\n ARTICLE VIII
\n TERMINATION, AMENDMENT AND WAIVER<\/p>\n SECTION 8.01 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
\n SECTION 8.02 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
\n SECTION 8.03 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
\n SECTION 8.04 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44<\/p>\n
ARTICLE IX
\n MAXIMUM HARKEN SHARES TO BE ISSUED<\/p>\n
SECTION 9.01 Maximum Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
\n SECTION 9.02 Excess Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
\n SECTION 9.03 Timing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45<\/p>\n
ARTICLE X
\n GENERAL PROVISIONS<\/p>\n
SECTION 10.01 Non-Survival of Representations, Warranties and Agreements. . . . . . . . . . . . . . . . . . 45
\n SECTION 10.02 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
\n SECTION 10.03 Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
\n SECTION 10.04 Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
\n SECTION 10.05 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
\n SECTION 10.06 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
\n SECTION 10.07 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
\n SECTION 10.08 Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
\n SECTION 10.09 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
\n SECTION 10.10 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
\n SECTION 10.11 Parties in Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
\n SECTION 10.12 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
\n SECTION 10.13 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
\n SECTION 10.14 Plan of Reorganization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
\n<\/c><\/s><\/table>\n
(iv)
\n 6
\n SCHEDULE OF EXHIBITS<\/p>\n
Exhibit “A” – Balance Sheet Date Statements<\/p>\n
Exhibit “B-1” – Developed Oil and Gas Leases and Wells,
\n Working Interests and Net Revenue Interests<\/p>\n
Exhibit “B-2” – Other Material Assets<\/p>\n
Exhibit “C” – Reserve Report as of July 1, 1994<\/p>\n
Exhibit “D” – Undeveloped Properties, Working Interests and
\n Stipulated Values<\/p>\n
Exhibit “E-1” – Form of Affiliate Letter<\/p>\n
Exhibit “E-2” – Form of Affiliate Agreement<\/p>\n
Exhibit “F” – Schedule of Holders of Eastern Shelf Override<\/p>\n
Exhibit “G-1” – Schedule of Warrant Exchange<\/p>\n
Exhibit “G-2” – Form of Harken Warrant Agreement<\/p>\n
Exhibit “H-1” – Promissory Note issued to Concorde<\/p>\n
Exhibit “H-2” – Promissory Note issued to EnCap<\/p>\n
Exhibit “H-3” – Promissory Note issued to Langston<\/p>\n
Exhibit “I” – Search Partnerships and Partners<\/p>\n
Exhibit “J” – Note Holder Exchange<\/p>\n
Exhibit “K” – Major Transactions of Search<\/p>\n
Exhibit “L” – Royalty Assignment Agreement<\/p>\n
Exhibit “M” – Provision in Certificate of Incorporation of
\n Merger Sub<\/p>\n
Exhibit “N” – Form of Indemnification Agreement<\/p>\n
(v)
\n 7
\nExhibit “O” – Search Disclosure Schedule<\/p>\n
Exhibit “P” – Harken Disclosure Schedule<\/p>\n
(vi)
\n 8
\n AGREEMENT AND PLAN OF MERGER<\/p>\n
AGREEMENT AND PLAN OF MERGER, dated as of November 8, 1994 (the
\n“Agreement”) among HARKEN ENERGY CORPORATION, a Delaware corporation
\n(“Harken”), SEARCH ACQUISITION CORP., a Delaware corporation and a wholly-owned
\nsubsidiary of Harken (“Merger Sub”), and SEARCH EXPLORATION, INC., a Delaware
\ncorporation (“Search”).<\/p>\n
WHEREAS, upon the terms and subject to the conditions of this
\nAgreement and in accordance with the General Corporation Law of the State of
\nDelaware (“Delaware Law”), Merger Sub will merge with and into Search;<\/p>\n
WHEREAS, the Board of Directors of Search has (i) determined that the
\nMerger (as defined in Section 1.01 hereof) is fair to the holders of Search
\nShares (as defined in Section 1.06 hereof) and in the best interests of such
\nstockholders and (ii) approved and adopted this Agreement and the transactions
\ncontemplated hereby and recommended approval and adoption of this Agreement by
\nthe stockholders of Search; and<\/p>\n
WHEREAS, the Board of Directors of Harken has determined that the
\nMerger is fair to and in the best interests of its stockholders;<\/p>\n
NOW, THEREFORE, in consideration of the foregoing and the mutual
\ncovenants and agreements herein contained, and intending to be legally bound
\nhereby, Harken, Merger Sub and Search hereby agree as follows:<\/p>\n
ARTICLE I
\n THE MERGER<\/p>\n
SECTION 1.01 The Merger. Upon the terms and subject to the conditions
\nset forth in this Agreement, and in accordance with Delaware Law, at the
\nEffective Time (as defined in Section 1.02 hereof) Search and Merger Sub shall
\nconsummate a merger (the “Merger”) in which Search shall be merged with and
\ninto Merger Sub and the separate corporate existence of Search shall cease and
\nMerger Sub shall be the surviving corporation. The corporation surviving the
\nMerger is sometimes hereinafter referred to as the “Surviving Corporation.”<\/p>\n
SECTION 1.02 The Closing; Effective Time. Subject to the terms and
\nconditions of this Agreement, the closing of the Merger (the “Closing”) shall
\ntake place (a) at the offices of Harken located at 2505 N. Highway 360, Suite
\n800, Grand Prairie, Texas 75050, at 10:00 a.m., local time, on the first
\nbusiness day immediately following the day on which the last to be fulfilled or
\nwaived of the conditions set forth in Article VI shall be fulfilled or waived
\nin accordance herewith or (b) at such other time, date or place as Harken and
\nSearch may agree. The date on which the Closing occurs is hereinafter referred
\nto as the “Closing Date.”
\n 9
\n The parties hereto shall cause a Certificate of Merger meeting the
\nrequirements of Delaware Law to be properly executed and filed in accordance
\nwith Delaware Law on the Closing Date. The Merger shall become effective at
\nthe time of filing of the Certificate of Merger with the Secretary of State of
\nthe State of Delaware in accordance with Delaware Law or at such later time
\nwhich the parties hereto shall have agreed upon and designated in such filing
\nas the effective time of the Merger (the “Effective Time”).<\/p>\n
SECTION 1.03 Effect of the Merger. At the Effective Time, the effect
\nof the Merger shall be as provided in the applicable provisions of Delaware
\nLaw. Without limiting the generality of the foregoing, and subject thereto, at
\nthe Effective Time, except as otherwise provided herein, all the property,
\nrights, privileges, powers and franchises of Search and Merger Sub shall vest
\nin the Surviving Corporation, and all debts, liabilities and duties of Search
\nand Merger Sub shall become the debts, liabilities and duties of the Surviving
\nCorporation.<\/p>\n
SECTION 1.04 Certificate of Incorporation; By-Laws.<\/p>\n
(a) The Certificate of Incorporation of Merger Sub, as in effect
\nimmediately prior to the Effective Time, shall be the Certificate of
\nIncorporation of the Surviving Corporation until thereafter amended as provided
\nby Delaware Law.<\/p>\n
(b) The By-Laws of Merger Sub, as in effect immediately prior to
\nthe Effective Time, shall be the By-Laws of the Surviving Corporation until
\nthereafter amended as provided by Delaware Law, the Certificate of
\nIncorporation of the Surviving Corporation, and such By-Laws.<\/p>\n
SECTION 1.05 Directors and Officers. The directors of Merger Sub
\nserving immediately prior to the Effective Time shall be the directors of the
\nSurviving Corporation as of the Effective Time, and the officers of Merger Sub
\nserving immediately prior to the Effective Time shall be the officers of the
\nSurviving Corporation as of the Effective Time, in each case until their
\nrespective successors are duly elected or appointed and qualified in accordance
\nwith applicable law.<\/p>\n
SECTION 1.06 Conversion of Stock. At the Effective Time:<\/p>\n
(a) Each share of Common Stock, $.05 par value, of Search then
\nissued and outstanding (the “Search Common Stock”) (other than Appraisal Shares
\n(as defined and to the extent provided in Section 1.11(b) hereof)) shall, by
\nvirtue of the Merger and without any action on the part of the holder thereof,
\nbe converted into and represent the right to receive and shall be exchangeable
\nfor, as provided in Section 1.09 hereof, a share (or shares or a fraction
\nthereof) of the common stock, $.01 par value per share, of Harken (the “Harken
\nCommon Stock”) equal to the Exchange Ratio (as defined in Section 10.03
\nhereof). In addition, the holder of a share of Search Common Stock then issued
\nand outstanding (other than Appraisal Shares) shall be entitled to receive from
\nHarken, under certain conditions, shares of Harken Common Stock as provided in
\nSection 1.10 hereof.<\/p>\n
2
\n 10
\n (b) Each share of Preferred Stock, $.001 par value, of Search then
\nissued and outstanding (the “Search Preferred Stock”) (other than Appraisal
\nShares (to the extent provided in Section 1.11(b) hereof)) shall, by virtue of
\nthe Merger and without any action on the part of the holder thereof, be
\nconvertible into and represent the right to receive and shall be exchangeable
\nfor, as provided in Section 1.09 hereof, a share (or shares or a fraction
\nthereof) of Harken Common Stock equal to the Preferred Exchange Ratio (as
\ndefined in Section 10.03 hereof).<\/p>\n
(c) Each share of Search Common Stock and\/or Search Preferred
\nStock (such Search Common Stock and Search Preferred Stock being hereinafter
\ncollectively referred to as the “Search Shares”) then held in the treasury of
\nSearch, if any, shall, by virtue of the Merger, be cancelled without payment of
\nany consideration therefore and without any conversion thereof.<\/p>\n
SECTION 1.07 Conversion of Notes. At the Effective Time, each of the
\nConcorde Note, EnCap Note, and Langston Note (each of which is described in
\nSection 5.07 hereof and hereinafter collectively referred to as the “Notes”)
\nshall, pursuant to its terms, be converted into and represent the right to
\nreceive and shall be exchangeable for the number of whole shares of Harken
\nCommon Stock determined by dividing the principal amount of each Note by the
\nStrike Price (as defined in Section 10.03 hereof) as provided in Section 1.09
\nhereof. In addition, the holders of the Concorde Note and EnCap Note shall be
\nentitled to receive from Harken, under certain conditions, shares of Harken
\nCommon Stock as provided in Section 1.10 hereof. Exhibit “J,” attached hereto,
\nsets forth a schedule of the holders of such Notes, the amount of such Notes
\nand the number of shares of Harken Common Stock to be issued hereunder to each
\nholder of such Notes.<\/p>\n
SECTION 1.08 Exchange of Eastern Shelf Overriding Royalty. At the
\nEffective Time, the Royalty Holders (as defined in Section 5.16 hereof), shall
\nhave the right to receive, under certain conditions, shares of Harken Common
\nStock as provided in Section 1.10 hereof pursuant to the terms of the Royalty
\nAssignment Agreement (as defined in Section 5.16 hereof).<\/p>\n
SECTION 1.09 Exchange.<\/p>\n
(a) Pursuant to an agreement to be entered into on or before the
\nEffective Time among Harken, Search and an exchange agent (the “Exchange
\nAgent”) to be chosen by Harken, the Exchange Agent will distribute the Harken
\nCommon Stock issued pursuant to Sections 1.06 and 1.07 hereof. Except as
\notherwise provided in this Agreement, upon surrender to the Exchange Agent of
\nthe Letter of Transmittal (provided by the Exchange Agent to the holders of the
\nSearch Shares and the Notes promptly after the Effective Time for such
\npurpose), duly completed and validly executed in accordance with the
\ninstructions thereto accompanied by the certificates that, immediately prior to
\nthe Effective Time shall have evidenced Search Shares and the Notes to be
\nexchanged pursuant to the Merger (the “Search Certificates”) and such other
\ndocuments as may be requested, Harken shall cause to be distributed to the
\nperson in whose name such Search Certificates shall have been registered
\ncertificates registered in the name of such person representing the number of
\nwhole shares of Harken Common Stock into which any shares<\/p>\n
3
\n 11
\npreviously represented by the Search Certificates shall have been converted at
\nthe Effective Time, and a letter from Harken to the holders of the Search
\nCommon Stock, the Concorde Note and the EnCap Note, setting forth the right of
\nsuch holder’s to receive, under certain conditions, additional shares of Harken
\nCommon Stock pursuant to the terms of Section 1.10 hereof (the “Stock
\nConsideration”). No fractional shares of Harken Common Stock shall be issued
\nor delivered pursuant to this Section 1.09 and Section 1.08. Should any holder
\nof the Search Shares or the Notes be entitled to a fractional share interest in
\nHarken Common Stock pursuant to this Section 1.09 and Section 1.08, Harken
\nshall deliver to such holder that number of shares of Harken Common Stock to
\nwhich such holder is entitled rounded up to the nearest whole number. Until
\nsurrendered as contemplated by the preceding sentence, each certificate that
\nimmediately prior to the Effective Time shall have represented any Search
\nShares or the Notes shall be deemed at and after the Effective Time to
\nrepresent only the right to receive upon such surrender the certificates
\nrepresenting Harken Common Stock and, as applicable, the right to receive,
\nunder certain conditions, additional shares of Harken Common Stock. Search
\nCertificates surrendered for exchange by any person constituting an “affiliate”
\nof Search for purposes of Rule 145(c) under the Securities Act of 1933, as
\namended (the “Securities Act”), shall not be exchanged until Harken has
\nreceived a written agreement from such person as provided in Section 5.06
\nhereof.<\/p>\n
(b) No holder of any unsurrendered certificates representing
\nSearch Shares or the Notes shall be entitled to any rights as a stockholder of
\nHarken until his certificates shall be surrendered and exchanged for Harken
\nCommon Stock as provided herein. No dividends or other distributions declared
\nafter the Effective Time with respect to Harken Common Stock and payable to the
\nholders of record thereof after the Effective Time shall be paid to the holder
\nof any unsurrendered Search Certificates with respect to which the shares of
\nHarken Common Stock may be issued in the Merger until such Search Certificates
\nshall be surrendered and exchanged as provided herein. Subject to the effect
\nof applicable laws, following surrender of any Search Certificate, there shall
\nbe paid to the holder of such certificate representing whole shares of Harken
\nCommon Stock issued in exchange therefor, without interest, (i) at the time of
\nsuch surrender, the amount of dividends or other distributions with a record
\ndate after the Effective Time theretofore payable with respect to such whole
\nshares of Harken Common Stock and not paid, less the amount of any withholding
\ntaxes which may be required thereon, and (ii) at the appropriate payment date,
\nthe amount of dividends or other distributions with a record date after the
\nEffective Time but prior to surrender and a payment date subsequent to
\nsurrender payable with respect to such whole shares of Harken Common Stock,
\nless the amount of any withholding taxes which may be required thereon.<\/p>\n
(c) If the Harken Common Stock is to be issued to a person other
\nthan the person in whose name a Search Certificate is registered, it shall be a
\ncondition to such payment or issuance that the Search Certificate so
\nsurrendered shall be properly endorsed or shall be otherwise in proper form for
\ntransfer and that the person requesting such payment or issuance shall have
\npaid any transfer and other taxes required by reason of such payment or
\nissuance in a name other than that of the registered holder of the Search
\nCertificate surrendered or shall have established to the satisfaction of Harken
\nor the Exchange Agent that such tax either has been paid or is not payable.<\/p>\n
4
\n 12
\n (d) All rights to receive the Stock Consideration into which
\nSearch Shares and the Notes shall have been converted pursuant to this Article
\nI shall be deemed to have been paid or issued in full satisfaction of all
\nrights pertaining to such Search Shares and the Notes.<\/p>\n
(e) Neither the Exchange Agent, Harken nor any party hereto shall
\nbe liable to a holder of Search Shares or the Notes for any amount properly
\npaid to a public official pursuant to any applicable property, escheat or
\nsimilar law.<\/p>\n
(f) In the event any Search Certificates shall have been lost,
\nstolen or destroyed, upon the making of an affidavit of that fact by the person
\nclaiming such Search Certificate to be lost, stolen or destroyed, Exchange
\nAgent will issue in exchange for such lost, stolen or destroyed Search
\nCertificate the Stock Consideration deliverable in respect thereof as
\ndetermined in accordance with this Article I. When authorizing such issue of
\nthe Stock Consideration in exchange therefore the Exchange Agent shall, as a
\ncondition precedent to the issuance thereof, require the owner of such lost,
\nstolen or destroyed Search Certificate to give Harken a bond in such sum as the
\nExchange Agent reasonably determines to be appropriate as indemnity against any
\nclaim that may be made against Harken or the Surviving Corporation with respect
\nto the Search Certificate alleged to have lost, stolen or destroyed.<\/p>\n
(g) No interest shall be paid or accrued on any portion of the
\nStock Consideration.<\/p>\n
SECTION 1.10 Contingent Shares.<\/p>\n
(a) Additional shares of Harken Common Stock (the “Contingent
\nShares”) shall be distributed by Harken to the parties described in Section
\n1.10(d) hereof (the “Rights Holders”) to the extent the Valuation (as
\nhereinafter defined) of the group of undeveloped leases and properties
\ndescribed on Exhibit “D” attached hereto (the “Undeveloped Properties”) as of
\nJune 30, 1996 (the “Valuation Date”) exceeds the aggregate of the stipulated
\nvalues set forth on Exhibit “D” attached hereto (the “Stipulated Value”).<\/p>\n
(b) Harken will cause a reserve report (the “Report”) covering the
\nUndeveloped Properties to be prepared by Dupont, Gaffney Cline, or such other
\nindependent petroleum engineer. Such Report will be prepared based on an SEC
\nCase (as defined below) and will calculate a valuation (the “Valuation”) of
\nthese Undeveloped Properties as of the Valuation Date in accordance with this
\nSection 1.10(b) hereof. The Valuation shall be further adjusted based upon the
\nproduct of eighty percent (80%) multiplied by the present value of future net
\ncash flows before income taxes (the product of such amounts is hereinafter
\nreferred to as the “Present Value”) of Harken’s or its affiliate’s interest as
\nof the Valuation Date in the proved reserves of the Undeveloped Properties, as
\nestablished by the Report. The Present Value will be further adjusted (as so
\nadjusted, the “Adjusted Present Value”) for geological risks based upon reserve
\ncategories of the Undeveloped Properties as of the Valuation Date as set out
\nbelow:<\/p>\n
5
\n 13
\n 0% reduction for proved developed producing reserves.
\n 20% reduction for proved developed non-producing reserves.
