades in which the broker dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal
to
facilitate the transaction;
|
| · |
purchases
by a broker dealer as principal and resale by the broker dealer
for its
account;
|
| ·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| ·
|
privately
negotiated transactions;
|
Roman">25
| ·
|
ten
business days following the start of a tender offer or exchange
offer that
would result in a person becoming an acquiring person. Our board
of
directors may defer the distribution date in some circumstances.
Also,
some inadvertent acquisitions of our common stock will not result
in a
person b
|
| ·
|
settlement
of short sales created after the date of this prospectus;
|
| · |
broker
dealers may agree with the selling stockholders to sell a
specified number
of such shares at a stipulated price per share;
|
| ·
|
a
combination of any such methods of sale; and
|
| ·
|
any
other method permitted pursuant to applicable law.
|
Each
of
the selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus. Broker dealers
engaged by the selling stockholders may arrange for other brokers dealers to
participate in sales. Broker dealers may receive commissions or discounts from
the selling stockholders (or, if any broker dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
selling stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.
Each
of
the selling stockholder may from time to time pledge or grant a security
interest in some or all of the shares or common stock or warrants owned by
them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act of
1933
amending the list of selling stockholders to include the pledgee, transferee
or
other successors in interest as selling stockholders under this prospectus.
The
selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors
in
interest will be the selling beneficial owners for purposes of this prospectus.
The
selling stockholders and any broker dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. The selling stockholders have informed
us
that none of them have any agreement or understanding, directly or indirectly,
with any person to distribute the common stock.
We
have
agreed to indemnify the selling stockholders against certain losses, claims,
damages and liabilities, including liabilities under the Securities Act.
WHERE
YOU CAN FIND MORE INFORMATION
We
are
subject to the informational reporting requirements of the Securities Exchange
Act of 1934, which requires us to file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any document that we file at the Public
Reference Room of the Securities and Exchange Commission at 100
F Street, N.E., Washington, D.C. 20549. Information on the operation
of the
Public Reference Room may be obtained by calling the Securities and Exchange
Commission at 1-800-SEC-0330. You may also inspect our filings at the regional
offices of the Securities and Exchange Commission or over the Internet at the
Securities and Exchange Commission’s website at http://www.sec.gov. Our common
shares are listed on the American Stock Exchange under the symbol “HEC.” Our
reports, proxy statements and other information may also be obtained from the
American Stock Exchange.
The
Securities and Exchange Commission allows us to incorporate by reference the
information we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this prospectus, and
information that we file later with the Securities and Exchange Commission
will
automatically update and supercede this information. We incorporate by reference
the documents listed below and any future filings made with the Securities
and
Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until we sell all of the securities that we have registered
under the registration statement of which this prospectus forms a part:
| ·
|
Annual
Report on Form 10-K/A, as amended, for the year ended December 31,
2004;
|
| ·
|
Quarterly
Report on Form 10-Q for the quarter ended March 31, 2005, as amended
by
the Quarterly Report on Form 10-Q/A for the same period, and Quartecoming an acquiring person if the person promptly divests
itself
of sufficient common stock.
|
Until
the
distribution date:
| ·
|
common
stock certificates will evidence the rights,
|
| ·
|
the
rights will be transferable only with those certificates,
|
| ·
|
new
common stock certificates will contain a notation incorporating
the rights
agreement by reference, and
|
| ·
|
the
surrender for transfer of any common stock certificate will also
constitute the transfer of the rights associated with the common
stock
represented by the certificate.
|
The
rights are not exercisable until the distribution date and will expire at the
close of business on April 6, 2008, unless we redeem or exchange them at an
earlier date as described below or we extend the expiration date prior to April
6, 2008.
As
soon
as practicable after the distribution date, the rights agent will mail
certificates representing the rights to holders of record of common stock as
of
the close of business on the distribution date. From that date on, only separate
rights certificates will represent the rights. We will issue rights with all
shares of common stock issued prior to the distribution date. We will also
issue
rights with shares of common stock issued after the distribution date in
connection with some employee benefit plans or upon conversion of some
securities. Except as otherwise determined by our board of directors, we will
not issue rights with any other shares of common stock issued after the
distribution date.
Shares
of
preferred stock purchasable upon exercise of the rights will not be redeemable.
Each share of preferred stock will be entitled, when and if declared, to a
minimum preferential quarterly dividend payment of $10.00 per share but will
be
entitled to an aggregate dividend of 1,000 times the dividend declared per
share
of common stock. In the event of our liquidation, dissolution or winding up,
the
holders of the preferred stock will be entitled to a minimum preferential
liquidation payment of $1,000.00 per share (plus any accrued but unpaid
dividends) but will be entitled to an aggregate payment of 1,000 times the
payment made per share of common stock. Each share of preferred stock will
have
1,000 votes, voting together with the common stock. Finally, in the event of
any
merger, consolidation or other transaction in which outstanding shares of common
stock are converted or exchanged, each share of preferred stock will be entitled
to receive 1,000 times the amount received per share of common stock. These
rights are protected by customary antidultion provisions.
Because
of the nature of the preferred stock’s dividend, liquidation and voting rights,
the value of the one one-thousandth interest in a share of preferred stock
purchasable upon exercise of each right should approximate the value of one
share of common stock.