\n 40% reduction for proved undeveloped reserves.<\/p>\n
The Valuation shall equal the Adjusted Present Value: (i) plus 100% of
\nthe market value of any proceeds (including notes or securities) received by
\nHarken or any of its affiliates from any prospect sales, farmouts, or joint
\nventure arrangements of or with respect to any of the Undeveloped Properties or
\nany other consideration received upon the disposition of an oil and gas
\ninterest in the Undeveloped Properties plus 80% of the net revenue (calculated
\nbefore income taxes and after deduction of lease operating expenses) from sales
\nof oil and\/or gas produced from such Undeveloped Properties during the
\nDevelopment Period; (ii) less 100% of any direct costs, direct expenses, and
\ndirect charges (in each case not associated with oil or gas production and
\nwhich are not otherwise taken into account in the Report) incurred or accrued
\nby Harken or its affiliates with respect to the Undeveloped Properties for the
\nperiod of time from the Effective Time to the Valuation Date (the “Development
\nPeriod”), including an appropriate amount of “overhead,” which is hereby
\nstipulated to be $180,000; (iii) less 100% of the Stipulated Value; (iv) less
\n100% of the Reserve Deficiency set forth in Section 1.10(i) hereof; and (v)
\nless 100% of the Adverse Consequences set forth in Section 1.10(j) hereof. The
\nabove calculation shall be made without any duplication of additions or charges
\nand with respect to clauses (i) and (ii) above shall be made using an accrual
\nmethod of accounting.<\/p>\n
For purposes of this Section 1.10, “SEC Case” means the present value
\nof estimated future net revenues, before taxes, of the specified reserves or
\nproperty, determined in all material respects in accordance with the rules and
\nregulations of the Securities Exchange Commission (the “SEC”) using prices and
\ncosts in effect on the Valuation Date.<\/p>\n
(c) The number of Contingent Shares to be issued shall equal the
\nquotient of the Valuation divided by the average closing sales price of Harken
\nCommon Stock for the 90 days immediately preceding the Valuation Date (the
\n“Contingent Share Price”).<\/p>\n
(d) The Contingent Shares, and a letter from the chief financial
\nofficer of Harken describing the calculations made in determining the number of
\nContingent Shares, shall be distributed on or about September 30, 1996 (the
\n“Settlement Date”) as follows:<\/p>\n
(i) Two percent (2%) of the Contingent Shares shall be
\ndistributed to Concorde Financial Corporation (“Concorde”).<\/p>\n
(ii) Two percent (2%) of the Contingent Shares shall be
\ndistributed to EnCap Investments L.C. (“EnCap”).<\/p>\n
(iii) That number of Contingent Shares equal to the
\nquotient of the Value of the Eastern Shelf Properties (as hereinafter defined)
\ndivided by the Contingent Share Price shall be distributed to the Royalty
\nHolders which Contingent Shares shall be distributed among the Royalty<\/p>\n
6
\n 14
\nHolders in proportion to the interest in the Eastern Shelf Properties (as
\ndefined in Section 5.16 hereof) conveyed by a Royalty Holder and the interest
\nin the Eastern Shelf Properties conveyed by all Royalty Holders. For purposes
\nof this Section 1.10(d) “Value of the Eastern Shelf Properties” shall mean the
\namount equal to a two percent overriding royalty interest in the Eastern Shelf
\nProperties as determined in the Report.<\/p>\n
(iv) The remainder of the Contingent Shares shall be
\ndistributed to the Record Holders, with each such Record Holder receiving that
\nfraction of such Contingent Shares as equal to the quotient of the number of
\nshares of Harken Common Stock into which such holders’ Search Shares or the
\nLangston Note were converted at the Effective Time (not including Contingent
\nShares) plus the number of shares, if any, of Harken Common Stock received by
\nthe Record Holder upon the exercise of Harken Warrants (as defined in Section
\n7.01 hereof) or Unexchanged Search Warrants divided by the number of shares of
\nHarken Common Stock into which all Record Holders’ Search Shares and the
\nLangston Note were converted at the Effective Time (not including Contingent
\nShares) plus the number of shares of Harken Common Stock received upon the
\nexercise of all Harken Warrants or Unexchanged Search Warrants.<\/p>\n
For purposes of this Section 1.10, “Record Holder” shall mean a holder
\nof record of Search Common Stock, or the Unexchanged Search Warrants at the
\nEffective Time or a holder of Search Warrants that were exchanged for Harken
\nWarrants at the Effective Time.<\/p>\n
(e) As soon as practicable after the date all Unliquidated Losses
\n(as defined in Section 1.10(j) hereof) have become liquidated losses,
\nliabilities, damages, fees or expenses actually suffered or incurred by Harken,
\nHarken shall determine the amount, if any, that the Unliquidated Losses exceed
\nsuch liquidated amount actually suffered or incurred by Harken (the “Excess
\nAmount”). Harken shall then distribute to the Rights Holders (excluding the
\nRoyalty Holders), in accordance with the provisions of Sections 1.10(d) and
\n1.10(h) hereof, the number of additional Contingent Shares equal to the
\nquotient of the Excess Amount divided by the Contingent Share Price (the “Final
\nSettlement Date”).<\/p>\n
(f) During the Development Period, Harken shall, through Merger
\nSub, as its wholly-owned subsidiary, own, hold and manage the Undeveloped
\nProperties. Harken may sell, farmout, develop or otherwise deal in these
\nUndeveloped Properties during the Development Period in a manner which, in its
\njudgment, optimizes the full potential of these properties under the
\ncircumstances then existing. During the Development Period, Harken will cause
\na maximum of $600,000 (the “Development Amount”) to be expended in the further
\nexploration and\/or development of the Undeveloped Properties as described in
\nthe development plan set forth in Exhibit “D”. In the event that an
\ninsufficient number of the wells drilled on the Undeveloped Properties during
\nthe Development Period are determined to be commercial to warrant to Harken the
\nprudent expenditure of the full Development Amount or otherwise which would
\njustify further development and expenditures to a reasonable, prudent operator,
\nthen Harken shall not be required nor obligated to cause any additional minimum
\ninvestments to be made on such Undeveloped Properties even if the Development
\nAmount has not yet been expended in full.<\/p>\n
7
\n 15
\n During the Development Period, Harken shall cause all production of
\noil and gas from the Undeveloped Properties to be sold to non-affiliates
\npursuant to bona fide contracts providing for the highest price reasonably
\nattainable through good faith negotiations as of the date of each such
\ncontract.<\/p>\n
(g) As soon as practicable, but in any event within 90 days, after
\nJune 30, 1995 and December 31, 1995, Harken will provide to the Rights Holders
\na interim report regarding the status of development and production activities
\non the Undeveloped Properties.<\/p>\n
(h) On the Settlement Date (and on the Final Settlement Date),
\nHarken shall deliver to each of the Rights Holders, at the addresses of the
\nRights Holders as they appear on the stock records of Search at the Effective
\nTime (or, in the case of Concorde, EnCap or the Royalty Holders, at such
\naddress as may be specified in writing after the date hereof by Concorde, EnCap
\nand the Royalty Holders, respectively) or at such other addresses as Rights
\nHolders shall provide to Harken by written notice, certificates representing
\nthe number of shares of Harken Common Stock payable to such Rights Holder
\npursuant to this Section 1.10. No fractional shares of Harken Common Stock
\nshall be issued or delivered pursuant to this Section 1.10. Should any Rights
\nHolder be entitled to a fractional share interest in Harken Common Stock
\npursuant to this Section 1.10, Harken shall deliver to such Rights Holder that
\nnumber of shares of Harken Common Stock to which such Rights Holder is entitled
\nrounded up to the nearest whole number. In the event of any stock split, stock
\ndividend, reclassification, merger, or consolidation occurring on or after 90
\ndays immediately preceding the Valuation Date, the number of shares of Harken
\nCommon Stock distributable to the Rights Holders in accordance with this
\nSection 1.10 shall be appropriately adjusted to accord the equitable benefit of
\nsuch changes to the Rights Holders. Dividends and other distributions with
\nrespect to Harken Common Stock declared after the Settlement Date and payable
\nto the holders of record thereof after the Settlement Date shall be payable to
\nthe Rights Holders with respect to the shares of Harken Common Stock to be
\ndelivered pursuant to this Section 1.10; provided, however, no such payment
\nshall be made unless and until a certificate representing the Contingent Shares
\nshall have been delivered to the Rights Holders. No dividends payable to
\nholders of record of shares of Harken Common Stock prior to the Settlement Date
\nshall be paid to the Rights Holders with respect to such Contingent Shares.
\nThe right of each Right Holder to receive shares of Harken Common Stock
\npursuant to this Agreement may not be assigned or transferred in any manner
\nwhatsoever except by operation of law or by will.<\/p>\n
(i) The reserve report dated as of July 1, 1994 is attached hereto
\nas Exhibit “C” covering and evaluating each of the leases, wells and prospects
\nof Search and its subsidiaries (the “Reserve Report”). If the aggregate value
\nof the oil and gas reserves attributed to all of such properties pursuant to a
\nsubsequent reserve report to be prepared as of December 31, 1994 (the
\n“Subsequent Report”) is less in value than the aggregate value of all of such
\nproperties as set forth in the Reserve Report after giving credit for actual
\nproduction from such properties for the period of time from July 1, 1994 to
\nDecember 31, 1994 (the “Reserve Deficiency”), the Valuation shall be adjusted
\nby such Reserve Deficiency as set forth in Section 1.10(b) hereof. The
\nSubsequent Report will be prepared by a reserve engineering firm known in the
\noil and gas industry and<\/p>\n
8
\n 16
\nchosen by Harken in good faith, based upon the same pricing and substantially
\nthe same parameters and criteria as used in the properties of the Reserve
\nReport. The parties hereby agree that either or both parties current reserve
\nengineers, Dupont and Gaffney Cline, are deemed to be acceptable for
\npreparation of the Subsequent Report.<\/p>\n
(j) In the event Search breaches any of its representations,
\nwarranties and covenants contained in this Agreement, subject to an applicable
\nsurvival period pursuant to Section 10.01 hereof, then Harken, as provided in
\nSection 1.10(b) hereof and this Section 1.10(j), may deduct from the amount of
\nthe Valuation, if any, the entirety of any Adverse Consequences (as defined
\nbelow) resulting from, arising out of, relating to, or caused by such breach;
\nprovided, however, that no amount shall be deducted from the Valuation until
\nHarken has suffered Adverse Consequences by reason of all such breaches equal
\nto or in excess of $100,000 (at which point the entire amount of such Adverse
\nConsequences will be deducted relating back to the first dollar). Solely for
\npurposes of this Section 1.10 and in calculating the amount of the Adverse
\nConsequences, any representation, warranty or covenant made by Search in this
\nAgreement shall be read and interpreted as if the qualification stated therein
\nwith respect to materiality or Material Adverse Effect were not contained
\ntherein.<\/p>\n
As used in this Section 1.10, “Adverse Consequences” means (a) the
\namount of any and all liquidated losses, liabilities or damages (including
\nreasonable amounts paid in settlement) actually suffered or incurred by Harken
\nas a result of a breach by Search of any of its representations, warranties or
\ncovenants contained in this Agreement; (b) the amount of any and all
\nunliquidated losses, liabilities or damages as reasonably estimated in good
\nfaith by Harken to be suffered or incurred by Harken as a result of a breach by
\nSearch of any of its representations, warranties or covenants contained in this
\nAgreement; and (c) all reasonable fees and expenses, including attorneys’ fees
\nand court costs, actually incurred by Harken or reasonably estimated in good
\nfaith by Harken to be incurred in connection with any claim, action, suit,
\nproceeding or demand relating to a breach by Search of any of its
\nrepresentations, warranties or covenants. As a condition precedent to its
\nability to make an adjustment to the Valuation for Adverse Consequences
\nrelating to any loss, liability or damage actually suffered or incurred or
\nestimated to be suffered or incurred by Harken as contemplated by the preceding
\nprovisions and which arises by virtue of a claim, action, suit, proceeding or
\ndemand of a third party, Harken must have used commercially reasonable efforts
\nto defend against or otherwise challenge the merits of such claim, action,
\nsuit, proceeding or demand. The amount of unliquidated losses, liabilities,
\ndamages, fees and expenses reasonably estimated in good faith by Harken shall
\nhereinafter be referred to as “Unliquidated Losses.”<\/p>\n
(k) The number of Contingent Shares to be issued pursuant to this
\nSection 1.10 is subject to the Maximum Share Limit as set forth in Article IX
\nhereof.<\/p>\n
(l) The parties hereto agree that Harken’s obligation to issue
\nContingent Shares is conditional in nature, and Harken may never make any
\nadditional payments beyond those shares<\/p>\n
9
\n 17
\nof Harken Common Stock issued as of the Effective Time or upon the exercise of
\nthe Harken Warrants or the Unexchanged Search Warrants.<\/p>\n
SECTION 1.11 Appraisal Shares.<\/p>\n
(a) Search shall give Harken (i) prompt notice of any threat or
\nactual assertions of appraisal rights received by Search from any of its
\nstockholders (“Search Stockholders”) who may be attempting to exercise their
\nright to receive payment of the “fair value” of these Search Shares in
\naccordance with Delaware Law, as well as any withdrawals of any such
\nassertions, and any other instruments served pursuant to Delaware Law and
\nreceived by Search or any of its affiliates, subsidiaries, officers, directors
\nor agents and (ii) the opportunity to direct with the consent of Search all
\nnegotiations and proceedings with respect to assertions of appraisal rights
\nunder Delaware Law. Search shall not, except with the prior written consent of
\nHarken, make any payment with respect to any assertions of appraisal rights or
\nsettle any such assertions.<\/p>\n
(b) In the event any Search Stockholder(s) give notice that they
\nintend to exercise appraisal rights and such number of Search Shares dissenting
\ndoes not exceed 5% of the outstanding Search Shares then in such event such
\nSearch Shares that are outstanding immediately prior to the Effective Time and
\nthat are held by stockholders who have not voted in favor of the Merger or
\nconsented thereto in writing and who shall have properly exercised their right
\nof appraisal and receive payment of the “fair value” of his Search Shares in
\naccordance with Delaware Law (collectively, the “Appraisal Shares”) shall not
\nbe converted into or represent the right to receive the Stock Consideration,
\nexcept that any Appraisal Shares held by stockholders who shall have failed to
\nperfect or shall have effectively withdrawn or lost their rights of appraisal
\nunder Delaware Law shall thereupon be deemed to have been converted into and to
\nhave become exchangeable for, as of the Effective Time, the right to receive
\nthe Stock Consideration, as determined in accordance with Section 1.06 hereof
\nupon surrender of the certificate or certificates formerly representing such
\nSearch Shares.<\/p>\n
SECTION 1.12 Stock Transfer Books. At the Effective Time, the stock
\ntransfer books of Search shall be closed and there shall be no further
\nregistration of transfers of shares of Search Shares and the Search Warrants
\nthereafter on the records of Search. From and after the Effective Time, the
\nholders of certificates evidencing ownership of Search Shares or the Notes
\noutstanding immediately prior to the Effective Time shall cease to have any
\nrights with respect to such shares or the notes except as otherwise provided
\nherein or by law.<\/p>\n
SECTION 1.13 Adjustments. If, between the date of this Agreement and
\nthe Effective Time, the outstanding shares of Harken Common Stock shall have
\nbeen changed into a different number of shares or a different class by reason
\nof any recapitalization, reorganization, or any split-up or combination, or a
\nstock dividend or distribution thereon shall be declared with a record date
\nwithin said period, or for any other reason except for those enumerated in
\nSections 4.02(b)(iii) and (iv) hereof, the number and class of shares of Harken
\nCommon Stock to be issued<\/p>\n
10
\n 18
\nand delivered at the Effective Time in exchange for each outstanding share of
\nthe Search Shares shall be proportionately adjusted.<\/p>\n
SECTION 1.14 Fractional Shares. No fractional share of Harken Common
\nStock shall be issued in the Merger. The total number of shares of Harken
\nCommon Stock that any person shall have a right to receive under this Agreement
\nwill be rounded up to the nearest whole share of Harken Common Stock.<\/p>\n
SECTION 1.15 Unexchanged Search Warrants. Search Warrants (as
\ndefined in Section 2.03 hereof) outstanding at the Effective Time and which
\nhave not been tendered pursuant to Article VII (the “Unexchanged Search
\nWarrants”) shall remain outstanding and shall be exercisable pursuant to their
\nterms following the Effective Time; provided, however, that if the Unexchanged
\nSearch Warrants do not contain express provisions regarding the exercise price
\nand the type and number of securities such warrant is exercisable for after the
\nMerger, the Unexchanged Search Warrants shall be treated in the following
\nmanner:<\/p>\n
At the Effective Time, such Unexchanged Search Warrants shall be
\n exercisable upon the same terms and conditions as the applicable
\n Search Warrant except that each such Unexchanged Search Warrant shall
\n be exercisable for that whole number of shares of Harken Common Stock
\n equal to the product of the number of shares of Search Common Stock
\n covered by the Unexchanged Search Warrant immediately prior to the
\n Effective Time multiplied by the Exchange Ratio rounded up to the
\n nearest whole number of shares of Harken Common Stock, and the per
\n share exercise price for the shares of Harken Common Stock issuable
\n upon the exercise of such Unexchanged Search Warrant shall be equal to
\n the quotient determined by dividing the exercise price per share of
\n Search Common Stock specified for such Unexchanged Search Warrant
\n under the applicable agreement immediately prior to the Effective Time
\n by the Exchange Ratio rounding the resulting exercise price down to
\n the nearest whole cent. In addition, a Record Holder of an
\n Unexchanged Search Warrant who has exercised such warrant in whole or
\n in part shall have the right to receive Contingent Shares, if any, as
\n set forth in Section 1.10 hereof.<\/p>\n
ARTICLE II
\n REPRESENTATIONS AND WARRANTIES OF SEARCH<\/p>\n
Search hereby represents and warrants to Harken and Merger Sub as
\nfollows:<\/p>\n
SECTION 2.01 Organization and Qualifications; Subsidiaries. Each of
\nSearch and each of its subsidiaries is a corporation duly organized, validly
\nexisting and in good standing under the laws of the jurisdiction of its
\nincorporation and has the requisite corporate power and authority and is in
\npossession of all franchises, grants, authorizations, licenses, permits,
\neasements,<\/p>\n
11
\n 19
\nconsents, certificates, approvals, and orders (“Approvals”) necessary to own,
\nlease and operate its properties and to carry on its business as it is now
\nbeing conducted, except where the failure to be so organized, existing and in
\ngood standing or to have such power, authority and Approvals would not,
\nindividually or in the aggregate, have a Material Adverse Effect (as defined
\nbelow). Neither Search nor any subsidiary has received any notice of
\nproceedings relating to the revocation or modification of any such Approvals.
\nEach of Search and each of its subsidiaries is duly qualified or licensed as a
\nforeign corporation to do business, and is in good standing, in each
\njurisdiction where the character of its properties owned, leased or operated by
\nit or the nature of its activities makes such qualification or licensing
\nnecessary, except for such failures to be so duly qualified or licensed and in
\ngood standing that would not, either individually or in the aggregate, have a
\nMaterial Adverse Effect. When used in connection with Search or any of its
\nsubsidiaries, the term “Material Adverse Effect” means any change or effect
\nthat is or is reasonably likely to be materially adverse to the business,
\noperations, properties (including intangible properties), condition (financial
\nor otherwise), assets or liabilities (including contingent liabilities) of
\nSearch and its subsidiaries taken as a whole or which would reasonably be
\nexpected to have an adverse financial statement impact to Search and its
\nsubsidiaries taken as a whole of $100,000 or more. A true and complete
\nschedule listing of all of Search’s and all of its subsidiaries, together with
\nthe jurisdiction of incorporation of each, the percentage of each subsidiary’s
\noutstanding capital stock owned by Search or another Search subsidiary, the
\ncapitalization and outstanding shares of each, is set forth in the Disclosure
\nSchedule prepared by Search attached hereto as Exhibit “O”(the “Search
\nDisclosure Schedule”). Except for such subsidiaries and as set forth in the
\nSearch Distribution Schedule, Search does not directly or indirectly own any
\nmajority equity or similar interest in, or any interest convertible into or
\nexchangeable or exercisable for, any equity or similar interest in, any
\ncorporation, partnership, joint venture or other business association or
\nentity, other than partnerships which are entered into in the ordinary course
\nof business.<\/p>\n
SECTION 2.02 Certificate of Incorporation and By-Laws. Search has
\nheretofore furnished to Harken a complete and correct copy of the Certificate
\nof Incorporation and the By-Laws, each as amended to date, of Search and each
\nof its subsidiaries. Such Certificate of Incorporation, By-Laws and the
\nequivalent organizational documents of each of its subsidiaries are in full
\nforce and effect. Neither Search nor any of its subsidiaries is in violation
\nof any of the provisions of its Certificate of Incorporation or By-Laws or
\nequivalent organizational documents.<\/p>\n
SECTION 2.03 Capitalization. The authorized capital stock of Search
\nconsists of 20,000,000 shares of Search Common Stock and 5,000,000 shares of
\nSearch Preferred Stock. As of the date hereof, (i) 3,690,632 shares of Search
\nCommon Stock are issued and outstanding, all of which are validly issued, fully
\npaid and non-assessable and free of preemptive rights with no personal
\nliability attaching to the ownership thereof; (ii) 575,000 shares of Search
\nPreferred Stock are issued and outstanding, all of which are validly issued,
\nfully paid and non-assessable, all dividends due thereunder are fully paid
\nthrough the date hereof, and such Search Preferred Stock is free of preemptive
\nrights with no personal liability attaching to the ownership thereof; (iii) no
\nshares of the Search Shares are held in the treasury of Search; (iv) other than
\nan aggregate total of 989,000 shares of Search Common Stock reserved for
\nissuance upon the exercise of outstanding<\/p>\n
12
\n 20
\nstock purchase options and warrants (the “Search Warrants”), Search has no
\nother shares reserved for issuance; and (v) other than the stock purchase
\noptions and warrants pursuant to the exercise of which the holders thereof can
\ncurrently acquire shares of Search Common Stock all of which are disclosed in
\nthe Search Disclosure Schedule, and the issued and outstanding Search Preferred
\nStock, there are no other options, warrants, or other rights, agreements,
\narrangements or commitments of any character relating to the issued or unissued
\ncapital stock of Search or any of its subsidiaries or obligating Search or any
\nof its subsidiaries to issue or sell any shares of capital stock of, or any
\nsecurities convertible into or evidencing the right to purchase any shares of
\ncapital stock of, or other equity interests in, Search or any of its
\nsubsidiaries. All of the Search Common Stock subject to issuance as aforesaid,
\nupon issuance on the terms and conditions specified in the instruments pursuant
\nto which they are issuable, shall be duly authorized, validly issued, fully
\npaid and non-assessable. There are no obligations, contingent or otherwise, of
\nSearch or any of its subsidiaries to repurchase, redeem or otherwise acquire
\nany Search Shares or the common stock of any subsidiary to repurchase, redeem
\nor otherwise acquire any Search Shares or the common stock of any subsidiary or
\nto provide funds to or make any investment (in the form of a loan, capital
\ncontribution or otherwise) in any such subsidiary or any other entity,
\nincluding agreements entered into in the ordinary course of business. Each of
\nthe outstanding shares of capital stock of each of Search’s subsidiaries is
\nduly authorized, validly issued, fully paid and non-assessable, and such shares
\nowned by Search or another subsidiary are owned free and clear of all security
\ninterests, liens, claims, pledges, agreements, limitations in Search’s voting
\nrights, charges or other encumbrances of any nature whatsoever.<\/p>\n
SECTION 2.04 Authority Relative to this Agreement. Search has the
\nrequisite corporate power and authority to execute and deliver this Agreement,
\nand to carry out its obligations hereunder and to consummate the transactions
\ncontemplated hereby. The execution and delivery of this Agreement by Search
\nand the consummation by Search of the transactions contemplated hereby have
\nbeen duly and validly authorized by all necessary corporate action and no other
\ncorporate proceedings on the part of Search are necessary to authorize this
\nAgreement or to consummate the transactions so contemplated (other than, with
\nrespect to the Merger, the approval and adoption of this Agreement and the
\nMerger by the stockholders of Search, in accordance with Delaware Law and
\nSearch’s Certificate of Incorporation and By-Laws). This Agreement has been
\nduly and validly executed and delivered by Search and, assuming the due
\nauthorization, execution and delivery by Harken and Merger Sub, constitutes the
\nlegal, valid and binding obligation of Search, enforceable in accordance with
\nits terms.<\/p>\n
SECTION 2.05 No Conflict; Required Filings and Consents.<\/p>\n
(a) The execution and delivery of this Agreement by Search does
\nnot, and the performance of this Agreement by Search shall not, (i) conflict
\nwith or violate the Certificate of Incorporation or By-Laws or equivalent
\norganizational documents of Search or any of its subsidiaries, (ii) conflict
\nwith or violate any law, rule, regulation, order, judgment or decree applicable
\nto Search or any of its subsidiaries, or by which its or any of their
\nrespective properties is bound or affected, except for any such conflicts or
\nviolations that would not, individually or in<\/p>\n
13
\n 21
\nthe aggregate, have a Material Adverse Effect, or (iii) result in any breach of
\nor constitute a default (or an event that with notice or lapse of time or both
\nwould become a default) under, or give to others any rights of termination,
\namendment, acceleration or cancellation of, or result in the creation of a lien
\nor encumbrance on any of the properties or assets of Search or any of its
\nsubsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
\nagreement, lease, license, permit, franchise or other instrument or obligation
\nto which Search or any of its subsidiaries is a party or by which Search or any
\nof its subsidiaries or its or any of their respective properties is bound or
\naffected, except for any such breaches, defaults or other occurrences that
\nwould not, individually or in the aggregate, have a Material Adverse Effect.<\/p>\n
(b) The execution and delivery of this Agreement by Search does
\nnot, and the performance of this Agreement by Search shall not, require any
\nconsent, approval, authorization or permit of, or filing with or notification
\nto, any governmental or regulatory authority, domestic or foreign, except (i)
\nfor applicable requirements, if any, of the Securities Act, the Securities
\nExchange Act of 1934, as amended (the “Exchange Act”), state securities laws
\n(“Blue Sky Laws”), the National Association of Securities Dealers Automated
\nQuotations System, and the rules and regulations thereunder, and the filing and
\nrecordation of appropriate merger or other documents as required by Delaware
\nLaw and (ii) where the failure to obtain such consents, approvals,
\nauthorizations or permits or to make such filings or notifications, would not
\nprevent or delay consummation of the Merger, or otherwise prevent Search from
\nperforming its obligations under this Agreement, and would not have a Material
\nAdverse Effect.<\/p>\n
SECTION 2.06 Compliance; Permits. Except as disclosed in the Search
\nDisclosure Schedule, (a) neither Search nor any of its subsidiaries is in
\nconflict with, or in default or violation of, (i) any law, rule, regulation,
\norder, judgment or decree applicable to Search or any of its subsidiaries or by
\nwhich its or any of their respective properties is bound or affected, or (ii)
\nany note, bond, mortgage, indenture, contract, agreement, lease, license,
\npermit, franchise or other instrument or obligation to which Search or any of
\nits subsidiaries is a party or by which Search or any of its subsidiaries or
\nits or any of their respective properties is bound or affected, nor has Search
\nor any of its subsidiaries received and not finally resolved any complaint,
\ncitation or notice of a conflict with or a default or violation of any of the
\nforegoing nor, are any threatened, except for any such conflicts, defaults or
\nviolations which would not, individually or in the aggregate, have a Material
\nAdverse Effect.<\/p>\n
(b) Search and its subsidiaries hold all permits, licenses,
\nvariances exemptions, orders and approvals from governmental authorities which
\nare material to the operation of the business of Search and its subsidiaries
\ntaken as a whole (collectively, the “Search Permits”). Search and its
\nsubsidiaries are in compliance with the terms of Search Permits, except where
\nthe failure to so comply would not have a Material Adverse Effect.<\/p>\n
SECTION 2.07 Securities and Exchange Commission Filing; Financial
\nStatements. Search has filed all forms, reports and documents required to be
\nfiled with the SEC since January 1, 1990, and has heretofore delivered or made
\navailable to Harken, in the form filed with the SEC,<\/p>\n
14
\n 22
\n(i) its Annual Reports on Form 10-K for the fiscal years ended December 31,
\n1991, 1992 and 1993, respectively, (ii) its Quarterly Reports on Form 10-Q for
\nthe periods ended March 31, 1994 and June 30, 1994, (iii) all proxy statements
\nrelating to Search’s meetings of stockholders (whether annual or special) held
\nsince January 1, 1991, (iv) all Form 8-K’s filed by Search with the SEC since
\nJanuary 1, 1991, (v) all other reports or registration statements filed by
\nSearch with the SEC since January 1, 1991 and (vi) all amendments and
\nsupplements to all such reports and registration statements filed by Search
\nwith the SEC since January 1, 1991 (collectively, the “Search SEC Reports”).
\nThe Search Disclosure Schedule lists all Search SEC Reports that have been
\nprovided to Harken prior to the date hereof. Except as set forth in the Search
\nDisclosure Schedule, to the best knowledge and belief of Search, the Search SEC
\nReports (i) were prepared in substantial compliance with the requirements of
\nthe Securities Act or the Exchange Act, as the case may be, and with all of the
\nrules and regulations thereunder, and (ii) did not at the time they were filed
\ncontain any untrue statement of a material fact or omit to state a material
\nfact required to be stated therein or necessary in order to make the statements
\ntherein, in the light of the circumstances under which they were made, not
\nmisleading. None of Search’s subsidiaries is required to file any forms,
\nreports or other documents with the SEC, or any state securities authority,
\nexcept documents that may be filed with regard to the liquidation of the Search
\nPartnerships (as defined in Section 6.02(m) hereof).<\/p>\n
(b) Except as set forth in the Search Disclosure Schedule, each of
\nthe consolidated financial statements (including, in each case, any related
\nnotes thereto) contained in Search SEC Reports and each of the consolidated
\nfinancial statements for the periods ended March 31, 1994 and June 30, 1994,
\nhas been prepared in accordance with generally accepted accounting principles
\napplied on a consistent basis throughout the periods involved (except as may be
\nindicated in the notes thereto) and each fairly presents the consolidated
\nfinancial position of Search and its subsidiaries as of the respective dates
\nthereof and the consolidated results of its operations and changes in financial
\nposition for the periods indicated, except for the omission of footnotes in the
\nunaudited interim financial statements and except that the unaudited interim
\nfinancial statements were or are subject to normal and recurring year-end
\nadjustments which were not or are not expected to be material in amount. The
\nconsolidated financial statements provided by Search for periods subsequent to
\nJune 30, 1994, shall comply with the foregoing standards.<\/p>\n
SECTION 2.08 Undisclosed Liabilities. Except as and to the extent
\nset forth on the consolidated balance sheet of Search and its subsidiaries as
\nof June 30, 1994 (the “Balance Sheet Date”), including the notes thereto (the
\n“Search Balance Sheet”), neither Search nor any of its subsidiaries has any
\nliabilities or obligations of any nature (whether accrued, absolute, contingent
\nor otherwise) that would be required to be reflected on a balance sheet, or in
\nthe notes thereto, prepared in accordance with generally accepted accounting
\nprinciples, except (i) for liabilities or obligations incurred in the ordinary
\ncourse of business since the Balance Sheet Date, that would not, individually
\nor in the aggregate, have a Material Adverse Effect, (ii) as otherwise
\nreflected in the Search SEC Reports filed with the SEC since the Balance Sheet
\nDate, or (iii) as specified in the Search Disclosure Schedule.<\/p>\n
15
\n 23
\n SECTION 2.09 Properties and Assets. Except as set forth in the
\nSearch Disclosure Schedule and except to the extent that the failure of any one
\nor more of the following representations or warranties would not individually
\nor in the aggregate have a Material Adverse Effect:<\/p>\n
(a) Title to Property. Except as set forth in the Search
\nDisclosure Schedule:<\/p>\n
(i) Search and\/or its subsidiaries have Good
\nTitle (as defined in Section 10.03 hereof) to the Oil and Gas Interests (as
\ndefined in Section 10.03 hereof).<\/p>\n
(ii) Except for Permitted Encumbrances (as defined
\nin Section 10.03 hereof), the Oil and Gas Interests reflected in the Reserve
\nReport entitles Search and\/or its subsidiaries to receive not less than the
\nundivided interests set forth in such engineering report of all oil and gas
\nproduced, saved and sold from a particular property and the portion of the
\ncosts and expenses of operation and development of such property which is borne
\nor to be borne by Search or its subsidiaries is not greater than the undivided
\ninterests set forth in such engineering report.<\/p>\n
(iii) Except for Permitted Encumbrances, Search
\nand\/or its subsidiaries have good and marketable title to such portion of the
\nassets of Search or its subsidiaries (other than the Oil and Gas Interests) and
\nother properties included or reflected on the financial statements for Search’s
\naccounting periods prepared as of the Balance Sheet Date (attached hereto as
\nExhibit “A”, the “Balance Sheet Date Statements”), which assets and properties
\nare set forth and described on Exhibit “B-2” attached hereto.<\/p>\n
(b) Oil and Gas Interests of Search and its Subsidiaries.
\nExcept as set forth in the Search Disclosure Schedule:<\/p>\n
(i) Neither Search nor any of its subsidiaries
\nhas been advised by any operator, lessor or any other party of any material
\ndefault under any such oil and gas leases which default has not heretofore been
\ncured in all material respects.<\/p>\n
(ii) To the best knowledge of Search and its
\nsubsidiaries all proper and timely payments (including but not limited to
\nroyalties, delay rentals and shut-in royalties), due under the oil and gas
\nleases giving rise to the Oil and Gas Interests have been timely made and paid
\nby the operator(s) of each such lease or well.<\/p>\n
(iii) Search and\/or its subsidiaries are entitled
\nto be paid, and are being paid, in all material respects, its percentage of net
\nrevenue interests included in the Oil and Gas Interests without suspense and
\nwithout indemnity other than those customarily found in the industry.<\/p>\n
(c) Wells. Except as set forth in the Search Disclosure
\nschedule:<\/p>\n
16
\n 24
\n (i) All of the wells included in the Oil and Gas
\nInterests and which are described on Exhibit “B-1” hereto of Search and\/or its
\nsubsidiaries have been drilled and completed within the boundaries of such Oil
\nand Gas Interests or within the limits otherwise permitted by contract, pooling
\nor unit agreement, lease instrument and by law.<\/p>\n
(ii) All drilling and completion of the wells in
\nsuch Oil and Gas Interests and all development and operations on such Oil and
\nGas Interests have been conducted in material compliance with all applicable
\nlaws, ordinances, rules, regulations and permits, and judgments, orders and
\ndecrees of any court or governmental body or agency.<\/p>\n
(iii) Except as may be reflected in the Reserve
\nReport, no well included in such Oil and Gas Interests is subject to material
\npenalties on allowables because of any overproduction (legal or illegal) which
\nwould prevent the full legal and regular allowable (including maximum
\npermissible tolerance) as prescribed by any court or federal, state or local
\ngovernmental body or agency to be assigned to any such well.<\/p>\n
(d) Refund. Except as included or reflected on the
\nBalance Sheet Date Statements as of June 30, 1994 or as set forth in the Search
\nDisclosure Schedule:<\/p>\n
(i) Neither Search nor any of its subsidiaries is
\nobligated by virtue of a prepayment arrangement under any gas contract
\ncontaining a “take or pay” or similar provision, a production payment or any
\nother arrangement to deliver any material amount of gas or oil attributable to
\nthe Oil and Gas Interests at some future time without then or thereafter
\nreceiving full payment therefor.<\/p>\n
(ii) Neither Search nor any of its subsidiaries
\nhas received any funds or payments from purchasers of production of gas under
\ngas contracts which are subject to a potential material refund.<\/p>\n
(e) Operation of Assets. Since the acquisition of Oil
\nand Gas Interests by Search and\/or its subsidiaries, the Oil and Gas Interests
\nhave been administered and maintained by Search directly or through its
\nsubsidiaries in a reasonable manner and in accordance with generally prevailing
\nstandards of the oil and gas industry. Neither Search nor any of its
\nsubsidiaries are named nor act as the operator of any Oil and Gas Interests or
\nother leases or properties.<\/p>\n
(f) Environmental Matters. (i)(A) Search and each of its
\nsubsidiaries is in material compliance with all applicable foreign, federal
\n(including but not limited to the Clean Water Act, the Oil Pollution Act, the
\nResource Conservation and Recovery Act, the Clean Air Act, the Comprehensive
\nEnvironmental Response Compensation and Liability Act, the Occupational Safety
\nand Health Act and the Hazardous Materials Transportation Act), state and local
\nlaws and regulations and common law relating to pollution or protection of
\nhuman health or the environment (including, without limitation, ambient air,
\nsurface water, ground water, land<\/p>\n
17
\n 25
\nsurface or subsurface strata (collectively, “Environmental Laws”)), except for
\nnon-compliance that individually or in the aggregate would not have a Material
\nAdverse Effect, which compliance includes, but is not limited to, the
\npossession by Search and its subsidiaries of all material permits and other
\ngovernmental authorizations required under applicable Environmental Laws, and
\ncompliance with the terms and conditions thereof and compliance with
\nnotification, reporting and registration provisions under applicable
\nEnvironmental Laws; and (B) neither Search nor any of its subsidiaries has
\nreceived notice of, or, to the knowledge of Search, is the subject of, any
\naction, cause of action, claim, investigation, demand or notice by any person
\nor entity alleging liability under or non-compliance with any Environmental Law
\n(an “Environmental Claim”) that individually or in the aggregate would have a
\nMaterial Adverse Effect.<\/p>\n
(ii) There are no Environmental Claims which individually or
\nin the aggregate would have a Material Adverse Effect that are pending or, to
\nthe knowledge of Search, threatened against Search or any of its subsidiaries
\nor, to the knowledge of Search, against any person or entity whose liability
\nfor any Environmental Claim Search or any of its subsidiaries has or may have
\nretained or assumed either contractually or by operation of law.<\/p>\n
(iii) To the knowledge of Search, there are no circumstances
\nthat could form the basis for an Environmental Claim against Search or any of
\nits subsidiaries, or against any person or entity whose liability for any
\nEnvironmental Claim Search or any of its subsidiaries has or may have retained
\nor assumed either contractually or by operation of law, which individually or
\nin the aggregate would have a Material Adverse Effect.<\/p>\n
SECTION 2.10 Absence of Certain Changes or Events. Since June 30,
\n1994, except as disclosed in the Search Disclosure Schedule or in the Search
\nSEC Reports filed since that date to the date of this Agreement or as otherwise
\ncontemplated by this Agreement, Search and its subsidiaries have conducted
\ntheir business only in the ordinary course and in a manner consistent with past
\npractice and, since such date, there has not been (i) any change in the
\nfinancial condition, results of operations or business of Search or any of its
\nsubsidiaries having a Material Adverse Effect, (ii) any damage, destruction or
\nloss (whether or not covered by insurance) with respect to any assets of Search
\nor any of its subsidiaries having a Material Adverse Effect, (iii) any change
\nby Search in its accounting methods, principles or practices, (iv) any
\nreevaluation by Search, which is material taken as a whole, of any of its
\nassets, including, without limitation, writing down the value of inventory or
\nwriting off notes or accounts receivable other than in the ordinary course of
\nbusiness, (v) any entry by Search or any of its subsidiaries into any
\ncommitment or transactions material to Search and its subsidiaries taken as a
\nwhole, (vi) any declaration, setting aside or payment of any dividends or
\ndistributions in respect of shares of Search Common Stock or any redemption,
\npurchase or other acquisition of any of its securities or any of the securities
\nof any subsidiary, (vii) any increase in or establishment of any bonus,
\ninsurance, severance, deferred compensation, pension, retirement, profit
\nsharing, stock option (including, without limitation, the granting of stock
\noptions, stock appreciation rights, performance awards, or restricted stock
\nawards), stock purchase or other employee benefit plan, or any other increase
\nin the compensation payable or to become payable to any officers or key<\/p>\n
18
\n 26
\nemployees of Search or any of its subsidiaries, (viii) any contract, lease,
\ncommitment or loan outstanding where Search or any of its subsidiaries was a
\nparty that involved or related to any officer or director of Search or any of
\nits subsidiaries, (ix) any increase or addition in the obligations, liabilities
\nand\/or accounts payable of Search, or (x) any reduction, loss or material
\ndecline in the value of its assets including, without limitation, monthly
\nproduction of oil and gas from Search’s properties, wells and leases.<\/p>\n
SECTION 2.11 Absence of Litigation. The Search Disclosure Schedule
\ncontains a list of all claims, actions, proceedings or investigations pending
\nor, to the best knowledge of Search, threatened against Search or any of its
\nsubsidiaries, before any court, arbitrator or administrative, governmental or
\nregulatory authority or body, domestic or foreign, that, individually or in the
\naggregate, would have a Material Adverse Effect. As of the date hereof,
\nneither Search nor any of its subsidiaries nor any of their properties is
\nsubject to any order, writ, judgment, injunction, decree, determination or
\naward having a Material Adverse Effect. Since June 30, 1994, and except as set
\nforth in the Search Disclosure Schedule, there has been no event, action or
\nother development in connection with any claim, action, proceeding, or
\ninvestigation pending or to the best knowledge of Search threatened against
\nSearch or any of its subsidiaries or any properties or rights of Search or any
\nof its subsidiaries, individually or in the aggregate, having a Material
\nAdverse Effect.<\/p>\n
SECTION 2.12 Registration Statement; Proxy Statement\/Prospectus.
\nThe information supplied by Search for inclusion in the Registration Statement
\n(as defined in Section 3.10 hereof) shall not at the time the Registration
\nStatement is declared effective contain any untrue statement of a material fact
\nor omit to state any material fact required to be stated therein or necessary
\nin order to make the statements therein, in the light of the circumstances
\nunder which they were made, not misleading. The information supplied by Search
\nfor inclusion in the proxy statement\/prospectus to be sent to the stockholders
\nof Search in connection with the meeting of Search’s stockholders to consider
\nthe approval and adoption of this Agreement and the Merger (the “Search
\nStockholders’ Meeting”) (such proxy statement\/prospectus as amended or
\nsupplemented is referred to herein as the “Proxy Statement”), shall not, at the
\ndate the Proxy Statement (or any amendment thereof or supplement thereto) is
\nfirst mailed to stockholders, at the time of Search Stockholders’ Meeting, and
\nat the Effective Time, contain any untrue statements of material fact, or omit
\nto state any material fact required to be stated therein or necessary in order
\nto make the statements made therein, in the light of the circumstances under
\nwhich they are made, not misleading; or omit to state any material fact
\nnecessary to correct any statement in any earlier communication with respect to
\nthe solicitation of proxies for Search Stockholders’ Meeting which has become
\nfalse or misleading. If at any time prior to the Effective Time any event
\nrelating to Search, any of its subsidiaries, or any of its respective
\naffiliated, officers or directors should be discovered by Search which should
\nbe set forth in an amendment to the Registration Statement or a supplement to
\nthe Proxy Statement, Search shall promptly inform Harken and Merger Sub.