In
the
event that any person or group of affiliated or associated persons becomes
an
acquiring person, each holder of a right, other than rights beneficially owned
by the acquiring person (which will become void), will thereafter have the
right
to receive upon exercise of a right that number of shares of common stock having
a market value of two times the exercise price of the right.
In
the
event that, after a person or group has become an acquiring person, we are
acquired in a merger or other business combination transaction or 50% or more
of
our consolidated assets or earning power are sold, proper provisions will be
made so that each holder of a right (other than rights beneficially owned by
an
acquiring person) will have the right to receive upon the exeerly
Report on Form 10-Q for the quarter ended June 30,
2005;
| ·
|
Definitive
Proxy Statement on Schedule 14A filed on April 22, 2005;
|
| ·
|
Current
Reports on Form 8-K filed on March 18, 2005, March 23, 2005, March
29,
2005, April 5, 2005, April 12, 2005, April 14, 2005, April 21,
2005, April
29, 2005, May 11, 2005, May 31, 2005, June 3, 2005, June 10, 2005,
June
20, 2005, June 23, 2005, June 27, 2006, June 28, 2005, August 31,
2005,
September 8, 2005, September 12, 2005, September 16, 2005, September
21,
2005 and September 23, 2005 and on Form 8-K/A filed on June
28, 2005.
|
At
any
time after any person or group becomes an acquiring person and prior to the
earlier of one of the events described in the pervious paragraph or the
acquisition by such acquiring person of 50% or more of the outstanding shares
of
common stock, the board of directors may exchange the rights (other than rights
owned by the acquiring person), in whole or in part, for shares of common stock
or preferred stock (or a series of preferred stock having equivalent rights,
preferences and privileges), at an exchange ratio of one share of common stock,
or a fractional share of preferred stock (or other preferred stock) equivalent
in value thereto, per right.
With
certain exceptions, no adjustment in the purchase price will be required until
cumulative adjustments require an adjustment of at least 1% in that purchase
price. No fractional shares of p; MARGIN-LEFT: 0pt; TEXT-INDENT: 27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
You
may
request a copy of these filings at no cost, by writing or telephoning us at
the
following address:
Secretary
and General Counsel
Harken
Energy Corporation
180
State
Street, Suite 200
Southlake,
TX 76092
LEGAL
MATTERS
Certain
matters with respect to the validity of the shares of common stock offered
hereby will be passed upon for us by McGuireWoods LLP, New York, New York.
At
any
time until the time a person becomes an acquiring person, we may redeem the
rights in whole, but not in part, at a price of $.01 per right, payable, at
our
option, in cash, shares of common stock or such other consideration as our
board
of directors may determine. Upon such redemption, the rights will terminate
and
the only right of the holders of rights will be to receive the $.01 redemption
price.
Until
a
right is exercised, a holder of rights will have no rights to vote or receive
dividends or any other rights as a stockholder of our common stock. Stockholders
may, depending upon the circumstances, recognize taxable income in the event
that the rights become exercisable for our common stock, or other consideration,
or for the common stock of the acquiring company or are exchanged as described
above.
ChaseMellon
Shareholder Services serves as rights agent with regard to the rights.
The
rights will have anti-takeover effects. They will cause substantial dilution
to
any person or group that attempts to acquire us without the approval of our
board of directors. As a result, the overall effect of the rights may be to
make
more difficult or discourage any attempt to acquire us even if such acquisition
may be favorable to the interests of our stockholders. Because our board of
directors can redeem the rights or approve a permitted offer, the rights should
not interfere with a merger or other business combination approved by our board
of directors.
PLAN
OF DISTRIBUTION
EXPERTS
The
consolidated financial statements of Harken Energy Corporation for the year
ended December 31, 2004 on Form 10-K/A Amendment No. 3) for the year ended
December 31, 2004, incorporated by reference in this Prospectus have been
audited by Hein & Associates LLP, an independent registered public
accounting firm, to the extent and for the period set forth in their report
incorporated herein by reference, and are incorporated herein in reliance upon
such report given upon the authority of said firm as experts in auditing and
accounting.
The
consolidated financial statements of Harken Energy Corporation as of December
31, 2003 and for the year then ended incorporated by reference in this
Prospectus have been audited by BDO Seidman, LLP, an independent registered
public accounting firm, to the extent and for the period set forth in their
report incorporated herein by reference, and are incorporated herein in reliance
upon such report given upon the authority of said firm as experts in auditing
and accounting.
In
June
2004, our Audit Committee accepted the resignation of BDO Seidman, LLP as our
independent accountant. BDO’s report on our consolidated financial statements
for the year ended December 31, 2003 did not contain an adverse opinion or
disclaimer of opinion, nor was such report qualified or modified as to
uncertainty, audit scope or accounting principles. During the year ended
December 31, 2003 and the six month period ending June 30, 2004, there were
reportable events requiring disclosure pursuant to Item 304(a)(1)(v) of
Regulation S-K. For additional detail, please refer to our Form 10-K/A filed
on
April 13, 2005.