\nNotwithstanding the foregoing, Search makes no representation or warranty with
\nrespect to any information supplied by Harken which is contained in any of the
\nforegoing documents. The Proxy<\/p>\n
19
\n 27
\nStatement shall comply in all material respects as to form and substance with
\nthe requirements of the Exchange Act and the rules and regulations thereunder.<\/p>\n
SECTION 2.13 Investment Bankers. No broker, finder, advisor,
\nconsultant, or investment banker, except for EnCap, Concorde and Principal
\nFinancial Securities, Inc. (“Principal”), are entitled to any consulting,
\nbrokerage, finder’s or other fee or commission in connection with the
\ntransactions contemplated by this Agreement based upon arrangements made by or
\non behalf of Search. Search has received the oral opinion of Principal on the
\ndate of this Agreement to the effect that the consideration to be received by
\nthe common stockholders of Search as a result of the Agreement is fair, from a
\nfinancial point of view, to the common stockholders of Search.<\/p>\n
SECTION 2.14 Board Recommendation. The Board of Directors of Search
\nhas, by resolutions duly adopted by the requisite vote of directors present at
\na meeting of such Board duly called and held on November 7, 1994, determined
\nthat the Merger, in accordance with the terms of this Agreement, is in the best
\ninterests of Search and its stockholders, approved and adopted this Agreement
\nand the transactions contemplated hereby and recommended approval and adoption
\nof this Agreement by the stockholders of Search.<\/p>\n
SECTION 2.15 Warrants. At the Effective Time, except for the Search
\nWarrants (as described in Section 2.03 hereof), there will be no outstanding
\noptions, warrants, or other agreements, arrangements or other derivative
\nsecurities under which the holder thereof would have the right to acquire
\nSearch Common Stock, Search Preferred Stock or the capital stock of any of its
\nsubsidiaries.<\/p>\n
SECTION 2.16 Disposition of Harken Common Stock. Search has no
\nknowledge that any Search stockholders nor any of the other parties whom will
\nacquire shares of Harken Common Stock, as contemplated under this Agreement,
\nhave the present intention of disposing of such Harken Common Stock.<\/p>\n
SECTION 2.17 ERISA.<\/p>\n
(a) Except as set forth in the Search Disclosure
\nSchedule, Search currently has none and has never had, in the past, any
\nemployee benefit plan (including, without limitation, any “employee benefit
\nplan,” as defined in Section 3(3) of the Employee Retirement Income Security
\nAct of 1974, as amended (“ERISA”)), nor any bonus, pension, profit sharing,
\ndeferred compensation, incentive compensation, stock ownership, stock purchase,
\nstock option, phantom stock, retirement, vacation, severance, disability, death
\nbenefit, hospitalization, insurance or other plan, arrangement or understanding
\n(whether or not legally binding), maintained or contributed to by Search or any
\nof its subsidiaries.<\/p>\n
(b) Neither Search nor any of its subsidiaries is a party
\nto any collective bargaining agreement.<\/p>\n
20
\n 28
\n (c) Neither Search nor any of its subsidiaries has any
\nobligation for retiree health, medical or life insurance benefits under any
\nplan referred to in this Section 2.17(a) other than (a) deferred compensation
\nbenefits accrued as liabilities on the consolidated financial statements of
\nSearch and its subsidiaries, or (b) benefits the full cost of which are borne
\nby the current or former employee (or his beneficiary).<\/p>\n
SECTION 2.18 Taxes. Search and each of its subsidiaries have duly
\nfiled all material U.S. federal, state, local and foreign tax returns required
\nto be filed by it in any capacity, and Search has duly paid, caused to be paid
\nor made adequate provision for the payment of all Taxes (as hereinafter
\ndefined) shown to be payable on such returns in respect of the periods covered
\nby such returns and has made and recorded in the Balance Sheet Date Statements
\nadequate provision for payment of all Taxes anticipated to be payable in
\nrespect of all calendar periods since the periods covered by such returns.
\nExcept as provided in the Search Disclosure Schedule, no U.S. federal income
\ntax return ever filed by Search or any of its subsidiaries has ever been
\naudited by the Internal Revenue Service (the “IRS”). Except as disclosed in
\nthe Search Disclosure Schedule, all deficiencies and assessments asserted as a
\nresult of any examinations or other audits by U.S. federal, state, local or
\nforeign taxing authorities have been paid, fully settled or adequately provided
\nfor in the financial statements contained in the Search SEC Reports, and no
\nissue or claim has been asserted for Taxes by any taxing authority for any
\nprior period, the adverse determination of which would result in a deficiency
\nwhich would have a Material Adverse Effect, other than those heretofore paid or
\nprovided for. Except as set forth in the Search Disclosure Schedule, there are
\nno outstanding agreements or waivers extending the statutory period of
\nlimitation applicable to any U.S. federal, state, local or foreign income tax
\nreturn of Search or its subsidiaries. Except as set forth in the Search
\nDisclosure Schedule, neither Search nor any of its subsidiaries is a party to
\nany agreement, contract or arrangement that would result, separately or in the
\naggregate, in the payment of any “excess parachute payment” within the meaning
\nof Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”),
\nand the Merger will not be a factor causing any payments to be made by Search,
\nHarken or any subsidiaries of either which payments are not deductible (in
\nwhole or in part) pursuant to Section 280G of the Code. For purposes of this
\nAgreement, “Taxes” shall mean all taxes, fees, levies, duties, charges or other
\nassessments imposed by any federal, state, county, local or foreign government,
\ntaxing authority, subdivision or agency thereof, including interest, penalties,
\nadditions to tax or additional amounts thereto.<\/p>\n
SECTION 2.19 Change in Control. Except as set forth in the Search
\nDisclosure Schedule, neither Search nor any of its subsidiaries is a party to
\nany contract, agreement or understanding which contains a “change in control,”
\n“potential change in control” or similar provision. Except as set forth in the
\nSearch Disclosure Schedule or as set forth in this Agreement, the consummation
\nof the transactions contemplated by this Agreement will not (either alone or
\nupon the occurrence of any additional acts or events) result in any payment
\n(whether of severance pay or otherwise) becoming due from Search or any of its
\nsubsidiaries to any person.<\/p>\n
21
\n 29
\n SECTION 2.20 Material Contracts. The Search Disclosure Schedule sets
\nforth a complete and accurate list of all contracts, agreements and instruments
\n(including any amendments hereto), other than oil and gas leases, to which
\nSearch or any of its subsidiaries is a party or by which any of them or any of
\ntheir properties or assets may be bound which (a) is material to the oil and
\ngas business conducted by Search and its subsidiaries to which Search or any of
\nits subsidiaries is a party or by which they or their respective assets are
\nbound or subject or (b) provide for payments in any one year by or to Search or
\nany of its subsidiaries in excess of $10,000. Except as set forth in the
\nSearch Disclosure Schedule, each of such contracts, agreements and instruments
\nis valid and binding and in full force and effect and, to the best knowledge of
\nSearch, there has not occurred any default by any party thereto which remains
\nunremedied as of the date hereof.<\/p>\n
SECTION 2.21 Insurance. The Search Disclosure Schedule lists all
\npolicies of title, asset, fire, hazard, casualty, liability, life, worker’s
\ncompensation and other forms of insurance of any kind owned or held by Search
\nor any of its subsidiaries. All such policies: (a) are with insurance
\ncompanies believed by Search to be financially capable and reputable; (b) are
\nin full force and effect; (c) are sufficient for compliance by Search or its
\nsubsidiaries in all material respects with all requirements of law and of all
\nmaterial agreements to which Search or any of its subsidiaries is a party; (d)
\nare, to Search’s knowledge, valid and outstanding policies enforceable against
\nthe insurer; (e) provide insurance coverage against all risks normally insured
\nagainst in accordance with generally prevailing practices in the oil and gas
\nindustry; and (f) provide that they will remain in full force and effect
\nthrough the respective dates set forth in the Search Disclosure Schedule,
\nsubject to payment of required premiums thereunder.<\/p>\n
SECTION 2.22 Banks; Attorneys-in-fact. The Search Disclosure
\nSchedule sets forth a complete list showing the name of each bank or other
\nfinancial institution in which Search or any of its subsidiaries has accounts
\n(including a list of the names of all persons currently authorized to draw
\nthereon or to have access thereto). Such list also shows the name of each
\nperson holding a power of attorney and any other power or authority under which
\nanother party may obligate or commit Search, its subsidiaries, or any of their
\nassets in any manner or form.<\/p>\n
SECTION 2.23 Amendment to Stock Options. The Stock Option Agreement
\nbetween Search and Dr. Gary Wood dated March 3, 1994 to purchase 25,000 shares
\nof Search Common Stock has been amended to terminate on June 30, 1996.<\/p>\n
SECTION 2.24 Documentation Regarding Partnerships. Search has
\ndelivered to Harken copies of all materials and documents previously sent or
\ndelivered to the partners of any of the Search Partnerships in connection with
\neither the acquisition by Search or any of its subsidiaries of partnership
\ninterests in the Search Partnerships or the liquidation of the Search
\nPartnerships.<\/p>\n
SECTION 2.25 Ownership of Harken Stock. Search does not own, nor has
\nit owned during the past five years, any shares of the stock of Harken.<\/p>\n
22
\n 30
\n SECTION 2.26 Not Investment Company. Neither Search nor any of its
\nsubsidiaries is a investment company as defined in Sections 368(a)(2)(F)(iii)
\nand (iv) of the Code.<\/p>\n
SECTION 2.27 No Intercorporate Indebtedness. There is no
\nintercorporate indebtedness existing between Search and Harken that was issued,
\nacquired or will be settled at a discount.<\/p>\n
ARTICLE III
\n REPRESENTATIONS AND WARRANTIES OF HARKEN AND MERGER SUB<\/p>\n
Harken and Merger Sub hereby, jointly and severally, represent and
\nwarrant to Search that:<\/p>\n
SECTION 3.01 Organization and Qualifications; Subsidiaries. Each of
\nHarken and each of its subsidiaries is a corporation duly organized, validly
\nexisting and in good standing under the laws of the jurisdiction of its
\nincorporation and has the requisite corporate power and authority and is in
\npossession of all Approvals necessary to own, lease and operate its properties
\nand to carry on its business as it is now being conducted, except where the
\nfailure to be so organized, existing and in good standing or to have such
\npower, authority and Approvals would not, individually or in the aggregate,
\nhave a Material Adverse Effect (as defined below). Neither Harken nor any
\nsubsidiary has received any notice of proceedings relating to the revocation or
\nmodification of any such Approvals. Each of Harken and each of its
\nsubsidiaries is duly qualified or licensed as a foreign corporation to do
\nbusiness, and is in good standing, in each jurisdiction where the character of
\nits properties owned, leased or operated by it or the nature of its activities
\nmakes such qualification or licensing necessary, except for such failures to be
\nso duly qualified or licensed and in good standing that would not, either
\nindividually or in the aggregate, have a Material Adverse Effect. When used in
\nconnection with Harken or Merger Sub, the term “Material Adverse Effect” means
\nany change or effect that is or is reasonably likely to be materially adverse
\nto the business, operations, properties (including intangible properties),
\ncondition (financial or otherwise), assets or liabilities (including contingent
\nliabilities) of Harken and its subsidiaries taken as a whole. The Disclosure
\nSchedule prepared by Harken attached hereto as Exhibit “P” (the “Harken
\nDisclosure Schedule”) lists all of Harken’s subsidiaries.<\/p>\n
SECTION 3.02 Certificate of Incorporation and By-Laws. Harken has
\nheretofore furnished to Search a complete and correct copy of the Certificate
\nof Incorporation and the By-Laws, each as amended to date, of Harken and Merger
\nSub. Each of Harken’s and Merger Sub’s Certificate of Incorporation, By-Laws
\nand the equivalent organizational documents of each of its subsidiaries are in
\nfull force and effect. Neither Harken nor any of its subsidiaries is in
\nviolation of any of the provisions of its respective Certificate of
\nIncorporation or By-Laws.<\/p>\n
23
\n 31
\n SECTION 3.03 Capitalization.<\/p>\n
(a) The authorized capital stock of Harken consists of (i)
\n100,000,000 shares of Harken Common Stock of which, as of the date hereof,
\n59,482,853 shares were issued and outstanding, 5,983,655 shares are held in
\ntreasury, 6,425,534 shares are reserved for issuance pursuant to (A)
\noutstanding options under Harken’s stock option plans, (B) the conversion terms
\nof Harken’s Series C Convertible Preferred Stock and (C) the terms set forth in
\nthe Harken Disclosure Schedule; and (ii) 10,000,000 shares of preferred stock
\nof which, as of the date hereof, 186,760 shares of Harken’s Series C
\nConvertible Preferred Stock were issued and outstanding. The authorized
\ncapital stock of Merger Sub consists of 10,000 shares of common stock, par
\nvalue $.10 per share, 1,000 shares of which, as of the date hereof, are issued
\nand outstanding. All of the outstanding shares of Harken’s and Merger Sub’s
\nrespective capital stock have been duly authorized and validly issued and are
\nfully paid and non-assessable and are free of preemptive rights with no
\npersonal liability attaching to the ownership thereof. Except as set forth in
\nthis Section 3.03, as of the date hereof, there are no options, warrants or
\nother rights, agreements, arrangements or commitments of any character relating
\nto the issued or unissued capital stock of Harken or any of its subsidiaries or
\nobligating Harken or any of its subsidiaries to issue or sell any shares of
\ncapital stock of, or any securities convertible into or evidencing the right to
\npurchase any shares of capital stock of, or other equity interests in, Harken
\nor any of its subsidiaries. There are no obligations, contingent or otherwise,
\nof Harken or any of its subsidiaries to repurchase, redeem or otherwise acquire
\nany shares of Harken Common Stock or the capital stock of any subsidiary of
\nHarken. Each of the outstanding shares of capital stock of each of Harken’s
\nsubsidiaries is duly authorized, validly issued, fully paid, and non-
\nassessable, and such shares owned by Harken or another subsidiary are owned
\nfree and clear of all security interests, liens, claims, pledges, agreements,
\nlimitations in Harken’s voting rights, charges, or other encumbrances of any
\nnature whatsoever.<\/p>\n
(b) The shares of Harken Common Stock to be issued as of the
\nEffective Time, the Contingent Shares, if any, issued on the Settlement Date
\nand the Final Settlement Date and upon exercise of the Harken Warrants and the
\nUnexchanged Search Warrants in accordance with their terms, the shares of
\nHarken Common Stock issued thereunder, will, upon their issuance, be duly
\nauthorized, validly issued, fully paid and non-assessable, and free of any
\npreemptive rights with no personal liability attached to the ownership thereof.<\/p>\n
SECTION 3.04 Authority Relative to this Agreement. Each of Harken
\nand Merger Sub has the requisite corporate power and authority to execute and
\ndeliver this Agreement and to carry out its obligations hereunder and to
\nconsummate the transactions contemplated hereby. The execution and delivery of
\nthis Agreement by Harken and Merger Sub and the consummation by Harken and
\nMerger Sub of the transactions contemplated hereby have been duly and validly
\nauthorized by all necessary corporate action on the part of Harken and Merger
\nSub and no other corporate proceedings on the part of Harken or Merger Sub are
\nnecessary to authorize this Agreement or to consummate the transactions so
\ncontemplated. This Agreement has been duly and validly executed and delivered
\nby Harken and Merger Sub and assuming the due<\/p>\n
24
\n 32
\nauthorization, execution and delivery by Search, constitutes the legal, valid
\nand binding obligation of each of Harken and Merger Sub, enforceable in
\naccordance with its terms.<\/p>\n
SECTION 3.05 No Conflict; Required Filings and Consents.<\/p>\n
(a) The execution and delivery of this Agreement by Harken and
\nMerger Sub do not, and the performance of this Agreement by Harken and Merger
\nSub shall not, (i) conflict with or violate the Certificate of Incorporation or
\nBy-Laws of Harken, Merger Sub, or any of Harken’s subsidiaries (ii) conflict
\nwith or violate any law, rule, regulation, order, judgment or decree applicable
\nto Harken, any of its subsidiaries, or Merger Sub or by which any of their
\nrespective properties are bound or affected, except for any such conflicts or
\nviolations that would not, individually or in the aggregate, have a Material
\nAdverse Effect, or (iii) result in any breach of or constitute a default (or an
\nevent which with notice or lapse of time or both would become a default) under,
\nor give to others any rights of termination, amendment, acceleration or
\ncancellation of, or result in the creation of a lien or encumbrance on any of
\nthe properties or assets of Harken, or any of its subsidiaries, or Merger Sub
\npursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
\nlicense, permit, franchise or other instrument or obligation to which Harken,
\nor any of its subsidiaries, or Merger Sub is a party or by which Harken, or any
\nof its subsidiaries, or Merger Sub or any of their respective properties are
\nbound or affected, except for any such breaches, defaults or other occurrences
\nthat would not, individually or in the aggregate, have a Material Adverse
\nEffect.<\/p>\n
(b) The execution and delivery of this Agreement by Harken and
\nMerger Sub do not, and the performance of this Agreement by Harken and Merger
\nSub shall not, require any consent, approval, authorization or permit of, or
\nfiling with or notification to, any governmental or regulatory authority,
\ndomestic or foreign, except (i) for applicable requirements, if any, of the
\nSecurities Act, the Exchange Act, Blue Sky Laws, the American Stock Exchange
\nand the rules and regulations thereunder, and the filing and recordation of
\nappropriate merger or other documents as required by Delaware Law and (ii)
\nwhere the failure to obtain such consents, approvals, authorizations or
\npermits, or to make such filings or notifications, would not prevent or delay
\nconsummation of the Merger, or otherwise prevent Harken or Merger Sub from
\nperforming their respective obligations under this Agreement, and would not
\nhave a Material Adverse Effect.<\/p>\n
SECTION 3.06 Compliance; Permits.<\/p>\n
(a) Neither Harken nor any of its subsidiaries is in conflict
\nwith, or in default or violation of, (i) any law, rule, regulation, order,
\njudgment or decree applicable to Harken or any of its subsidiaries or by which
\nits or any of their respective properties is bound or affected, or (ii) any
\nnote, bond, mortgage, indenture, contract, agreement, lease, license, permit,
\nfranchise or other instrument or obligation to which Harken or any of its
\nsubsidiaries is a party or by which Harken or any of its<\/p>\n
25
\n 33
\nsubsidiaries or any of its or any of their respective properties is bound or
\naffected, nor, except as disclosed in the Harken Disclosure Schedule, has
\nHarken or any of its subsidiaries received and not finally resolved any
\ncomplaint, citation or notice of a conflict with or a default or violation of
\nany of the foregoing nor, to the best of Harken’s knowledge, are any
\nthreatened, except for any such conflicts, defaults or violations which would
\nnot, individually or in the aggregate, have a Material Adverse Effect.<\/p>\n
(b) Harken and its subsidiaries hold all permits, licenses,
\nvariances, exemptions, orders and approvals from governmental authorities which
\nare material to the operation of the business of Harken and its subsidiaries
\ntaken as a whole (collectively, the “Harken Permits”). Harken and its
\nsubsidiaries are in compliance with the terms of the Harken Permits, except
\nwhere the failure to so comply would not have a Material Adverse Effect.<\/p>\n
SECTION 3.07 SEC Filings; Financial Statements.<\/p>\n
(a) Harken has filed all forms, reports and documents required to
\nbe filed with the SEC since January 1, 1989, and has heretofore delivered or
\nmade available to Search, in the form filed with the SEC, (i) its Annual
\nReports on Form 10-K for the fiscal years ended December 31, 1991, 1992 and
\n1993, respectively, (ii) its Quarterly Reports on Form 10-Q for the periods
\nended March 31, 1994 and June 30, 1994, (iii) all proxy statements relating to
\nHarken’s meetings of stockholders (whether annual or special) held since
\nJanuary 1, 1991, (iv) all Form 8-K’s filed by Harken with the SEC since January
\n1, 1991, (v) all other reports or registration statements filed by Harken with
\nthe SEC since January 1, 1991 and (vi) all amendments and supplements to all
\nsuch reports and registration statements filed by Harken with the SEC since
\nJanuary 1, 1991 (collectively, the “Harken SEC Reports”). The Harken
\nDisclosure Schedule lists all Harken SEC Reports which have been provided to
\nSearch prior to the date hereof. To the best knowledge and belief of Harken,
\nthe Harken SEC Reports (i) were prepared in substantial compliance with the
\nrequirements of the Securities Act or the Exchange Act, as the case may be, and
\n(ii) did not at the time they were filed contain any untrue statement of a
\nmaterial fact or omit to state a material fact required to be stated therein or
\nnecessary in order to make the statements therein, in the light of the
\ncircumstances under which they were made, not misleading. None of Harken’s
\nsubsidiaries is required to file any forms, reports or other documents with the
\nSEC or any state securities authority.<\/p>\n
(b) Each of the consolidated financial statements (including, in
\neach case, any related notes thereto) contained in the Harken SEC Reports has
\nbeen prepared in accordance with generally accepted accounting principles
\napplied on a consistent basis throughout the periods involved (except as may be
\nindicated in the notes thereto) and each fairly presents the consolidated
\nfinancial position of Harken and its subsidiaries as of the respective dates
\nthereof and the consolidated results of its operations and changes in financial
\nposition for the periods indicated, except for the omission of certain
\nfootnotes in the unaudited interim financial statements and except that the
\nunaudited interim financial statements were or are subject to normal and
\nrecurring year-end adjustments, which were not or are not expected to be
\nmaterial in amount.<\/p>\n
26
\n 34
\n (c) Except as and to the extent set forth on the consolidated
\nbalance sheet of Harken and its subsidiaries as at the Balance Sheet Date,
\nincluding the notes thereto (the “Harken Balance Sheet”), neither Harken nor
\nany of its subsidiaries has any liabilities or obligations of any nature
\n(whether accrued, absolute, contingent or otherwise), which would be required
\nto be reflected on a balance sheet, or in the notes thereto, prepared in
\naccordance with generally accepted accounting principles, except (i) for
\nliabilities or obligations incurred in the ordinary course of business since
\nthe Balance Sheet Date that would not, individually or in the aggregate, have a
\nMaterial Adverse Effect, (ii) as otherwise reflected in the Harken SEC Reports
\nfiled with the SEC since the Balance Sheet Date, or (iii) as specified in the
\nHarken Disclosure Schedule.<\/p>\n
SECTION 3.08 Absence of Certain Changes or Events. Since June 30,
\n1994, except as disclosed in the Harken Disclosure Statement or in the Harken
\nSEC Reports filed since that date to the date of this Agreement, Harken and its
\nsubsidiaries have conducted their businesses only in the ordinary course and in
\na manner consistent with past practice and, since such date, there has not been
\n(i) any change in the financial condition, results of operations or business of
\nHarken or any of its subsidiaries having a Material Adverse Effect, (ii) any
\ndamage, destruction or loss (whether or not covered by insurance) with respect
\nto any assets of Harken or any of its subsidiaries having a Material Adverse
\nEffect, (iii) any change by Harken in its accounting methods, principles or
\npractices, or (iv) any re-evaluation by Harken, which is material taken as a
\nwhole, of any of its assets, including, without limitation, writing down the
\nvalue of inventory or writing off notes or accounts receivable other than in
\nthe ordinary course of business.<\/p>\n
SECTION 3.09 Absence of Litigation. The Harken Disclosure Schedule
\ncontains a list of all claims, actions, proceedings or investigations pending
\nor, to the best knowledge of Harken, threatened against Harken or any of its
\nsubsidiaries, or any properties or rights of Harken or any of its subsidiaries,
\nbefore any court, arbitrator or administrative, governmental or regulatory
\nauthority or body, domestic or foreign, which could have a Material Adverse
\nEffect on Harken or any of its subsidiaries. As of the date hereof, neither
\nHarken nor any of its subsidiaries nor any of their properties is subject to
\nany order, writ, judgment, injunction, decree, determination or award having a
\nMaterial Adverse Effect. Since June 30, 1994, there has been no event, action
\nor other development in connection with any claim, action, proceeding or
\ninvestigation pending or to the best knowledge of Harken threatened against
\nHarken, any of its subsidiaries, or any properties or rights of Harken or any
\nof its subsidiaries, individually or in the aggregate, having a Material
\nAdverse Effect.<\/p>\n
SECTION 3.10 Registration Statement; Proxy Statement\/Prospectus.
\nThe information supplied by Harken for inclusion in the registration statement
\nof Harken pursuant to which the shares of Harken Common Stock to be issued as
\nof the Effective Time, the Contingent Shares, the Harken Warrants, and the
\nshares of Harken Common Stock issuable pursuant to the exercise of the Harken
\nWarrants and the Unexchanged Search Warrants will be registered with the SEC
\n(the “Registration Statement”) shall not, at the time the Registration
\nStatement (including any amendments or supplements thereto) is declared
\neffective by the SEC, contain any untrue statement of a material fact or omit
\nto state any material fact required to be stated therein or<\/p>\n
27
\n 35
\nnecessary in order to make the statements therein, in the light of the
\ncircumstances under which they were made, not misleading. The information
\nsupplied by Harken for inclusion in the Proxy Statement shall not, on the date
\nthe Proxy Statement is first mailed to stockholders, at the time of Search’s
\nStockholders Meeting and at the Effective Time contain any untrue statements of
\nmaterial fact, or omit to state any material fact required to be stated therein
\nor necessary in order to make the statements therein, in light of the
\ncircumstances under which they were made, not misleading. If at any time prior
\nto the Effective Time any event relating to Harken, Merger Sub or any of their
\nrespective affiliates, officers or directors should be discovered by Harken or
\nMerger Sub which should be set forth in an amendment to the Registration
\nStatement or a supplement to the Proxy Statement, Harken or Merger Sub will
\npromptly inform Search. Notwithstanding the foregoing, Harken and Merger Sub
\nmake no representation or warranty with respect to any information supplied by
\nSearch which is contained in any of the foregoing documents. The Registration
\nStatement and Proxy Statement shall comply in all material respects as to form
\nand substance with the requirements of the Securities Act, the Exchange Act and
\nthe rules and regulations thereunder.<\/p>\n
SECTION 3.11 Investment Bankers. No broker, finder, advisor,
\nconsultant, or investment banker is entitled to any consulting, brokerage,
\nfinder’s or other fee or commission in connection with the transactions
\ncontemplated by this Agreement based upon arrangements made by or on behalf of
\nHarken.<\/p>\n
SECTION 3.12 Board Approval. The Board of Directors of Harken has,
\nby resolutions duly adopted by the requisite vote of directors present at a
\nmeeting of such Board duly called and held on September 30, 1994, determined
\nthat the Merger in accordance with the terms of this Agreement, is fair to and
\nin the best interests of its stockholders.<\/p>\n
SECTION 3.13 . Merger Sub will acquire at least ninety percent (90%)
\nof the fair market value of Search’s net assets and at least seventy percent
\n(70%) of the fair market value of Search’s gross assets in Merger. For
\npurposes of this representation, amounts paid by Search to dissenters, amounts
\npaid by Search to stockholders who receive cash or other property, amounts used
\nby Search to pay reorganization expenses, and all redemptions and distributions
\n(except for regular, normal dividends) made by Search will be included as
\nassets of Search immediately prior to the Merger.<\/p>\n
SECTION 3.14 Control of Merger Sub. Prior to the Merger, Harken will
\nbe in control of Merger Sub within the meaning of Section 368(c) of the Code.
\nFollowing the Merger, Merger Sub will not issue additional shares of its stock
\nthat will result in Harken losing control of Merger Sub within the meaning of
\nSection 368(c) of the Code. No stock of Merger Sub will be issued in the
\nMerger.<\/p>\n
SECTION 3.15 No Plan or Intention to Reacquire Stock. Harken has no
\ncurrent plan or intention to reacquire any shares of Harken Common Stock issued
\nat the Effective Time.<\/p>\n
28
\n 36
\n SECTION 3.16 No Plan or Intention to Merge, Sell or Otherwise Dispose
\nof Search. Harken has no current plan or intention after the Merger to
\nliquidate Merger Sub; to merge Merger Sub with or into another corporation; to
\nsell or otherwise dispose of the stock of Merger Sub; or to cause Merger Sub to
\nsell or otherwise dispose of any of its assets or of any of the assets acquired
\nfrom Search, except for dispositions made in the ordinary course of business,
\ndispositions contemplated by this Agreement or transfers described in Section
\n368(a)(2)(C) of the Code.<\/p>\n
SECTION 3.17 No Liabilities. Merger Sub will have no liabilities
\nprior to the Merger. There is no intercorporate indebtedness existing between
\nHarken and Search or between Merger Sub and Search that was issued, acquired or
\nwill be settled at a discount.<\/p>\n
SECTION 3.18 Historic Business. Following the Merger, Merger Sub
\nwill continue the historic business of Search or use a significant portion of
\nSearch’s historic business assets in a business.<\/p>\n
SECTION 3.19 Ownership of Search Stock. Harken does not own, nor has
\nit owned during the past five years, any shares of the stock of Search.<\/p>\n
SECTION 3.20 Not Investment Company. Harken and Merger Sub are not
\ninvestment companies as defined in Sections 368(a)(2)(F)(iii) and (iv) of the
\nCode.<\/p>\n
SECTION 3.21 No Prior Business. Merger Sub has not conducted any
\nbusiness prior to the Merger, except such business as may be necessary for
\nMerger Sub to engage in the Merger.<\/p>\n
ARTICLE IV
\n CONDUCT OF BUSINESS PENDING THE MERGER<\/p>\n
SECTION 4.01 Conduct of Business by Search Pending the Merger.
\nExcept as disclosed in the Search Disclosure Schedule or as contemplated in
\nthis Agreement, Search covenants and agrees that, between the date of this
\nAgreement and the Effective Time, unless Harken shall otherwise agree, which
\nagreement shall not be unreasonably withheld, Search shall conduct business and
\nshall cause the businesses of its subsidiaries, to be conducted only in, and
\nSearch shall not, take any action except in, the ordinary course of business
\nand in a manner consistent with past practice, and Search shall use
\ncommercially reasonable efforts to preserve substantially intact the business
\norganization of Search and its subsidiaries, to keep available the services of
\nthe present officers, employees and consultants of Search and its subsidiaries
\nand to preserve the present relationships of Search and its subsidiaries with
\ncustomers, suppliers, partners, investors, operators and other persons with
\nwhich Search and its subsidiaries have significant business relations. By way
\nof amplification and not limitation, except as disclosed in the Search
\nDisclosure Schedule and as contemplated in this Agreement, neither Search nor
\nany of its subsidiaries shall, between the date of this Agreement and the
\nEffective Time, directly or indirectly do, or propose<\/p>\n
29
\n 37
\nto do, any of the following without the prior written consent of Harken, which
\nconsent shall not be unreasonably withheld:<\/p>\n
(a) amend or otherwise change its Certificate of Incorporation or
\nBy-Laws or equivalent organizational documents;<\/p>\n
(b) issue, sell, pledge, dispose of or encumber, or authorize the
\nissuance, sale, pledge, disposition or encumbrance of, any shares of capital
\nstock of any class, or any options, warrants, convertible securities or other
\nrights of any kind to acquire any shares of capital stock, or any other
\nownership interest, of Search, any of its subsidiaries, or affiliates (except
\nfor sales of Search Common Stock pursuant to the valid exercise for cash of any
\nof the existing Search Warrants);<\/p>\n
(c) sell, assign, transfer, hypothecate, pledge, mortgage, or in
\nany other manner transfer or dispose of any of its properties, leases or assets
\n(other than oil and gas production in the normal course of business);<\/p>\n
(d) declare, set aside, make or pay any dividend or other
\ndistribution, payable in cash, stock, property or otherwise, with respect to
\nany of its capital stock except dividends payable on the preferred stock of
\nSearch for the period ending September 30, 1994 and December 31, 994;<\/p>\n
(e) reclassify, combine, split, subdivide or redeem, purchase or
\notherwise acquire, directly or indirectly, any of its capital stock;<\/p>\n
(f) (i) acquire (by merger, consolidation, or acquisition of stock
\nor assets) any corporation, partnership or other business organization or
\ndivision thereof; (ii) incur any indebtedness for borrowed money or issue any
\ndebt securities or assume, guarantee or endorse or otherwise as an
\naccommodation become responsible for, the obligations of any person, or make
\nany loans or advances, except in the ordinary course of business consistent
\nwith past practice; (iii) enter into or agree to amend, modify, extend,
\nterminate or in any way change any of the terms, conditions or provisions of
\nany of the Material Contracts; (iv) enter into or amend any other contract,
\nagreement, commitment, or arrangement other than in the ordinary course of
\nbusiness; (v) the settlement of claims not exceeding $10,000 for fair value,
\nand the payment of existing debts to banks, affiliated, vendors, joint
\nventurers, or stockholders which have been previously disclosed to Harken; or
\n(vi) except as set forth in the Search Disclosure Schedule, authorize or incur
\nany capital expenditures which are individually or, in the aggregate, in excess
\nof $10,000 for Search and any of its subsidiaries taken as a whole;<\/p>\n
(g) increase the compensation or fees payable or to become payable
\nto its directors, officers or employees, or grant any severance or termination
\npay, warrants or stock options to, or enter into any employment, severance or
\nother agreement with any director, officer or other employee of Search or any
\nof its subsidiaries, or establish, adopt, enter into or amend any collective
\nbargaining, bonus, profit sharing, thrift, compensation, stock option,
\nrestricted stock, pension, retirement, deferred compensation, employment,
\ntermination, severance or other plan,<\/p>\n
30
\n 38
\nagreement, trust, fund, policy or arrangement for the benefit of any current or
\nformer directors, officers or employees, except for the termination of
\nconsulting and other agreements with former officers and directors of Search
\nand its subsidiaries;<\/p>\n
(h) take any action other than in the ordinary course of business
\nand in a manner consistent with past prudent practice (none of which actions
\nshall be unreasonable or unusual) with respect to accounting policies or
\nprocedures (including, without limitation, procedures with respect to the
\npayment of accounts payable and collection of accounts receivable);<\/p>\n
(i) make any tax election or settle or compromise any material
\nfederal, state, local or foreign income tax liability; or<\/p>\n
(j) pay, discharge or satisfy any claims, liabilities or
\nobligations (absolute, accrued, asserted or unasserted, contingent or
\notherwise), other than as contemplated in the Balance Sheet Date Statements or
\nthe payment, discharge or satisfaction in the ordinary course of business and
\nconsistent with past practice of liabilities reflected or reserved against, in
\nthe financial statements of Search or incurred in the ordinary course of
\nbusiness and consistent with past practice.<\/p>\n
SECTION 4.02 Conduct of Business by Harken and Merger Sub Pending the
\nMerger. Except as contemplated by this Agreement or as otherwise disclosed in
\nthe Harken Disclosure Schedule, Harken and\/or its subsidiaries, as the case may
\nbe, shall not, between the date of this Agreement and the Effective Time,
\ndirectly or indirectly do, or propose to do, any of the following without the
\nprior written consent of Search:<\/p>\n
(a) amend or otherwise change its Certificate of Incorporation or
\nBy- Laws;<\/p>\n
(b) issue or sell, pledge, dispose of, encumber, or authorize the
\nissuance or sale of, any shares of capital stock of any class, or any options,
\nwarrants, convertible securities, or any rights of any kind to acquire shares
\nof capital stock of Harken or any of its subsidiaries, except for (i) the
\nissuance of Harken Common Stock pursuant to the transactions contemplated
\nhereunder, (ii) the issuance of the Harken Warrants in the Exchange Offer (as
\ndefined in Section 7.01 hereof), (iii) the issuance of a maximum of 6,425,534
\nshares of Harken Common Stock currently reserved for issuance under Section
\n3.03 hereof, (iv) the issuance and sale of capital stock for fair value as
\ndetermined by the Board of Directors of Harken, and (v) transactions relating
\nto indebtedness incurred or to be incurred by Harken or any of its
\nsubsidiaries;<\/p>\n
(c) reclassify, combine, split, or subdivide, directly or
\nindirectly, any of its capital stock; or<\/p>\n
(d) Merger Sub shall not conduct any business other than such
\nbusiness as may be necessary to prepare the Merger Sub to engage in the
\ntransactions contemplated hereunder.<\/p>\n
31
\n 39
\n SECTION 4.03 Insurance. Through the Effective Time, Search and
\nHarken will each maintain in full force and effect either all of their policies
\nof insurance which were in effect on June 30, 1994 or insurance comparable to
\nthe coverage afforded by such policies.<\/p>\n
ARTICLE V
\n ADDITIONAL AGREEMENTS<\/p>\n
SECTION 5.01 Proxy Statement\/Prospectus; Registration Statement.<\/p>\n
(a) As promptly as practicable after the execution of this
\nAgreement, Search and Harken shall prepare and file with the SEC and any other
\nappropriate regulatory authority, a registration statement on SEC Form S-4, or
\non such other form as shall be appropriate (“Form S-4”), containing a proxy
\nstatement\/prospectus relating to the approval of the Merger and the
\ntransactions contemplated hereby by the stockholders of Search and the
\nregistration under the Securities Act of the shares of Harken Common Stock to
\nbe issued as of the Effective Time, the Contingent Shares, the Harken Warrants,
\nand the shares of Harken Common Stock issuable pursuant to the exercise of the
\nHarken Warrants and the Unexchanged Search Warrants. Harken and Search shall
\neach use all commercially reasonable efforts to cause the Form S-4 to become
\neffective as soon thereafter as practicable. Subject to the applicable
\nfiduciary duties of directors of Search, as determined by such directors after
\nconsultation with independent counsel, the Proxy Statement shall include the
\nrecommendation of the Board of Directors of Search in favor of the Merger. The
\nBoard of Directors of Search shall submit the Merger on the basis that it be
\napproved by a majority of the voting power of the holders of the Search Common
\nStock and the holders of Search Preferred Stock voting separately as a class.<\/p>\n
(b) Harken shall use all commercially reasonable efforts to keep
\neffective and maintain from Closing until July 17, 1996 the Registration
\nStatement or such other registration statement under the Securities Act as
\nHarken may select covering the sale of the shares of Harken Common Stock
\nissuable upon the exercise of the Harken Warrants and the Unexchanged Search
\nWarrants, and from time to time during such period shall amend or supplement
\nthe prospectus used in connection therewith to the extent necessary in order to
\ncomply with applicable law.<\/p>\n
(c) Harken and Search shall make all necessary filings with
\nrespect to the Merger under the Securities Act and the Exchange Act and the
\nrules and regulations thereunder, under applicable Blue Sky or similar
\nsecurities laws, under applicable foreign securities laws, rules and
\nregulations and under any rules and regulations of any stock exchange and shall
\nuse all commercially reasonable efforts to obtain required approvals and
\nclearances with respect thereto. Search shall make all necessary filings with
\nany exchange upon which the Search Common Stock shall be listed.<\/p>\n
SECTION 5.02 Meeting of Stockholders.<\/p>\n
32
\n 40
\n (a) Search shall promptly after the date hereof take all action
\nnecessary in accordance with Delaware Law, any exchange upon which the Search
\nCommon Stock may be listed, and its Certificate of Incorporation and By-Laws to
\nconvene the Search Stockholders’ Meeting for the purpose of voting on this
\nAgreement and the Merger; provided, however, that Search will have no
\nobligation to hold such meeting prior to the effective date of the Registration
\nStatement. Subject to the applicable fiduciary duties of the Board of
\nDirectors of Search, Search will, through its Board of Directors, recommend to
\nits stockholders approval of this Agreement and the Merger and shall use
\ncommercially reasonable efforts to solicit from stockholders of Search proxies
\nin favor of the Merger and shall take any and all other actions necessary or
\nadvisable to secure the vote or consent of stockholders required by Delaware
\nLaw to effect the Merger.<\/p>\n
(b) Harken shall promptly after the date hereof take all action
\nnecessary to cause the Harken Common Stock to be issued as of the Effective
\nTime, the Contingent Shares, and the shares of Harken Common Stock issued
\npursuant to the exercise of the Harken Warrants and the Unexchanged Search
\nWarrants to be approved for listing on the American Stock Exchange prior to the
\nEffective Time. In addition, Harken shall take all action necessary to cause
\nthe Contingent Shares to be approved for listing on the American Stock Exchange
\nprior to the Settlement Date.<\/p>\n
SECTION 5.03 Access to Information; Confidentiality.<\/p>\n
(a) From the date hereof to the Effective Time, each of Search,
\nHarken and Merger Sub shall, and shall cause their respective subsidiaries,
\naffiliates, officers, directors, employees, auditors and agents to, afford the
\nofficers, employees and agents of one another complete access at all reasonable
\ntimes to one another’s officers, employees, agents, properties, offices, plants
\nand other facilities and to all books and records, including the audit work
\npapers of their respective certified public accountants, and shall furnish one
\nanother with all financial, operating and other data and information generated
\nin the ordinary course of business as each, through its officers, employees or
\nagents, may reasonably request; provided, however, that no party shall be
\nrequired to provide access or furnish information which it is prohibited by law
\nor contract to provide or furnish. Harken and Search further agree to furnish
\nto Harken, Merger Sub, and to Search, respectively, and to use their
\ncommercially reasonable efforts to cause their respective independent certified
\npublic accountants to furnish, copies of all tax returns, and of all work
\npapers, audit work papers, and background materials used in the preparation of
\nsuch tax returns by Harken, Search, or their respective accountants.<\/p>\n
(b) Each of Harken, Merger Sub and Search shall, and shall cause
\ntheir respective affiliates and their respective officers, directors, employees
\nand agents to, hold in strict confidence all data and information obtained by
\nthem from one another or their respective subsidiaries, affiliates, directors,
\nofficers, employees and agents (unless such information is or becomes readily
\nascertainable from public or published information or trade sources or public
\ndisclosure or such information is required to be disclosed by law or in the
\nRegistration Statement or Proxy Statement) and shall ensure that such officers,
\ndirectors, employees and agents do not disclose such<\/p>\n