We
are
registering the common stock covered by this prospectus on behalf of the selling
stockholders. As used herein, “selling stockholders” include donees and pledgees
selling shares received from a named selling stockholder after the date of
this
prospectus. We will bear all costs, expenses and fees in connection with the
registration of the common stock offered hereby. Brokerage commissions and
similar selling expenses, if any, attributable to the sale of shares of common
stock will be borne by the selling shareholders.
Each
of
the selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which
the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. Each of the selling stockholders may use any one or more
of
the following methods when selling shares:
| ·
pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">The
consolidated financial statements of Harken Energy Corporation for the year
ended December 31, 2002, appearing in Harken Energy Corporation’s Annual Report
on Form 10-K/A (Amendment No. 3) for the year ended December 31, 2004, have
been
audited by Ernst & Young LLP, independent registered public accounting firm,
as set forth in their report thereon, included therein, and incorporated herein
by reference. Such consolidated financial statements are incorporated herein
by
reference in reliance upon such report given on the authority of such firm
as
experts in accounting and auditing.
Our
oil
and gas reserves in the United States have been reviewed by our independent
reserve engineers, Netherland, Sewell & Associates, Inc., as stated in their
report thereon. Our disclosures of our domestic oil and gas reserves included
in
our Annual Report on Form 10-K for the year ending December 31, 2004, have
been
presented in reliance upon the authority of such firm as experts in petroleum
engineering.
Our
oil
and gas reserves in Colombia have been reviewed by our independent reserve
engineers, Ryder Scott Company., as stated in their report thereon. Our
disclosures of our domestic oil and gas reserves in Colombia included in our
Annual Report on Form 10-K for the year ending December 31, 2004, have been
presented in reliance upon the authority of such firm as experts in petroleum
engineering.
|
ordinary
brokerage
transactions and transactions in which the broker dealer solicits
purchasers;
|
| ·
|
block
trades in which the broker dealer will attempt to sell the shares
div id="PN" style="PAGE-BREAK-AFTER: always">
30
20,197,246
Shares
____________________
PROSPECTUS
,
2005
____________________
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution.
The
table
below sets forth the expenses to be incurred by us in connection with the
issuance and distribution of the shares registered for offer and sale hereby,
other than underwriting discounts and commissions. All amounts shown represent
estimates except the Securities Act registration fee.
|
Registration
fees under the Securities Act
|
|
$
|
|
|
|
Accountants’
fees and expenses
|
|
|
20,000
|
|
|
Legal
fees and expenses
|
|
|
50,000
|
|
|
Miscellaneous
|
|
|
|
|
|
Total
|
|
$
|
|
|
| |
|
|
|
|
Item
15. Indemnification
of Directors and Officers.
Under
Section 145 of the General Corporation Law of the State of Delaware (“Delaware
Law”), a Delaware corporation may indemnify its directors, officers, employees
and agents against expenses (including attorneys fees), judgments, fines and
settlements in nonderivative suits, actually and reasonably incurred by them
in
connection with the defense of any action, suit or proceeding in which they
or
any of them were or are made parties or are threatened to be made parties by
reason of their serving or having served in such capacity. Delaware law,
howev as agent
but may position and resell a portion of the block as principal
to
facilitate the transaction;
|
| · |
purchases
by a broker dealer as principal and resale by the broker dealer
for its
account;
|
| ·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| ·
|
privately
negotiated transactions;
|
| ·
|
settlement
of short sales created after the date of this prospectus;
|
| · |
broker
dealers may agree with the selling stockholders to sell a
specified number
of such shares at a stipulated price per share;
|
| ·
|
a
combination of any such methods of sale; and
|
| ·
|
any
other method permitted pursuant to applicable law.
|
Each
of
the selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus. Broker dealers
engaged by the selling stockholders may arrange for other brokers dealers to
participate in sales. Broker dealers may receive commissions or discounts from
the selling stockholders (or, if any broker dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
selling stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.
Each
of
the selling stockholder may from time to time pledge or grant a security
interest in some or all of the shares or common stock or warrants owned by
them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act of
1933
amending the list of selling stockholders to include the pledgee, transferee
or
other successors in interest as selling stockholders under this prospectus.
The
selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors
in
interest will be the selling beneficial owners for purposes of this prospectus.
The
selling stockholders and any broker dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such saleer, provides that such person must have acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
corporation, and in the case of a criminal action, such person must have had
no
reasonable cause to believe his or her conduct was unlawful. Section 145 further
provides that in connection with the defense or settlement of any action by
or
in the right of the corporation, a Delaware corporation may indemnify its
directors and officers against expenses actually and reasonably incurred by
them
if, in connection with the matters in issue, they acted in good faith, in a
manner they reasonably believed to be in or not opposed to the best interests
of
the corporation, except that no indemnification may be made with respect to
any
claim, issue or matter as to which such person has been adjudged liable for
negligence or misconduct unless the Court of Chancery or the court in which
such
action or suit is brought approves such indemnification. Section 145 further
permits a Delaware corporation to grant its directors and officers additional
rights of indemnification through bylaw provisions and otherwise, and to
purchase indemnity insurance on behalf of its directors and officers.
Indemnification is mandatory to the extent a claim, issue or matter has been
successfully defended.