33
\n 41
\ninformation to others without the prior written consent of Search, Harken or
\nMerger Sub, as the case may be.<\/p>\n
(c) In the event of the termination of this Agreement, Search,
\nHarken and Merger Sub shall, and shall cause their respective affiliates,
\nofficers, directors, employees and agents to, (i) return promptly every
\ndocument furnished to them by one another or any of their respective
\nsubsidiaries, affiliates, officers, directors, employees and agents in
\nconnection with the transactions contemplated hereby and any copies thereof,
\nand shall cause others to whom such documents may have been furnished promptly
\nto return such documents and any copies thereof any of them may have made,
\nother than documents filed with the SEC or otherwise publicly available, and
\n(ii) retain in confidence all documents created by them from any data,
\ninformation or document furnished by Search, Harken or Merger Sub, as the case
\nmay be, or any of their respective subsidiaries, affiliates, officers,
\ndirectors, employees and agents in connection with the transactions
\ncontemplated hereby and any copies thereof, and shall cause others to whom such
\ndocuments may have been furnished promptly to destroy the same and any copies
\nthereof, other than documents created from data, information or documents filed
\nwith the SEC or otherwise publicly available.<\/p>\n
(d) No investigation pursuant to this Section 5.03 shall affect
\nany representations or warranties of the parties herein or the conditions to
\nthe obligations of the parties hereto.<\/p>\n
SECTION 5.04 No Solicitations. From and after the date hereof,
\nSearch will not, and will not authorize or permit any of its officers,
\ndirectors, employees, agents and other representatives or those of any of its
\nsubsidiaries (collectively, “Search Representatives”) to, directly or
\nindirectly, solicit, initiate or encourage (including by way of furnishing
\ninformation) any prospective buyer or the making of any proposal which
\nconstitutes or may reasonably be expected to lead to, an Acquisition
\nTransaction (as defined herein) from any person, or engage in any discussions
\nor negotiations relating thereto or accept any Acquisition Transaction;
\nprovided, however, that, notwithstanding any other provision of this Agreement,
\n(i) Search may engage in discussions or negotiations with a third party who
\n(without any solicitation, initiation, encouragement, discussion or
\nnegotiation, directly of indirectly, by or with Search or any Search
\nRepresentatives after the date of this Agreement) seeks to initiate such
\ndiscussions or negotiations and may furnish such third party information
\nconcerning Search and its business, properties and assets, (ii) Search’s Board
\nof Directors may take and disclose to Search’s stockholders a position
\ncontemplated by Rule 14(e)-2(a) promulgated under the Exchange Act and (iii)
\nfollowing receipt of an Acquisition Transaction that is financially superior to
\nthe Merger and reasonably capable of being financed (as determined in each case
\nin good faith by Search’s Board of Directors after consultation with Search’s
\nfinancial advisors), the Board of Directors of Search may withdraw, modify or
\nnot make its recommendation referred to in Section 5.02 hereof or terminate
\nthis Agreement in accordance with Section 8.01(d) hereof, but in each case
\nreferred to in the foregoing clauses (i) through (iii) only to the extent that
\nthe Board of Directors of Search shall conclude in good faith after consulting
\nwith Search’s outside counsel that such action is necessary in order for the
\nBoard of Directors of Search to act in a manner which is consistent with its
\nfiduciary<\/p>\n
34
\n 42
\nobligations under applicable law. Search shall immediately cease and cause to
\nbe terminated any existing solicitation, initiation, encouragement, activity,
\ndiscussion or negotiation with any parties conducted heretofore by Search or
\nany Search Representatives with respect to any Acquisition Transaction. Search
\nwill promptly notify Harken of any such discussions or negotiations, requests
\nfor such information or the receipt of any Acquisition Transaction, including
\nthe identity of the person or group engaging in such discussions or
\nnegotiations, requesting such information or making such Acquisition
\nTransaction and the material terms and conditions of any Acquisition
\nTransaction. As used in this Agreement, “Acquisition Transaction” shall mean
\nany proposal or offer, other than a proposal or offer by Harken or any of its
\naffiliates, for a tender or exchange offer, a merger, consolidation or other
\nbusiness combination involving Search or any subsidiary or division of Search
\nor any proposal to acquire in any manner an equity interest in, or significant
\nassets of, Search or any of its subsidiaries or divisions.<\/p>\n
SECTION 5.05 Consents; Approvals. Search and Harken shall use all
\ncommercially reasonable efforts to obtain all consents, waivers, approvals,
\nauthorizations or orders (including, without limitation, all United States and
\nforeign governmental and regulatory rulings and approvals), and Search and
\nHarken shall make all filings (including, without limitation, all filings with
\nUnited States and foreign governmental or regulatory agencies) required in
\nconnection with the authorization, execution and delivery of this Agreement by
\nSearch and Harken and the consummation by them of the transactions contemplated
\nhereby. Search and Harken shall furnish all information required to be
\nincluded in the Proxy Statement and the Registration Statement, and the
\nAmerican Stock Exchange Listing Application, or for any application or other
\nfiling to be made pursuant to the rules and regulations of any United States or
\nforeign governmental body in connection with the transactions contemplated by
\nthis Agreement.<\/p>\n
SECTION 5.06 Agreements of Affiliates. Search shall deliver to
\nHarken, prior to the date the Registration Statement becomes effective under
\nthe Securities Act, a letter (the “Affiliate Letter”), in the form attached
\nhereto as Exhibit “E-1,” identifying all persons who are, at the record date
\nfor the Search Stockholders’ Meeting, “affiliates” of Search for purposes of
\nRule 145 under the Securities Act. Search shall use commercially reasonable
\nefforts to cause each person who is identified as an “affiliate” in the
\nAffiliate Letter to deliver to Harken, prior to the Effective Time, a written
\nagreement (an “Affiliate Agreement”) in the form attached hereto as Exhibit
\n“E-2.” Harken shall be entitled to place legends as specified in such
\nAffiliate Agreements on the certificates evidencing any Harken Common Stock to
\nbe received by such affiliates pursuant to the terms of this Agreement, and to
\nissue appropriate stop transfer instructions to the transfer agent for the
\nHarken Common Stock, consistent with the terms of such Affiliate Agreements.<\/p>\n
SECTION 5.07 Notes. Prior to the Closing, Search shall enter into
\nagreements with each of Concorde, EnCap and Joseph F. Langston to amend,
\neffective as of the Effective Time, the Letter Agreement dated January 10, 1994
\nbetween Search and Concorde (the “Concorde Agreement”), the Letter Agreement
\ndated December 20, 1993 between Search and EnCap (the “EnCap Agreement”) and
\nthe Employment Agreement dated July 1, 1991 between Search and Mr. Langston
\n(the “Employment Agreement”), pursuant to which amendments Search shall issue a<\/p>\n
35
\n 43
\ndemand, unsecured, non-interest bearing promissory note to (a) evidence the
\namount payable to Concorde by Search at the Closing under the Concorde
\nAgreement in the form attached hereto as Exhibit “H-1” (the “Concorde Note”);
\n(b) evidence the amount payable to EnCap at the Closing by Search under the
\nEnCap Agreement in the form attached hereto as Exhibit “H-2” (the “EnCap
\nNote”); and (c) evidence the full settlement of any amounts payable to Joseph
\nF. Langston under the Employment Agreement, reduced by the amount of any salary
\npaid to Mr. Langston by Search prior to the Effective Time in the form attached
\nhereto as Exhibit “H-3” (the “Langston Note”). Each of the Concorde Note,
\nEnCap Note and the Langston Note shall provide that at the Effective Time it
\nwill be converted automatically into and represent the right to receive shares
\nof Harken Common Stock, as provided in Section 1.07 hereof.<\/p>\n
SECTION 5.08 Indemnification of Directors and Officers. (a) From
\nand after the Closing, Harken shall cause the Surviving Corporation to, and the
\nSurviving Corporation shall, keep in effect a provision in its Certificate of
\nIncorporation, substantially in the form of Exhibit “M,” providing for the
\nexculpation of liability for, and the indemnification of, each person who is
\nnow or ever has been an officer, director, employee, trustee or agent of Search
\nand\/or any of its Subsidiaries (as identified on Schedule 5.08 attached hereto
\nthe “Agent Indemnified Parties”) to the fullest extent permitted under
\napplicable law, which provision shall not (i) be contradicted by, or in
\nconflict with , any other term or provision of such Certificate of
\nIncorporation, or (ii) be amended or repealed except as required by applicable
\nlaw or except to make changes permitted by law that would enlarge an Agent
\nIndemnified Parties’ right of indemnification, until the lapse of the time
\nperiod provided for in Section 11 of the indemnification agreements to be
\nentered into pursuant to Section 5.08 (c) below.<\/p>\n
(b) The rights of each Agent Indemnified Party hereunder shall be
\nin addition to any other rights such Agent Indemnified Party may have under the
\nCertificate of Incorporation or Bylaws of the Surviving Corporation as the
\nsurviving entity to the Merger, under Delaware Law or otherwise. The Merger
\nSub shall deliver a true and complete copy of its Certificate of Incorporation
\nand Bylaws to Search prior to the Closing.<\/p>\n
(c) At the Closing, Harken and Surviving Corporation each agree to
\nenter into indemnification agreements, substantially in the form of Exhibit
\n“N,” with each of the Agent Indemnified Parties.<\/p>\n
(d) The provisions of this Section 5.08 shall survive the
\nconsummation of the Merger and are expressly intended to benefit each of the
\nAgent Indemnified Parties.<\/p>\n
SECTION 5.09 Taxability of Transaction. Harken and Search agree to
\ntreat the Merger as a reorganization under Section 368(a)(1) of the Code. In
\naddition, Harken and Search agree to treat Section 483 of the Code and the
\nregulations thereunder and not Section 1273 of the Code and the regulations
\nthereunder as being applicable to compute the amount of interest, if any, that
\nwill be treated as income to the current stockholders of Search and deductible
\nby Harken upon such stockholders’ receipt of Contingent Shares. Harken agrees
\nto use commercially reasonable efforts to maintain the position upon any audit
\nor administrative proceeding with the IRS that<\/p>\n
36
\n 44
\nSection 483 of the Code, rather than Section 1273 of the Code, is applicable to
\nimpute interest income to the current stockholders upon the issuance to them of
\nthe Contingent Shares. Search agrees that either its legal counsel (or a firm
\nof certified public accountants retained by it) shall render an opinion with
\nregard to the material tax consequences of the transactions hereunder to the
\nholders of Search Shares and the Search Warrants, which opinion shall be filed
\nas an exhibit to the Registration Statement as required by Item 601(b)(8) of
\nRegulation S-K of the Securities Act.<\/p>\n
SECTION 5.10 Notice of Developments. Search shall give prompt notice
\nto Harken, and Harken shall give prompt notice to Search, of (a) the
\noccurrence, or non-occurrence, of any event the occurrence or non-occurrence of
\nwhich would be likely to cause any representation or warranty contained in this
\nAgreement to be untrue or inaccurate and (b) any failure of Search, Harken or
\nMerger Sub, as the case may be, to comply with or satisfy any covenant,
\ncondition or agreement to be complied with or satisfied by it hereunder;
\nprovided, however, that the delivery of any notice pursuant to this Section
\n5.10 shall not limit or otherwise affect the remedies available hereunder to
\nthe party receiving such notice.<\/p>\n
SECTION 5.11 Further Action. Upon the terms and subject to the
\nconditions hereof, each of the parties hereto shall (a) promptly make its
\nrespective filings, and thereafter make any other required submissions, and (b)
\nuse commercially reasonable efforts to take, or cause to be taken, all
\nappropriate action, and to do or cause to be done, all things necessary, proper
\nor advisable under applicable laws and regulations to consummate and make
\neffective the transactions contemplated by this Agreement, including, without
\nlimitation, using all commercially reasonable efforts to obtain all licenses,
\npermits, consents, approvals, authorizations, qualifications and orders of
\ngovernmental authorities and parties to contracts with Search and Harken and
\ntheir subsidiaries as are necessary for the consummation of the transactions
\ncontemplated by this Agreement and to fulfill the conditions to the Merger. In
\ncase at any time after the Effective Time any further action is necessary or
\ndesirable to carry out the purposes of this Agreement, the proper officers and
\ndirectors of each party to this Agreement shall use commercially reasonable
\nefforts to take all such necessary action.<\/p>\n
SECTION 5.12 Public Announcements. Harken and Search shall consult
\nwith each other before issuing any press release or otherwise making any public
\nstatements with respect to the Merger and shall not issue any such press
\nrelease or make any such public statement prior to such consultation, except as
\nmay be required by law or any listing agreement with a national securities
\nexchange.<\/p>\n
SECTION 5.13 Director Nominee. After the Effective Time, Harken’s
\nBoard of Directors will nominate and elect Dr. Gary Wood as a Director of
\nHarken to serve in such position through Harken’s Annual Stockholders meeting
\nto be held on or about June 1996.<\/p>\n
SECTION 5.14 Fees and Expenses. Whether or not the Merger is
\nconsummated, all costs and expenses incurred in connection with this Agreement
\nand the transactions contemplated hereby<\/p>\n
37
\n 45
\nshall be paid by the party incurring the expenses, except that expenses
\nincurred in connection with the preparation of the Registration Statement and
\nthe printing and mailing of the Proxy Statement shall be shared equally by
\nSearch and Harken.<\/p>\n
SECTION 5.15 Major Transactions. Described on Exhibit “K” attached
\nhereto, are the material terms of certain transactions (the “Major
\nTransactions”) which Search has represented to Harken have been negotiated and
\nagreed to between all parties necessary to each of such transactions and which
\nwill be documented and fully and finally closed by Search prior to the
\nEffective Time. The parties recognize and agree that the timely closing and
\ncompletion of each of these Major Transactions prior to the Effective Time is
\nof material importance in connection with the Merger.<\/p>\n
SECTION 5.16 Assignment of Eastern Shelf Overriding Royalty. Prior
\nto the Closing, Search shall acquire the overriding royalty interests in the
\nEastern Shelf Properties (as defined in Exhibit “F” attached hereto) by
\nentering into the Royalty Assignment Agreement with each of the holders (the
\n“Royalty Holders”) of such royalty interests (the “Eastern Shelf Overriding
\nRoyalty Interests”), a form of which agreement is attached hereto as Exhibit
\n“L” (the “Royalty Assignment Agreement”).<\/p>\n
SECTION 5.17 Partnership Documents. Search will deliver to Harken
\nfull and complete copies of any and all documentation and correspondence it or
\nany of its subsidiaries proposes to send to any of the Partners of any of the
\nSearch Partnerships, prior to such items being sent. Harken shall have the
\nright to review, comment on and approve all such documents and correspondence,
\nwhich approval Harken will not unreasonably withhold.<\/p>\n
ARTICLE VI
\n CONDITIONS OF MERGER<\/p>\n
SECTION 6.01 Conditions to Obligation of Each Party to Effect the
\nMerger. The respective obligations of each party to effect the Merger shall be
\nsubject to the satisfaction at or prior to the Effective Time of the following
\nconditions:<\/p>\n
(a) Effectiveness of the Registration Statement. The Registration
\nStatement shall have been declared effective. No stop order suspending the
\neffectiveness of the Registration Statement shall have been issued by the SEC
\nand no proceedings for that purpose shall, on or prior to the Effective Time,
\nhave been initiated or, to the knowledge of Harken or Search, threatened by the
\nSEC;<\/p>\n
(b) Stockholder Approval. This Agreement and the Merger shall
\nhave been approved and adopted by (i) the requisite vote of the holders of
\nSearch Common Stock (which shall be the<\/p>\n
38
\n 46
\nminimum required by Delaware Law or the Certificate of Incorporation and Bylaws
\nof Search) and (ii) the holders of 100% of the outstanding Search Preferred
\nStock;<\/p>\n
(c) AMEX Listing. The shares of Harken Common Stock issuable at
\nthe Effective Time, the Contingent Shares and the shares of Harken Common Stock
\nissuable pursuant to the exercise of the Harken Warrants or Unexchanged Search
\nWarrants shall have been approved for listing on the American Stock Exchange
\nupon official notice of issuance; and<\/p>\n
(d) No Order. No United States or state governmental authority or
\nother agency or commission or United States or state court of competent
\njurisdiction shall have enacted, issued, promulgated, enforced or entered any
\nstatute, rule, regulation, executive order, decree, injunction or other order
\n(whether temporary, preliminary or permanent) which is in effect restricting,
\npreventing or prohibiting consummation of the transactions contemplated by this
\nAgreement.<\/p>\n
SECTION 6.02 Additional Conditions to Obligations of Harken and
\nMerger Sub. The obligations of Harken and Merger Sub to effect the Merger are
\nalso subject to the following conditions:<\/p>\n
(a) Representations and Warranties. The representations and
\nwarranties of Search contained in this Agreement shall be true and correct in
\nall material respects on the date hereof and on and as of the Effective Time,
\nexcept for changes contemplated by this Agreement, and except for those
\nrepresentations and warranties which address matters only as of a particular
\ndate (which shall remain true and correct as of such date), with the same force
\nand effect as if made on and as of the Effective Time, and Harken and Merger
\nSub shall have received a certificate of the President and Chief Financial
\nOfficer of Search to that effect;<\/p>\n
(b) Agreements and Covenants. Search shall have performed or
\ncomplied in all material respects with all agreements and covenants required by
\nthis Agreement to be performed or complied with by it on or prior to the
\nEffective Time, including but not limited to the Major Transactions;<\/p>\n
(c) Consents Obtained. All material consents, waivers, approvals,
\nauthorizations or orders required to be obtained, and all filings required to
\nbe made, by Search for the authorization, execution and delivery of this
\nAgreement and the consummation by it of the transactions contemplated hereby
\nshall have been obtained and made by Search;<\/p>\n
(d) No Challenge. There shall not be any actual or threatened
\naction, proceeding or investigation before any court or administrative agency
\nor by any government agency or any other person (i) challenging, or seeking
\nmaterial damages by reason of consummation of the transactions contemplated by
\nthis Agreement, or (ii) seeking to restrain, prohibit or limit the exercise of
\nfull rights of ownership or operation by Harken or its subsidiaries of all or
\nany portion of the business or assets of Search, in either case having a
\nMaterial Adverse Effect on Search or Harken;<\/p>\n
39
\n 47
\n (e) Affiliate Agreements. Harken shall have received from the
\nchief executive officer of Search the Affiliate Letter and from each person who
\nis identified in the Affiliate Letter as an “affiliate” of Search, an Affiliate
\nAgreement;<\/p>\n
(f) Amendment of Agreements. The Employment Agreement, Concorde
\nAgreement and the EnCap Agreement shall have been amended by the mutual written
\nagreement of the parties thereto, effective as of the Effective Time as
\ndescribed in Section 5.07 hereof;<\/p>\n
(g) Other Agreements. Except as listed on the Search Disclosure
\nSchedule, all agreements between Search and any of Search’s officers or
\ndirectors shall have been terminated by the mutual written agreement of the
\nparties thereto, effective as of the Effective Time;<\/p>\n
(h) Material Adverse Effect. No fact, event or condition
\n(financial or otherwise) shall have occurred with respect to Search and its
\nsubsidiaries taken as a whole having, in the aggregate, a Material Adverse
\nEffect as defined in Section 2.01 hereof on Search and its subsidiaries;<\/p>\n
(i) Dissenting Votes. The holders of not more than five percent
\n(5%) of the outstanding Search Shares shall have exercised their appraisal
\nrights, if any, in accordance with Delaware Law;<\/p>\n
(j) Reconveyance of Overriding Royalty Interests. Search shall
\nhave obtained and made available for filing, if necessary, such assignments and
\nother evidences of transfer as are reasonably necessary in such form as may be
\nacceptable to Harken covering the reconveyance in full to Search of the Eastern
\nShelf Overriding Royalty Interests; and<\/p>\n
(k) Liquidation of Search Partnerships. The partnerships listed
\non Exhibit “I” (the “Search Partnerships”) shall have been liquidated pursuant
\nto the terms of their respective partnership agreements and on the terms and
\nconditions and with such agreements as are acceptable to Harken. Exhibit “I”
\nsets forth the disposition of each of the general and limited partnership
\ninterests in each of the Search Partnerships. Harken shall have received from
\nStead & Sughroue, L.L.C., an opinion in the form and substance satisfactory to
\nHarken, that (i) the Search Partnerships have been liquidated and dissolved in
\naccordance with the terms of each of the partnership agreements and applicable
\nlaws, and (ii) if Search or any of its subsidiaries acquired any of the
\npartnership interests of any of the Search Partnerships, that the acquisition
\nof such interests was in accordance with the terms of each of the partnership
\nagreements and applicable laws.<\/p>\n
SECTION 6.03 Additional Conditions to Obligation of Search. The
\nobligation of Search to effect the Merger is also subject to the following
\nconditions:<\/p>\n
(a) Representations and Warranties. The representations and
\nwarranties of Harken and Merger Sub contained in this Agreement shall be true
\nand correct in all material respects on the<\/p>\n
40
\n 48
\ndate hereof and on and as of the Effective Time, except for changes
\ncontemplated by this Agreement and except for those representations and
\nwarranties which address matters only as of a particular date (which shall
\nremain true and correct as of such date) with the same force and effect as if
\nmade on and as of the Effective Time, and Search shall have received a
\ncertificate of the President and Chief Financial Officer of Harken to that
\neffect;<\/p>\n
(b) Agreements and Covenants. Harken and Merger Sub shall have
\nperformed or complied in all material respects with all agreements and
\ncovenants required by this Agreement to be performed or complied with by them
\non or prior to the Effective Time;<\/p>\n
(c) Consents Obtained. All material consents, waivers, approvals,
\nauthorizations or orders required to be obtained, and all filings required to
\nbe made, by Harken and Merger Sub for the authorization, execution and delivery
\nof this Agreement and the consummation by them of the transactions contemplated
\nhereby shall have been obtained and made by Harken and Merger Sub;<\/p>\n
(d) No Challenge. There shall not be any actual or threatened
\naction, proceeding or investigation before any court or administrative agency
\nor by any government agency or any other person (i) challenging, or seeking
\nmaterial damages by reason of consummation of the transactions contemplated by
\nthis Agreement, or (ii) seeking to restrain, prohibit or limit the exercise of
\nfull rights of ownership or operation by Harken or its subsidiaries of all or
\nany portion of the business or assets of Search, in either case having a
\nMaterial Adverse Effect on Search or Harken;<\/p>\n
(e) Opinion of Investment Banker. Principal shall have delivered
\na written opinion to the Board of Directors of Search, in form reasonably
\nsatisfactory to Search, confirming, as of the date of the Proxy Statement, its
\nopinion referred to in Section 2.13 hereof; and<\/p>\n
(f) Material Adverse Effect. No fact, event or condition
\n(financial or otherwise) shall have occurred with respect to Harken and its
\nsubsidiaries taken as a whole having, in the aggregate, a Material Adverse
\nEffect on Harken and its subsidiaries.<\/p>\n
(g) Legal Opinion. Search shall have received a letter, in a form
\nreasonably satisfactory to Search, entitling Search to rely upon the opinion
\nrendered by legal counsel of Harken filed as an exhibit to the Registration
\nStatement pursuant to Item 601(b)(5) of Regulation S-K of the Securities Act.<\/p>\n
(h) Tax Opinion. Search shall have received an opinion rendered
\nby its legal counsel (or by a firm of certified public accountants retained by
\nit) with regard to the taxability of the transactions hereunder to the holders
\nof Search Shares and the Search Warrants.<\/p>\n
ARTICLE VII
\n SEARCH WARRANTS<\/p>\n
41
\n 49
\n SECTION 7.01 Warrant Exchange Offer. Prior to Closing, Harken will
\noffer (the “Exchange Offer”) to each of the current holders of the Search
\nWarrants to exchange their Search Warrants for new warrants issued by Harken to
\nacquire shares of Harken Common Stock, a form of which is attached hereto as
\nExhibit “G-2” (“Harken Warrants”), according to the exchange schedule set out
\nin Exhibit “G-1” attached hereto. Exhibit “G-1” sets forth the name of each
\nholder of a Search Warrant and the maximum number of shares of Search Common
\nStock issuable upon exercise of Search Warrants held by such holder and the
\nmaximum number of shares of Harken Common Stock issuable upon exercise of the
\nHarken Warrants which will be received upon tender of the Search Warrants
\npursuant to the Exchange Offer and identifies each such warrant which was
\nissued to employees as compensation. The Harken Warrants issued in the
\nExchange Offer will be effective as of the Effective Time with a term to expire
\non June 30, 1996 and will be initially exercisable at $1.82 per share. The
\nconsummation of the Exchange Offer is conditional upon the consummation of the
\nMerger.<\/p>\n
SECTION 7.02 Unexchanged Search Warrants. Each of the Unexchanged
\nSearch Warrants that is not tendered in the Exchange Offer shall represent the
\nright to purchase Harken Common Stock as set forth in Section 1.15 hereof.<\/p>\n
SECTION 7.03 Warrant Holders Participation in Contingent Shares. The
\nholders of Harken Warrants and Unexchanged Search Warrants shall be entitled to
\nreceive, under certain conditions, Contingent Shares as set forth in Section
\n1.10 hereof.<\/p>\n
ARTICLE VIII
\n TERMINATION, AMENDMENT AND WAIVER<\/p>\n
SECTION 8.01 Termination. This Agreement may be terminated and the
\nMerger contemplated hereby may be abandoned at any time prior to the Effective
\nTime, notwithstanding approval thereof by the stockholders of Search:<\/p>\n
(a) By mutual written consent duly authorized by the Boards of
\nDirectors of Harken and Search; or<\/p>\n
(b) By either Harken or Search if the Merger shall not have been
\nconsummated at the earlier of March 31, 1995, or before ninety (90) days
\nfollowing the declaration of the effectiveness of the Registration Statement by
\nthe SEC, or such later date as may be agreed to in writing by the parties;
\nprovided, however that the right to terminate this Agreement under this Section
\n8.01(b) shall not be available to any party whose willful failure to fulfill
\nany material obligation under this Agreement has been the cause of, or resulted
\nin, the failure of the Effective Time to occur on or before such date; or<\/p>\n
42
\n 50
\n (c) By either Harken or Search if a court of competent
\njurisdiction or governmental, regulatory or administrative agency or commission
\nshall have issued an order, decree or ruling or taken any other action, in each
\ncase permanently restraining, enjoining or otherwise prohibiting the
\ntransactions contemplated by this Agreement, and such order, decree, ruling or
\nother action shall have become final and nonappealable; or<\/p>\n
(d) By either Harken or Search if the Board of Directors of Search
\nshall have approved or recommended any Acquisition Transaction in accordance
\nwith Section 5.04 hereof; or<\/p>\n
(e) By Harken if the Board of Directors of Search shall have
\nwithdrawn, modified or amended in any manner adverse to Harken its approval of
\nor recommendation in favor of the Merger due to a Material Adverse Effect to
\nHarken; or<\/p>\n
(f) By Harken if Search breaches in any material respect any of
\nits agreements or covenants contained herein, or if any representation or
\nwarranty of Search shall be or shall have become untrue, in either case such
\nthat the conditions set forth in Section 6.02(a) or Section 6.02(b) hereof
\nwould not be satisfied, and such breach is not waived or cured within 10 days
\nafter written notice from Harken; or<\/p>\n
(g) By either Harken or Search if Search’s stockholders do not
\napprove the Merger at a meeting of stockholders (or any adjournments thereof)
\nduly called and held for such purpose; or<\/p>\n
(h) By Search if Harken breaches any of its agreements or
\ncovenants contained herein or if any representation or warranty of Harken shall
\nbe or shall have become untrue, in either case such that conditions set forth
\nin Section 6.03(a) or Section 6.03(b) hereof would not be satisfied, and such
\nbreach is not waived or cured within 10 days after written notice from Search;
\nor<\/p>\n
(i) By Search if the Form S-4 has not been initially filed by
\nHarken with the SEC within 21 days after the conditions set forth in Section
\n6.02(k) have been fulfilled.<\/p>\n
SECTION 8.02 Effect of Termination.<\/p>\n
(a) In the event of the termination of this Agreement pursuant to
\nSection 8.01 hereof, this Agreement shall forthwith become void and there shall
\nbe no liability on the part of any party hereto or its affiliates, directors,
\nofficers or stockholders, other than the provisions of Section 5.03, this
\nSection 8.02 and Section 10.01 hereof. Nothing contained in this Section 8.02
\nshall prejudice the ability of a party from asserting all rights and remedies
\nthat such party may have against any other party by reason of any breach or
\nviolation of this Agreement occurring prior to such termination, including,
\nwithout limitation, the right to pursue any remedy at law or equity and to
\nrecover all attorney’s fees incurred in connection therewith.<\/p>\n
43
\n 51
\n (b) If Harken or Search terminates this Agreement pursuant to
\nSections 8.01(d), Search shall pay Harken a cash fee equal to all of Harken’s
\nout-of-pocket expenses (including the fees and expenses of its legal counsel)
\nplus $800,000 by wire transfer of immediately available funds to an account
\ndesignated by Harken.<\/p>\n
(c) If Harken or Search terminates this Agreement pursuant to
\nSections 8.01(e), Search shall pay Harken a cash fee equal to all of Harken’s
\nout-of-pocket expenses (including the fees and expenses of its legal counsel)
\nplus $150,000 by wire transfer of immediately available funds to an account
\ndesignated by Harken.<\/p>\n
SECTION 8.03 Amendment. This Agreement may be amended by the mutual
\naction taken by or on behalf of their respective Boards of Directors at any
\ntime prior to the Effective Time; provided, however, that, after approval of
\nthe Merger by the stockholders of Search, no amendment may be made which by law
\nrequires further approval by such stockholders without such further approval.
\nThis Agreement may not be amended except by an instrument in writing signed by
\neach of the parties hereto.<\/p>\n
SECTION 8.04 Extension; Waiver. At any time prior to the Effective
\nTime, any party hereto may (a) extend the time for the performance of any of
\nthe obligations or other acts of the other parties hereto, (b) waive any
\ninaccuracies in the representations and warranties of the other parties
\ncontained herein or in any document delivered pursuant hereto and (c) waive
\ncompliance by the other parties with any of the agreements or conditions
\ncontained herein. Any such extension or waiver shall be valid if set forth in
\nan instrument in writing signed by the party or parties to be bound thereby.
\nExcept as provided in this Agreement, no action taken pursuant to this
\nAgreement, including, without limitation, any investigation by or on behalf of
\nany party, shall be deemed to constitute a waiver by the party taking such
\naction of compliance with any representations, warranties, covenants or
\nagreements contained in this Agreement. The waiver by any party hereto of a
\nbreach of any provision hereunder shall not operate or be construed as a waiver
\nof any prior or subsequent breach of the same or any other provision hereunder.<\/p>\n
ARTICLE IX
\n MAXIMUM HARKEN SHARES TO BE ISSUED<\/p>\n
SECTION 9.01 Maximum Shares. Notwithstanding any other provisions,
\nterms or other matters set forth or referenced in this Agreement, Harken shall
\nnot be required nor obligated to issue any portion of the Contingent Shares as
\nprovided in Section 1.10 hereof which when added to all other shares of Harken
\nCommon Stock called for to be issued or reserved for issuance hereunder and in
\nall related transactions to the Merger, would exceed a maximum amount of eleven
\nmillion (11,000,000) shares (the “Maximum Share Limit”) of Harken Common Stock.<\/p>\n
There shall be included for purposes of determining the number of
\nContingent Shares which may be issued within the Maximum Share Limit all shares
\nissued in exchange for Search<\/p>\n
44
\n 52
\nShares, in exchange for the Notes, and all shares issued or reserved for
\nissuance for the Harken Warrants and the Unexchanged Search Warrants.<\/p>\n
SECTION 9.02 Excess Shares. In the event the calculation of the
\nContingent Shares under Section 1.10 hereof when added to the aggregate total
\nof all other shares of Harken Common Stock to be issued or reserved for
\nissuance under this Merger and the other transactions which are directly
\nrelated to it, exceed the Maximum Share Limit, then in such event Harken shall
\nwithin 30 days after the Settlement Date or the Final Settlement Date, as may
\nbe applicable, elect at its sole option:<\/p>\n
(a) to pay the amount in cash of the number of such Contingent
\nShares which exceed the Maximum Share Limit times the Contingent Share Price to
\nthe parties entitled to receive the same, provided, however, that the cash
\nreceived by the holders of Search Shares shall in no event exceed 50% of the
\naggregate consideration received by such holders at the Effective Time and on
\nthe Settlement Date (and the Final Settlement Date, if applicable); or<\/p>\n
(b) to obtain the consent and approval from its stockholders to
\nissue additional shares of Harken Common Stock in excess of the Maximum Share
\nLimit.<\/p>\n
SECTION 9.03 Timing. In the event Harken elects to pursue the
\nalternative to pay cash as set forth in Section 9.02(a) above, Harken will use
\ncommercially reasonable efforts to make such payments within 45 days after the
\nSettlement Date or the Final Settlement Date, as may be applicable. In the
\nevent Harken elects to pursue the alternative to pay in additional shares as
\nset forth in Section 9.02(b) above or in the event the cash alternative is not
\navailable because of the above limitations placed upon the amount thereof then,
\nHarken will use commercially reasonable efforts to obtain the necessary consent
\nand approval from its stockholders so as to issue such additional shares within
\nsix months after the Settlement Date or the Final Settlement Date, as may be
\napplicable. Pending such additional authorizations or other actions necessary,
\nHarken shall issue that portion of the Contingent Shares up to the Maximum
\nShare Limit on the Settlement Date. In the event Harken elects to obtain the
\napproval of its stockholders to issue additional shares in excess of the
\nMaximum Share Limit and fails to obtain such approval, Harken will pay cash
\npursuant to Section 9.02(a) above.<\/p>\n
ARTICLE X
\n GENERAL PROVISIONS<\/p>\n
SECTION 10.01 Non-Survival of Representations, Warranties and
\nAgreements. The representations, warranties and agreements in this Agreement
\nshall terminate at the Effective Time or upon the termination of this Agreement
\npursuant to Section 8.01, as the case may be, provided, however, that (a) the
\nprovisions of Articles I, II, V and X, Sections 3.10, and the agreements
\ndelivered pursuant to this Agreement if not otherwise provided shall survive
\nthe Effective Time until the Settlement Date, provided, however, that Article I
\nand Sections 3.13 through 3.21 shall<\/p>\n
45
\n 53
\nsurvive until the Final Settlement Date and Section 5.08 shall survive until
\nthe lapse of the time period described in Section 5.08(a) hereof, and (b) the
\nprovisions of Section 8.02 and this Article X shall survive the termination of
\nthis Agreement and the representations, warranties and agreements in this
\nAgreement shall survive any such termination for the purposes of a party
\nasserting all of its rights and remedies as contemplated by Section 8.02(a).<\/p>\n
SECTION 10.02 Notices. All notices and other communications given or
\nmade pursuant hereto shall be in writing and shall be deemed to have been duly
\ngiven or made as of the date delivered or mailed if delivered personally or
\nmailed by registered or certified mail (postage prepaid, return receipt
\nrequested) to the parties at the following addresses (or at such other address
\nfor a party as shall be specified by like notice):<\/p>\n
(a) If to Harken or Merger Sub:
\n Harken Energy Corporation
\n 2505 North Highway 360, Suite 800
\n Grand Prairie, Texas 75050
\n Attention: Larry E. Cummings, General Counsel<\/p>\n
With a copy to:
\n Baker & McKenzie
\n 4500 Trammell Crow Center
\n 2001 Ross Avenue
\n Dallas, Texas 75201
\n Attention: John D. Curtis, Esq.<\/p>\n
(b) If to Search:
\n Search Exploration, Inc.
\n 1500 Three Lincoln Centre
\n 5430 LBJ Freeway
\n Dallas, Texas 75240
\n Attention: Joseph F. Langston, Jr.<\/p>\n
With copy to:
\n Johnson & Wortley, P.C.