Article
Ten of our certificate of incorporation and Article VII of our bylaws provide,
in general, that we shall indemnify our directors and officers under certain
of
the circumstances defined in Section 145. We have entered into agreements with
each member of our board of directors pursuant to which it will advance to
each
director costs of litigation in accordance with the indemnification provisions
of our Certificate of Incorporation and bylaws.
We
have
agreed to indemnify the selling stockholders against certain losses, claims,
damages and liabilities, including liabilities under the Securities Act.
WHERE
YOU CAN FIND MORE INFORMATION
We
are
subject to the informational reporting requirements of the Securities Exchange
Act of 1934, which requires us to file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any document that we file at the Public
Reference Room of the Securities and Exchange Commission at 100
F Street, N.E., Washington, D.C. 20549. Information on the operation
of the
Public Reference Room may be obtained by calling the Securities and Exchange
Commission at 1-800-SEC-0330. You may also inspect our filings at the regional
offices of the Securities and Exchange Commission or over the Internet at the
Securities and Exchange Commission’s website at http://www.sec.gov. Our common
shares are listed on the American Stock Exchange under the symbol “HEC.” Our
reports, proxy statements and other information may also be obtained from the
American Stock Exchange.
The
Securities and Exchange Commission allows us to incorporate by reference the
information we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this prospectus, and
information that we file later with the Securities and Exchange Commission
will
automatically update and supercede this information. We incorporate by reference
the documents listed below and any future filings made with the Securities
and
Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until we sell all of the securities that we have registered
under the registration statement of which this prospectus forms a part:
| Exhibits.
Exhibit
|
3.1
|
|
Certificate
of Incorporation of Harken Energy Corporation (filed as Exhibit
3.1 to
Harken’s Current Report on Form 8-K dated February 13, 2003, File No.
1-10262, and incorporated by reference herein).
|
|
3.2
|
|
·
|
Annual
Report on Form 10-K/A, as amended, for the year ended December 31,
2004;
|
| ·
|
Quarterly
Report on Form 10-Q for the quarter ended March 31, 2005, as amended
by
the Quarterly Report on Form 10-Q/A for the same period, and Quarterly
Report on Form 10-Q for the quarter ended June 30,
2005;
|
| ·
|
Definitive
Proxy Statement on Schedule 14A filed on April 22, 2005;
|
| ·
|
Current
Reports on Form 8-K filed on March 18, 2005, March 23, 2005, March
29,
2005, April 5, 2005, April 12, 2005, April 14, 2005, April 21,
2005, April
29, 2005, May 11, 2005, May 31, 2005, June 3, 2005, June 10, 2005,
June
20, 2005, June 23, 2005, June 27, 2006, June 28, 2005, August 31,
2005,
September 8, 2005, September 12, 2005, September 16, 2005, September
21,
2005 and September 23, 2005 and on Form 8-K/A filed on June
28, 2005.
|
You
may
request a copy of these filings at no cost, by writing or telephoning us at
the
following address:
Secretary
and General Counsel
Harken
Energy Corporation
180
State
Street, Suite 200
Southlake,
TX 76092
LEGAL
MATTERS
Certain
matters with respect to the validity of the shares of common stock offered
hereby will be passed upon for us by McGuireWoods LLP, New York, New York.
EXPERTS
The
consolidated financial statements of Harken Energy Corporation for the year
ended December 31, 2004 on Form 10-K/A Amendment No. 3) for the year ended
December 31, 2004, incorporated by reference in this Prospectus have been
audited by Hein & Associates LLP, an independent registered public
accounting firm, to the extent and for the period set forth in their report
incorporated herein by reference, and are incorporated herein in reliance upon
such report given upon the authority of said firm as experts in auditing and
accounting.
The
consolidated financial statements of Harken Energy Corporation as of December
31, 2003 and for the year then ended incorporated by reference in this
Prospectus have been audited by BDO Seidman, LLP, an independent registered
public accounting firm, to the extent and for the period set forth in their
report incorporated herein by reference, and are incorporated herein in reliance
up0pt" align="left">Certificate
of Amendment to Certificate of Incorporation of Harken Energy Corporation
(filed as Exhibit 3.2 to Harken’s Current Report on Form 8-K dated
February 13, 2003, File No. 1-10262, and incorporated by reference
herein).
|
In
June
2004, our Audit Committee accepted the resignation of BDO Seidman, LLP as our
independent accountant. BDO’s report on our consolidated financial statements
for the year ended December 31, 2003 did not contain an adverse opinion or
disclaimer of opinion, nor was such report qualified or modified as to
uncertainty, audit scope or accounting principles. During the year ended
December 31, 2003 and the six month period ending June 30, 2004, there were
reportable events requiring disclosure pursuant to Item 304(a)(1)(v) of
Regulation S-K. For additional detail, please refer to our Form 10-K/A filed
on
April 13, 2005.
The
consolidated financial statements of Harken Energy Corporation for the year
ended December 31, 2002, appearing in Harken Energy Corporation’s Annual Report
on Form 10-K/A (Amendment No. 3) for the year ended December 31, 2004, have
been
audited by Ernst & Young LLP, independent registered public accounting firm,
as set forth in their report thereon, included therein, and incorporated herein
by reference. Such consolidated financial statements are incorporated herein
by
reference in reliance upon such report given on the authority of such firm
as
experts in accounting and auditing.
Our
oil
and gas reserves in the United States have been reviewed by our independent
reserve engineers, Netherland, Sewell & Associates, Inc., as stated in their
report thereon. Our disclosures of our domestic oil and gas reserves included
in
our Annual Report on Form 10-K for the year ending December 31, 2004, have
been
presented in reliance upon the authority of such firm as experts in petroleum
engineering.
Our
oil
and gas reserves in Colombia have been reviewed by our independent reserve
engineers, Ryder Scott Company., as stated in their report thereon. Our
disclosures of our domestic oil and gas reserves in Colombia included in our
Annual Report on Form 10-K for the year ending December 31, 2004, have been
presented in reliance upon the authority of such firm as experts in petroleum
engineering.
20,197,246
Shares
____________________
PROSPECTUS
,
2005
____________________
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution.
The
table
below sets forth the expenses to be incurred by us in connection with the
issuance and distribution of the shares registered for offer and sale hereby,
other than underwriting discounts and commissions. All amounts shown represent
estimates except the Securities Act registration fee.
|
Registration
fees under the Securities Act
|
|
$
|
|
|
|
Accountants’
fees and expenses
|
|
|
20,000
|
|
|
|
3.3
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
(filed as Exhibit 3.3 to Harken’s Current Report on Form 8-K dated
February 13, 2003, File No. 1-10262, and incorporated by
reference
herein).
|
|
3.4
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
(filed as Exhibit 3.4 to Harken’s Current Report on Form 8-K dated
February 13, 2003, File No. 1-10262, and incorporated by
reference
herein).
|
|
3.5
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
(filed as Exhibit 3.5 to Harken’s Current Report on Form 8-K dated
February 13, 2003, File No. 1-10262, and incorporated by
reference
herein).
|
|
3.6
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
(filed as Exhibit 3.6 to Harken’s Current Report on Form 8-K dated
February 13, 2003, File No. 1-10262, and incorporated by
reference
herein).
Legal
fees and expenses
|
|
|
50,000
|
|
|
Miscellaneous
|
|
|
|
|
|
Total
|
|
$
|
|
|
| |
|
|
|
|
Item
15. Indemnification
of Directors and Officers.
Under
Section 145 of the General Corporation Law of the State of Delaware (“Delaware
Law”), a Delaware corporation may indemnify its directors, officers, employees
and agents against expenses (including attorneys fees), judgments, fines and
settlements in nonderivative suits, actually and reasonably incurred by them
in
connection with the defense of any action, suit or proceeding in which they
or
any of them were or are made parties or are threatened to be made parties by
reason of their serving or having served in such capacity. Delaware law,
however, provides that such person must have acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
corporation, and in the case of a criminal action, such person must have had
no
reasonable cause to believe his or her conduct was unlawful. Section 145 further
provides that in connection with the defense or settlement of any action by
or
in the right of the corporation, a Delaware corporation may indemnify its
directors and officers against expenses actually and reasonably incurred by
them
if, in connection with the matters in issue, they acted in good faith, in a
manner they reasonably believed to be in or not opposed to the best interests
of
the corporation, except that no indemnification may be made with respect to
any
claim, issue or matter as to which such person has been adjudged liable for
negligence or misconduct unless the Court of Chancery or the court in which
such
action or suit is brought approves such indemnification. Section 145 further
permits a Delaware corporation to grant its directors and officers additional
rights of indemnification through bylaw provisions and otherwise, and to
purchase indemnity insurance on behalf of its directors and officers.
Indemnification is mandatory to the extent a claim, issue or matter has been
successfully defended.
Article
Ten of our certificate of incorporation and Article VII of our bylaws provide,
in general, that we shall indemnify our directors and officers under certain
of
the circumstances defined in Section 145. We have entered into agreements with
each member of our board of directors pursuant to which it will advance to
each
director costs of litigation in accordance with the indemnification provisions
of our Certificate of Incorporation and bylaws.
|
|
3.7
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
dated August 4, 2004 (filed as Exhibit 3.7 to Harken’s Annual Report on
Form 10-K/A for the period ended December 31, 2004, File
No. 1-10262, and
incorporated by reference herein).
|
|
3.8
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
dated February 22, 2005 (filed as Exhibit 3.8 to Harken’s Annual Report on
Form 10-K/A for the period ended December 31, 2004, File
No. 1-10262, and
incorporated by reference herein).
|
|
4.1
|
|
Form
of certificate representing shares of Harken common stock,
par value $.01
per share (filed as Exhibit 1 to Harken’s Registration Statement on Form
8-A, File No. 1-10262, filed with the SEC on June 1, 1989
and incorporated
by reference herein).
Exhibits.
Exhibit
|
3.1
|
|
Certificate
of Incorporation of Harken Energy Corporation (filed as Exhibit
3.1 to
Harken’s Current Report on Form 8-K dated February 13, 2003, File No.
1-10262, and incorporated by reference herein).
|
|
3.2
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy Corporation
(filed as Exhibit 3.2 to Harken’s Current Report on Form 8-K dated
February 13, 2003, File No. 1-10262, and incorporated by reference
herein).
|
|
3.3
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
(filed as Exhibit 3.3 to Harken’s Current Report on Form 8-K dated
February 13-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
|
|
4.2
|
|
Rights
Agreement, dated as of April 6, 1998, by and between Harken
Energy
Corporation and ChaseMellon Shareholder Services L.L.C.,
as Rights Agent
(filed as Exhibit 4 to Harken’s Current Report on Form 8-K dated April 7,
1998, file No. 1-10262, and incorporated by reference
herein).
|
|
4.3
|
|
Amendment
to Rights Agreement by and between Harken Energy Corporation
and American
Stock Transfer and Trust Company (successor to Mellon Investor
Services
LLC, (formerly known as ChaseMellon Shareholder Services
L.L.C.), as
Rights Agent, dated June 18, 2002 (filed as Exhibit 4.11
to Harken’s
Quarterly Report on Form 10-Q for the period ended September
30, 2002,
File No. 1-10262, and incorporated by reference herein).
|
|
*5.1
|
|
Opinion
of McGuireWoods LLP
|
|
*23.1
|
|
|
|
3.4
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
(filed as Exhibit 3.4 to Harken’s Current Report on Form 8-K dated
February 13, 2003, File No. 1-10262, and incorporated byEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">Consent
of Independent Registered Public Accounting Firm - Ernst
& Young LLP
|
|
*23.2
|
|
Consent
of Independent Registered Public Accounting Firm - BDO Seidman,
LLP
|
|
*23.3
|
|
Consent
of Independent Registered Public Accounting Firm - Hein & Associates,
LLP
|
|
*23.4
|
|
Consent
of Netherland, Sewell & Associates, Inc. (Independent Reserve
Engineers)
|
|
*23.5
|
|
Consent
of Ryder Scott Company (Independent Reserve Engineers)
|
|
23.6
|
|
Consent
of McGuireWoods LLP (contained in Exhibit 5.1)
|
|
*24
|
|
Powers
of Attorney (included in signature page) |
Item
17. Undertakings.
The
undersigned registrants hereby undertake:
| (1) |
To
file, during any period in which offers or sales are being made,
a
post-effective amendment to this registration statement:
|
| (i) |
To
include any prospectus required by Section 10(a)(3) of the Securities
Act
of 1933;
|
| (ii) |
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent
a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease
in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from
the low or high and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC pursuant to
Rule
424(b), if, in the aggregate, the changes in volume and price represent
no
more than a 20 percent change in the maximum aggregate offering price
set
forth in the “Calculation of Registration Fee” table in the effective
registration statement.
|
| (iii) |
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration statement; provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the
information required to be included in a post-effective amendment
by those
paragraphs is contained in periodic reports filed with or furnished
to the
SEC by the registrants pursuant to Section 13 or Section 15(d) of
the
Securities Exchange Act of 1934 that are incorporated by reference
in this
registration statement.
|
| (2) |
That,
for the purpose of determining any liability under the Securities
Act of
1933, each such post-effective amendment shall
be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be
deemed to be the initial bona fide offering thereof.
|
| (3) |
To
remove from registration by means of a post-effective amendment any
of the
securities being registered which remain unsold
at
the termination of the offering.
|
| (4) |
For
purposes of determining any liability under the Securities Act of
1933,
each filing of each such registrant’s annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934
(and, where applicable, each filing of an employee benefit plan’s annual
report pursuant to Section 15(d) of the Securities Exchange Act of
1934)
that is incorporated by reference in the registration statement shall
be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be
deemed to be the initial bona fide offering thereof.
|
| (5) |
Insofar
as indemnification for liabilities arising under the Securities Act
of
1933 may be permitted to directors, officers and controlling persons
of
each registrant pursuant to the foregoing provisions, or otherwise,
the
registrants have been advised that in the opinion of the Securities
and
Exchange Commission such indemnification is against public policy
as
expressed in the Act and is, therefore, unenforceable. In the event
that a
claim for indemnification against such liabilities (other than the
payment
by a registrant of expenses incurred or paid by a director, officer
or
controlling person of such registrant in the successful defense of
any
action, suit or proceeding) is asserted by such director, officer
or
controlling person in connection with the securities being registered,
each registrant agrees that it will, unless in the opinion of its
counsel
the matter has been settled by controlling precedent, submit to a
court of
appropriate jurisdiction the question whether such indemnification
by it
is against public policy as expressed in the Act and will be governed
by
the final adjudication of such issue.
|
| (i) |
For
purposes of determining any liability under the Securities Act of
1933,
the information omitted from the form of prospectus filed as part
of this
registration statement in reliance upon Rule 430A and contained in
a form
of prospectus filed by such registrant pursuant to Rule 424(b)(1)
or (4)
or 497(h) under the Securities Act shall be deemed to be part of
this
registration statement as of the time it was declared effective.
|
| (ii) |
For
the purpose of determining any liability under the Securities Act
of 1933,
each post-effective amendment that contains a form
of
prospectus shall be deemed to be a new registration statement relating
to
the securities offered therein, and the offering of such securities
at
that time shall be deemed to be the initial bona fide offering thereof.
|
Signatures
Pursuant
to the requirements of the Securities Act of 1933, Harken Energy Corporation
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Southlake, State of Texas, on October 24, 2005.
|
HARKEN
ENERGY CORPORATION
|
|
|
| |
|
|
|
| |
|
|
|
| |
|
|
|
|
By:
|
/s/
Mikel D. Faulkner |
|
|
| |
Mikel
D. Faulkner
|
|
|
| |
Chief
Executive Officer
|
|
|
| |
|
|
|
Pursuant
to the requirements of the Securities Act of 1933, this amendment to the
registration statement has been signed by the following persons in the
capacities indicated on October 24, 2005.
|
Name
|
|
|
3.5
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
(filed as Exhibit 3.5 to Harken’s Current Report on Form 8-K dated
February 13, 2003, File No. 1-10262, and incorporated by
reference
herein).
|
|
3.6
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
(filed as Exhibit 3.6 to Harken’s Current Report on Form 8-K dated
February 13, 2003, File No. 1-10262, and incorporated by
reference
herein).
|
|
3.7
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
dated August 4, 2004 (filed as Exhibit 3.7 to Harken’s Annual Report on
Form 10-K/A for the period ended December 31, 2004, File
No. 1-10262, and
incorporated by reference herein).
|
|
3.8
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
dated February 22, 2005 (filed as Exhibit 3.8 to Harken’s Annual Report on
Form 10-K/A for the period ended December 31, 2004, File
No. 1-10262, and
incorporated by reference herein).
|
|
4.1
|
|
Form
of certificate representing shares of Harken common stock,
par value $.01
per share (filed as Exhibit 1 to Harken’s Registration Statement on Form
8-A, File No. 1-10262, filed with the SEC on June 1, 1989
and incorporated
t" colspan="2" valign="top" width="4%" style="BORDER-BOTTOM: medium none"> |
Title
|
| |
|
|
| /s/
Mikel D. Faulkner |
|
Chief
Executive Officer and Director
(Principal
Executive Officer)
|
|
Mikel
D. Faulkner
|
|
|
| /s/
Anna
M. Williams |
|
Vice
President and Chief Financial
(Principal
financial Officer and Principal Accounting Officer)
|
|
Anna
M. Williams
|
|
|
| |
|
|
| /s/
* |
|
Chairman
of the Board of Directors and Director
|
|
|
|
|
| |
|
|
| /s/
* |
|
Director
|
|
Michael
M. Ameen, Jr.
|
|
|
| |
|
|
| /s/
* |
|
Director
|
|
Dr.
J. William Petty
|
|
|
| |
|
|
| /s/
* |
|
Director
|
|
H.
A. Smith
|
|
|
| |
|
|
| *
By: /s/ Anna M. Williams |
|
|
|
Anna
M. Williams, attorney-in-fact
|
|
|
| |
|
|
|
|
|
4.2
|
|
Rights
Agreement, dated as of April 6, 1998, by and between Harken
Energy
Corporation and ChaseMellon Shareholder Services L.L.C.,
as Rights Agent
(filed as Exhibit 4 to Harken’s Current Report on Form 8-K dated April 7,
1998, file No. 1-10262, and incorporated by reference
herein).
|
|
4.3
|
|
Amendment
to Rights Agreement by and between Harken Energy Corporation
and American
Stock Transfer and Trust Company (successor to Mellon Investor
Services
LLC, (formerly known as ChaseMellon Shareholder Services
L.L.C.), as
Rights Agent, dated June 18, 2002 (filed as Exhibit 4.11
to Harken’s
Quarterly Report on Form 10-Q for the period ended September
30, 2002,
File No. 1-10262, and incorporated by reference herein).
|
|
*5.1
|
|
Opinion
of McGuireWoods LLP <2">
Exhibit
Index
Exhibit
|
3.1
|
|
Certificate
of Incorporation of Harken Energy Corporation (filed as Exhibit
3.1 to
Harken’s Current Report on Form 8-K dated February 13, 2003, File
No.
1-10262, and incorporated by reference herein).
|
|
3.2
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
(filed as Exhibit 3.2 to Harken’s Current Report on Form 8-K dated
February 13, 2003, File No. 1-10262, and incorporated by reference
herein).
|
|
3.3
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
(filed as Exhibit 3.3 to Harken’s Current Report on Form 8-K dated
February 13, 2003, File No. 1-10262, and incorporated by reference
herein).
|
|
|
|
*23.1
|
|
Consent
of Independent Registered Public Accounting Firm - Ernst
& Young LLP
|
|
*23.2
|
|
Consent
of Independent Registered Public Accounting Firm - BDO Seidman,
LLP
|
|
*23.3
|
|
Consent
of Independent Registered Public Accounting Firm - Hein & Associates,
LLP
|
|
*23.4
|
|
Consent
of Netherland, Sewell & Associates, Inc. (Independent Reserve
Engineers)
|
|
*23.53.4
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
(filed as Exhibit 3.4 to Harken’s Current Report on Form 8-K dated
February 13, 2003, File No. 1-10262, and incorporated by reference
herein).
|
|
|
|
Consent
of Ryder Scott Company (Independent Reserve Engineers)
|
|
23.6
|
|
Consent
of McGuireWoods LLP (contained in Exhibit 5.1)
|
|
*24
|
|
Powers
of Attorney (included in signature page) |
Item
17. Undertakings.
The
undersigned registrants hereby undertake:
| (1) |
To
file, during any period in which offers or sales are being made,
a
post-effective amendment to this registration statement:
|
| (i) |
To
include any prospectus required by Section 10(a)(3) of the Securities
Act
of 1933;
|
| (ii) |
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent
a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease
in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from
the low or high and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC pursuant to
Rule
424(b), if, in the aggregate, the changes in volume and price represent
no
more than a 20 percent change in the maximum aggregate offering price
set
forth in the “Calculation of Registration Fee” table in the effective
registration statement.
|
| (iii) |
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration statement; provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the
information required to be included in a post-effective amendment
by those
paragraphs is contained in periodic reports filed with or furnished
to the
SEC by the registrants pursuant to Section 13 or Section 15(d) of
the
Securities Exchange Act of 1934 that are incorporated by reference
in this
registration statement.
|
| (2) |
That,
for the purpose of determining any liability under the Securities
Act of
1933, each such post-effective amendment shall
be
deemed to be a new registration statement relating to the securities
offered therein, and the offeringlign="right">3.5
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
(filed as Exhibit 3.5 to Harken’s Current Report on Form 8-K dated
February 13, 2003, File No. 1-10262, and incorporated by reference
herein).
|
|
3.6
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
(filed as Exhibit 3.6 to Harken’s Current Report on Form 8-K dated
February 13, 2003, File No. 1-10262, and incorporated by reference
herein).
|
|
3.7
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
dated August 4, 2004 (filed as Exhibit 3.7 to Harken’s Annual Report on
Form 10-K/A for the period ended December 31, 2004, File No.
1-10262, and
incorporated by reference herein).
|
|
3.8
|
|
Certificate
of Amendment to Certificate of Incorporation of Harken Energy
Corporation
dated February 22, 2005 (filed as Exhibit 3.8 to Harken’s Annual Report on
Form 10-K/A for the period ended December 31, 2004, File No.
1-10262, and
incorporated by reference herein).
|
|
4.1
|
|
Form
of certificate representing shares of Harken common stock,
par value $.01
per share (filed as Exhibit 1 to Harken’s Registration Statement on Form
8-A, File No. 1-10262, filed with the SEC on June 1, 1989 and
incorporated
by reference herein).
|
|
4.2
|
|
Rights
Agreement, dated as of April 6, 1998, by and between Harken
Energy
Corporation and ChaseMellon Shareholder Services L.L.C., as
Rights Agent
(filed as Exhibit 4 to Harken’s Current Report on Form 8-K dated April 7,
1998, file No. 1-10262, and incorporated by reference
herein).
|
|
4.3
|
|
Amendment
to Rights Agreement by and between Harken Energy Corporation
and American
Stock Transfer and Trust Company (successor to Mellon Investor
Services
LLC, (formerly known as ChaseMellon Shareholder Services L.L.C.),
as
Rights Agent, dated June 18, 2002 (filed as Exhibit 4.11 to
Harken’s
Quarterly Report on Form 10-Q for the period ended September
30, 2002,
File No. 1-10262, and incorporated by reference herein).
|
|
| (3) |
To
remove from registration by means of a post-effective amendment any
of the
securities being registered which remain unsold
at
the termination of the offering.
|
| (4) |
For
purposes of determining any liability under the Securities Act of
1933,
each filing of each such registrant’s annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934
(and, where applicable, each filing of an employee benefit plan’s annual
report pursuant to Section 15(d) of the Securities Exchange Act of
1934)
that is incorporated by reference in the registration statement shall
be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be
deemed to be the initial bona fide offering thereof.
|
| (5) |
Insofar
as indemnification for liabilities arising under the Securities Act
of
1933 may be permitted to directors, officers and controlling persons
of
each registrant pursuant to the foregoing provisions, or otherwise,
the
registrants have been advised that in the opinion of the Securities
and
Exchange Commission such indemnification is against public policy
as
expressed in the Act and is, therefore, unenforceable. In the event
that a
claim for indemnification against such liabilities (other than the
payment
by a registrant of expenses incurred or paid by a director, officer
or
controlling person of such registrant in the successful defense of
any
action, suit or proceeding) is asserted by such director, officer
or
controlling person in connection with the securities being registered,
each registrant agrees that it will, unless in the opinion of its
counsel
the matter has been settled by controlling precedent, submit to a
court of
appropriate jurisdiction the question whether such indemnification
by it
is against public policy as expressed in the Act and will be governed
by
the final adjudication of such issue.
|
| *5.1
|
|
Opinion
of McGuireWoods LLP.
|
|
*23.1
|
|
Consent
of Independent Registered Public Accounting Firm - Ernst & Young
LLP
|
|
*23.2
|
|
Consent
of Independent Registered Public Accounting Firm - BDO Seidman,
LLP
|
|
*23.3
|
|
Consent
of Independent Registered Public Accounting Firm - Hein & Associates,
LLP
|
|
*23.4
|
|
Consent
of Netherland, Sewell & Associates, Inc. (Independent Reserve
Engineers)
|
|
*23.5
|
|
Consent
of Ryder Scott Company (Independent Reserve Engineers)
|
|
23.6
|
|
Consent
of McGuireWoods LLP (contained in Exhibit 5.1)
|
|
*24
|
|
Powers
of Attorney (included in signature page)
|
| |
| |