\n 100 Founders Square
\n 900 Jackson Street
\n Dallas, Texas 75202
\n Attention: Michael D. Wortley, Esq.<\/p>\n
SECTION 10.03 Certain Definitions. For purposes of this Agreement,
\nthe term:<\/p>\n
(a) “affiliate” means a person that directly or indirectly,
\nthrough one or more intermediaries, controls, is controlled by, or is under
\ncommon control with, the first mentioned<\/p>\n
46
\n 54
\nperson; including, without limitation, any partnership or joint venture in
\nwhich the first mentioned person (either alone, or through or together with any
\nother subsidiary) has, directly or indirectly, an interest of 5% or more;<\/p>\n
(b) “business day” means any day other than a day on which banks
\nin Dallas, Texas, are required or authorized to be closed;<\/p>\n
(c) “control” (including the terms “controlled by and under common
\ncontrol with”) means the possession, directly or indirectly or as trustee or
\nexecutor, of the power to direct or cause the direction of the management or
\npolicies of a person, whether through the ownership of stock, as trustee or
\nexecutor, by contract or credit arrangement or otherwise;<\/p>\n
(d) “Exchange Ratio” means the number (rounded to the nearest
\nten-thousandth) obtained by dividing (i) $.8099 by (ii) the Strike Price;<\/p>\n
(e) “Good Title” means subject to Permitted Encumbrances good and
\ndefensible title which is (i) evidenced by an instrument or instruments filed
\nof record in accordance with the conveyance and recording laws of the
\napplicable jurisdiction and is sufficient against competing claims of bona fide
\npurchasers for value without notice and (ii) free and clear of all liens,
\nsecurity interest, claims, infringements and other burdens of encumbrances,
\nother than such liens, security interests, claims, infringements and other
\nburdens or encumbrances that a reasonably prudent purchaser of oil and gas
\nproperties would accept in light of the value of the property affected, the
\nimprobability of assertion of the defect or irregularity or the degree of
\ndifficulty or the cost of performing curative work;<\/p>\n
(f) “Oil and Gas Interests” means the properties referenced under
\nExhibits “B-1” and “D” hereof, which constitute as to Search and its
\nsubsidiaries all interests in and rights in respect of oil, gas, mineral, and
\nrelated properties and assets of any kind and nature, direct or indirect,
\nincluding working interests, royalties, overriding royalties, production
\npayments, net profits interests, other nonworking interests and nonoperating
\ninterests, contract rights, debt instruments, and equity interests in joint
\nventures, partnerships, corporations and other entities, including but not
\nlimited to common and preferred stock, debentures, bonds and other securities
\nof every kind and nature and unrelated assets coincidentally acquired in
\nconnection with the acquisition of the foregoing assets; all interests in and
\nrights in respect of oil, gas and other minerals and hydrocarbons or revenues
\ntherefrom and all contracts in connection therewith and claims and rights
\nthereto (including but not limited to all oil and gas leases and interests
\nthereunder, surface interests, fee interests, reversionary interests,
\nroyalties, overriding royalties, reservations and concessions), all easements,
\nrights of way, licenses, permits, leases and other interests associated with
\nappurtenant to or necessary for the operation of any of the foregoing, and all
\ninterests in equipment and machinery (including but not limited to well
\nequipment and machinery), oil and gas transmission or storage facilities
\n(including but not limited to tanks, tank batteries, pipelines and gathering
\nsystems), camps, water plants, electric plants, gasoline and gas processing
\nplants,<\/p>\n
47
\n 55
\nrefineries and other tangible personal property and fixtures associated with,
\nappurtenant to or necessary for the operation of any of the foregoing;<\/p>\n
(g) “Preferred Exchange Ratio” means the number (rounded to the
\nnearest ten-thousandth) obtained by dividing (i) $1.00 by (ii) the Strike
\nPrice;<\/p>\n
(h) “Permitted Encumbrances” means (i) inchoate mechanics’,
\nmaterialman’s warehouseman’s and carrier’s liens and other similar liens
\narising by operation of law or statute in the ordinary course of a party’s
\nbusiness for obligations which are not delinquent and which will be paid or
\ndischarged in the ordinary course of such party’s business for obligations
\nwhich are not delinquent and which will be paid or discharged in the ordinary
\ncourse of such party’s business; (ii) liens arising under joint operating
\nagreements for obligations which are not delinquent and which will be paid or
\ndischarged in the ordinary course of a party’s business; (iii) liens for Taxes,
\nassessments, and similar governmental charges incurred and not delinquent; (iv)
\neasements, servitudes, rights-of-way and other rights which do not materially
\ninterfere with the use of a property; (v) liens arising pursuant to Section
\n9.319 of the Texas Business and Commerce Code and all other similar liens
\ncreated by operation of law to secure a party’s obligations as a purchaser of
\noil and gas; (vi) liens constituting pledges or deposits made in the ordinary
\ncourse of a party’s business to secure obligations under compulsory workmen’s
\ncompensation, unemployment insurance, social security, or other similar laws;
\n(vii) liens retained in any oil and gas lease in favor of the party granting
\nsuch lease; (viii) preferential rights to purchase and third-party consents
\nwhich would be activated by the Merger contemplated by this Agreement; (ix) all
\nrights to consent by, required notices to, filings with, or other actions by,
\ngovernmental entities in connection with the Closing if such are customarily
\nobtained subsequent to the Closing; and (x) Oil and Gas Interests of Search and
\nits subsidiaries, with respect to which Search and its subsidiaries own and
\nhold only beneficial or equitable title pursuant to a valid and enforceable
\nwritten agreement between such party and a non-affiliated third party or
\nparties and pursuant to which record or legal title is held by such
\nnon-affiliated third party or parties for the benefit of Search or its
\nsubsidiary;<\/p>\n
(i) “Person” means an individual, corporation, partnership,
\nassociation, trust, unincorporated organization, other entity or group (as
\ndefined in Section 13(d)(3) of the Exchange Act);<\/p>\n
(j) “Strike Price” means the average of the closing sales prices
\nof a share of Harken Common Stock on the American Stock Exchange (as reported
\nby the Wall Street Journal or, if not reported thereby, by another
\nauthoritative source) over the 30 days immediately preceding the date that is
\nfive trading days prior to the Closing Date; provided, however, that in no
\nevent shall the Strike Price be an amount which is (i) greater then $2.366 or
\n(ii) less than $1.274; and<\/p>\n
(k) “Subsidiary” or “Subsidiaries” of Search, the Surviving
\nCorporation, Harken or any other person means the entities listed in Section
\n3.01 of the Search Disclosure Schedule and the Harken Disclosure Schedule,
\nrespectively, and includes any corporation, partnership, joint<\/p>\n
48
\n 56
\nventure or other legal entity of which Search, the Surviving Corporation,
\nHarken or such other person, as the case may be, (either alone or through or
\ntogether with any other subsidiary) owns, directly or indirectly, more than 50%
\nof the stock or other equity interests the holders of which are generally
\nentitled to vote for the election of the board of directors or other governing
\nbody of such corporation or other legal entity.<\/p>\n
SECTION 10.04 Material Adverse Effect. Notwithstanding anything to
\nthe contrary herein, any change, effect, fact, event or condition which
\nadversely affects the oil and gas industry generally, such as a decline in the
\nprice of oil or natural gas generally, shall not be considered in determining
\nwhether a Material Adverse Effect has occurred with respect to Search or
\nHarken.<\/p>\n
SECTION 10.05 Headings. The headings contained in this Agreement are
\nfor reference purposes only and shall not affect in any way the meaning or
\ninterpretation of this Agreement.<\/p>\n
SECTION 10.06 Severability. If any term or other provision of this
\nAgreement is invalid, illegal or incapable of being enforced by any rule of
\nlaw, or public policy, all other conditions and provisions of this Agreement
\nshall nevertheless remain in full force and effect so long as the economic or
\nlegal substance of the transactions contemplated hereby is not affected in any
\nmanner adverse to any party. Furthermore, in lieu of such illegal, invalid or
\nunenforceable provision, there shall be added automatically as a part of this
\nAgreement a provision as similar in terms to such illegal, invalid or
\nunenforceable provision as may be possible and be legal, valid and enforceable.<\/p>\n
SECTION 10.07 Construction. This Agreement and any documents or
\ninstruments delivered pursuant hereto shall be construed without regard to the
\nidentity of the person who drafted the various provisions of the same.<\/p>\n
SECTION 10.08 Specific Performance. The parties hereto agree that if
\nany of the provisions of this Agreement were not performed in accordance with
\ntheir specific terms or were otherwise breached, irreparable damage would
\noccur, no adequate remedy at law would exist and damages would be difficult to
\ndetermine, and that the parties shall be entitled to specific performance of
\nthe terms hereof, in addition to any other remedy at law or equity. The rights
\nand remedies provided for in this Agreement are cumulative, and not exclusive
\nof, any rights or remedies otherwise available.<\/p>\n
SECTION 10.09 Entire Agreement. This Agreement (together with the
\nExhibits and Schedules) constitutes the entire agreement and supersedes all
\nprior agreements and undertakings (other than the Confidentiality Agreement
\nbetween Harken and Search, which shall survive), both written and oral, among
\nthe parties, or any of them, with respect to the subject matter hereof and,
\nexcept as otherwise expressly provided herein, are not intended to confer upon
\nany other person any rights or remedies hereunder.<\/p>\n
49
\n 57
\n SECTION 10.10 Assignment. This Agreement and all the provisions
\nhereof shall be binding upon and inure to the benefit of the parties hereto and
\ntheir respective successors and assigns. Neither this Agreement nor any of the
\nrights hereunder shall be assigned by any of the parties hereto without the
\nprior written consent of the other parties, provided that no such assignment
\nshall release the assigning party from its obligations hereunder.<\/p>\n
SECTION 10.11 Parties in Interest. This Agreement shall be binding
\nupon and inure solely to the benefit of each party hereto, and nothing in this
\nAgreement, express or implied, is intended to or shall confer upon any other
\nperson any right, benefit or remedy of any nature whatsoever under or by reason
\nof this Agreement, other than Section 5.08 (which is intended to be for the
\nbenefit of the indemnified parties and may be enforced by such indemnified
\nparties).<\/p>\n
SECTION 10.12 Governing Law. This Agreement shall be governed by,
\nand construed in accordance with, the laws of the State of Delaware, regardless
\nof the laws that might otherwise govern under applicable principles of
\nconflicts of laws thereof.<\/p>\n
SECTION 10.13 Counterparts. This Agreement may be executed in one or
\nmore counterparts, and by the different parties hereto in separate
\ncounterparts, each of which when executed shall be deemed to be an original but
\nall of which taken together shall constitute one and the same agreement.<\/p>\n
SECTION 10.14 Plan of Reorganization. This Agreement constitutes a
\nplan or reorganization within the meaning of Section 368 of the Code and
\nTreasury Regulation Section 1.368-2(d) among Harken, Search, Merger Sub and the
\nstockholders of Search.<\/p>\n
IN WITNESS WHEREOF, Harken, Merger Sub and Search have caused this
\nAgreement to be executed as of the date first written above by their respective
\nofficers thereunto duly authorized.<\/p>\n
HARKEN ENERGY CORPORATION<\/p>\n
By:_____________________________________
\n Richard H. Schroeder, President<\/p>\n
SEARCH ACQUISITION CORP.<\/p>\n
By:_____________________________________
\n Richard H. Schroeder, President<\/p>\n
50
\n 58
\n SEARCH EXPLORATION, INC.<\/p>\n
By:_____________________________________
\n Joseph F. Langston, Jr.
\n Chairman of the Board<\/p>\n
51
\n 59
\n AGREEMENT AND PLAN OF MERGER<\/p>\n
EXHIBIT “E-1”<\/p>\n
AFFILIATE LETTER<\/p>\n
Harken Energy Corporation
\n2505 North Highway 360, Suite 800
\nGrand Prairie, Texas 75050<\/p>\n
Gentlemen:<\/p>\n
Pursuant to Section 5.06 of the Agreement and Plan of Merger dated as of
\nOctober ___, 1994 (the “Agreement”), among Harken Energy Corporation, a
\nDelaware corporation (“Harken”), Search Acquisition Corporation, a Delaware
\ncorporation (“Acquisition Corp.”), and Search Exploration, Inc., a Delaware
\ncorporation (“SEI”), SEI hereby identifies the following persons as the only
\npersons who are, at the record date for its stockholders meeting to approve the
\nAgreement, “affiliates” of SEI for purposes of Rule 145 of the General Rules
\nand Regulations promulgated under the Securities Act of 1933, as amended:<\/p>\n
\n\n Name Position
\n —- ——–
\n
\n Joseph F. Langston President\/CEO
\n Dr. Gary B. Wood Secretary\/Board of Directors
\n James O. O’Donnell Board of Directors
\n M. Michael Witte Chairman, MEI\/Board of Directors
\n J. Robert Dobbins Board of Directors<\/p>\n<\/c><\/s><\/caption>\n<\/table>\n
Dated and effective __________________, 1994.<\/p>\n
Very truly yours,<\/p>\n
SEARCH EXPLORATION, INC.<\/p>\n
By:_____________________________________
\n Joseph F. Langston, Jr. ,
\n Chairman<\/p>\n
E-1-1
\n 60
\n AGREEMENT AND PLAN OF MERGER<\/p>\n
EXHIBIT “E-2”<\/p>\n
AFFILIATE AGREEMENT<\/p>\n
Harken Energy Corporation
\n2505 North Highway 360, Suite 800
\nGrand Prairie, Texas 75050<\/p>\n
Dear Sirs:<\/p>\n
I have been advised that as of the date of this letter I may be deemed
\nto be an “affiliate” of Search Exploration, Inc., a Delaware corporation
\n(“Search”), as the term “affiliate” is defined for purposes of paragraphs (c)
\nand (d) of Rule 145 of the rules and regulations (the “Rules and Regulations”)
\nof the Securities and Exchange Commission (the “Commission”) under the
\nSecurities Act of 1933, as amended (the “Act”). Pursuant to the terms of the
\nAgreement and Plan of Merger dated as of October ______, 1994 (the
\n“Agreement”), between Harken Energy Corporation, a Delaware corporation
\n(“Harken”), Search Acquisition Corporation, a Delaware corporation and a wholly
\nowned subsidiary of Harken (“Merger Sub”), and Search, Search will be merged
\nwith and into Merger Sub (the “Merger”).<\/p>\n
In connection with transactions contemplated by the Agreement, I may
\nreceive shares of Common Stock, par value $.01 per share (the “Common Stock”),
\nof Harken, the right to receive additional shares of Common Stock, if any,
\nunder certain conditions set forth in the Agreement, or warrants issued by
\nHarken exercisable for Common Stock (the “Harken Securities”).<\/p>\n
I represent, warrant and covenant to Harken that in the event I
\nreceive any Harken Securities as a result of the Merger:<\/p>\n
A. I shall not make any sale, transfer of other
\n disposition of the Harken Securities in violation of the Act or the
\n Rules and Regulations.<\/p>\n
B. I have carefully read this letter and the Agreement
\n and discussed the requirements of such documents and other applicable
\n limitations upon my ability to sell, transfer or otherwise dispose of
\n the Harken Securities to the extent I felt necessary, with my counsel
\n or counsel for Search.<\/p>\n
C. I have been advised that the issuance of Harken
\n Securities to me in connection with the transactions contemplated by
\n the Agreement has been registered with the Commission under the Act on
\n a Registration Statement on Form S-4. However, I have also been
\n advised that, since at the time the Merger and the Agreement was
\n submitted for<\/p>\n
E-2-1
\n 61
\n a vote of the stockholders of Search, I may be deemed to have been an
\n affiliate of Search and the distribution by me of the Harken
\n Securities has not been registered under the Act, I may not sell,
\n transfer or otherwise dispose of the Harken Securities issued to me in
\n connection with the transactions contemplated by the Agreement unless
\n (i) such sale, transfer or other disposition has been registered under
\n the Act, (ii) such sale, transfer or other disposition is made in
\n conformity with Rule 145 promulgated by the Commission under the Act,
\n or (iii) in the opinion of counsel reasonably acceptable to Harken, or
\n a “no action” letter obtained by the undersigned from the staff of the
\n Commission, such sale, transfer or other disposition is otherwise
\n exempt from registration under the Act.<\/p>\n
D. I understand that Harken is under no obligation to
\n register the sale, transfer or other disposition of the Harken
\n Securities by me or on my behalf under the Act or to take any other
\n action necessary in order to make compliance with an exemption from
\n such registration available.<\/p>\n
E. I also understand that stop transfer instructions
\n will be given to Harken’s transfer agents with respect to the Harken
\n Securities and that there will be placed on the certificates for the
\n Harken Securities issued to me, or any substitutions therefor; a
\n legend stating in substance:<\/p>\n
“THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
\n TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
\n ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS
\n CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE
\n TERMS OF AN AGREEMENT DATED _______________, 1994 BETWEEN THE
\n REGISTERED HOLDER HEREOF AND HARKEN ENERGY CORPORATION, A COPY
\n OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPLE OFFICES OF
\n HARKEN ENERGY CORPORATION.”<\/p>\n
F. I also understand that unless the transfer by me of
\n my Harken Securities has been registered under the Act or is a sale
\n made in conformity with the provisions of Rule 145, Harken reserves
\n the right to put the following legend on the certificates issued to my
\n transferee:<\/p>\n
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
\n REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
\n FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO
\n WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
\n APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH
\n A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION
\n THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
\n MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
\n ACCORDANCE<\/p>\n
E-2-2
\n 62
\n WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
\n SECURITIES ACT OF 1933.”<\/p>\n
It is understood and agreed that the legends set forth in paragraphs E
\nand F above shall be removed by delivery of substitute certificates without
\nsuch legend if such legend is not required for purposes of the Act or this
\nAgreement. It is understood and agreed that such legends and the stop orders
\nreferred to above will be removed if (i) two years shall have elapsed from the
\ndate the undersigned acquired the Harken Securities in connection with the
\nMerger and the provisions of Rule 145(d)(2) are then available to the
\nundersigned, (ii) three years shall have elapsed from the date the undersigned
\nacquired the Harken Securities in connection with the Merger and the provisions
\nof Rule 145(d)(3) are then applicable to the undersigned or (iii) Harken has
\nreceived either an opinion of counsel, which opinion and counsel shall be
\nreasonably satisfactory to Harken, or a “no action” letter obtained by the
\nundersigned from the staff of the Commission, to the effect that the
\nrestrictions imposed by Rule 145 under the Act no longer apply to the
\nundersigned. Prior to any transfer of any of the Shares, I will give written
\nnotice to Harken of my intention to effect such offer, sale or transfer,
\ndescribing the proposed transaction in sufficient detail to enable Harken and
\nits counsel to determine that the proposed transaction will not violate the
\nAct.<\/p>\n
Execution of this letter should not be considered an admission on my
\npart that I am an “affiliate” of Search as described in the first paragraph of
\nthis letter or as a waiver of any rights I may have to object to any claim that
\nI am such an affiliate on or after the date of this letter.<\/p>\n
Very truly yours,<\/p>\n
___________________________________
\n Name<\/p>\n
Accepted this _____ day of
\n_________________, 1994 by<\/p>\n
HARKEN ENERGY CORPORATION<\/p>\n
By:_________________________________
\n Larry E. Cummings, Secretary<\/p>\n
E-2-3
\n 63
\n AGREEMENT AND PLAN OF MERGER<\/p>\n
EXHIBIT “G-2”<\/p>\n
FORM OF HARKEN WARRANT AGREEMENT<\/p>\n
WARRANT NO. 94-____________
\n Warrant to Purchase
\n ________ Shares
\n (subject to adjustment)
\n of Common Stock of
\n Harken Energy Corporation<\/p>\n
Void after 3:00 p.m.
\nDallas, Texas
\nJune 30, 1996<\/p>\n
HARKEN ENERGY CORPORATION<\/p>\n
Stock Purchase Warrant<\/p>\n
THIS IS TO CERTIFY THAT, for value received, ____________________________
\n(the “Holder”), whose address is _____________________________, upon due
\nexercise of this Warrant, is entitled to purchase from Harken Energy
\nCorporation, a Delaware corporation (the “Company”), at any time after
\n___________________, 1994, and before 3:00 P.M., Dallas, Texas local time, on
\nJune 30, 1996 (the “Expiration Date”), all or any part of _____________ shares
\n(the “Shares”) of fully paid and non-assessable common stock, par value $.01
\nper share (the “Common Stock”), of the Company, at a purchase price of $______
\nper share (the “Strike Price”), both the Strike Price and number of shares
\nbeing subject to possible adjustment as provided below.<\/p>\n
This Warrant is issued pursuant to Article VII of an Agreement and
\nPlan of Merger dated as of October ___, 1994 (the “Agreement”) among the
\nCompany, Search Exploration, Inc., a Delaware corporation, and Search
\nAcquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the
\nCompany.<\/p>\n
1. Exercise of Warrant.<\/p>\n
(a) Subject to subsection 1(b) below, the Holder may
\nexercise this Warrant in whole or in part at any time, but only in such
\nmultiples as are required to permit the issuance by the Company of one or more
\nfull shares of Common Stock of the Company, by surrender of this Warrant with
\nthe Form of Subscription attached hereto duly executed, to the Company at or
\nprior to 3:00 P.M. Dallas, Texas local time on the Expiration Date, together
\nwith payment of the Strike<\/p>\n
G-2-1
\n 64
\nPrice for each of the Shares into which the Warrant is exercised. Payment for
\nthe Shares to be purchased upon exercise of this Warrant may be made by the
\ndelivery of a certified or cashier’s check payable to the Company for the
\naggregate Strike Price of the Shares to be purchased. In case of the exercise
\nof this Warrant in part only prior to the Expiration Date, the Company will
\ndeliver to the Holder a new Warrant of like tenor in the name of the Holder
\nevidencing the right to purchase the number of shares as to which this Warrant
\nhas not been exercised.<\/p>\n
(b) The Warrant may not be exercised by the Holder
\nunless, at the time of exercise, (1) there is either (i) a registration
\nstatement or prospectus covering the Common Stock of the Company, that is
\neffective under (A) the Act, and (B) the securities laws of the state of the
\naddress of record of such Holder, or (ii) an exemption available from
\nregistration for the Warrant exercise and issuance of Common Stock of the
\nCompany in the opinion of counsel to the Company, and (2) such exercise and
\nissuance would otherwise be in compliance with applicable law in the opinion of
\ncounsel to the Company. The Warrant may not be, directly or indirectly,
\ntransferred to, or exercised by, any person in any state where such transfer or
\nexercise would violate any law, including securities law, of such state in the
\nopinion of counsel to the Company. Legends as required by applicable federal
\nand state laws may be placed on the certificates representing the Shares. The
\nHolder and the Company agree to execute such documents and instruments as
\ncounsel for the Company reasonably deems necessary to effect compliance of the
\nissuance of this Warrant and any Shares issued upon exercise hereof with
\napplicable federal and state securities laws.<\/p>\n
2. Stock Dividends, Reclassification, Reorganization,
\nAnti-Dilution Provisions, Etc.<\/p>\n
This Warrant is subject to the following further provisions:<\/p>\n
(a) In case, prior to the expiration of this Warrant by
\nexercise or by its terms, the Company issues any shares of its Common Stock as
\na stock dividend or divides the number of shares, then, in either of such
\ncases, the Strike Price per share of the Shares purchasable pursuant to this
\nWarrant in effect at the time of such action will be proportionately reduced
\nand the number of Shares at that time purchasable pursuant to this Warrant
\nshall be proportionately increased; and conversely, in the event the Company
\nshall combine such shares of its Common Stock into a smaller number of shares,
\nthen, and in such event, the Strike Price per share of the Shares purchasable
\npursuant to this Warrant in effect at the time of such action shall be
\nproportionately increased and the number of Shares at that time purchasable
\npursuant to this Warrant shall be proportionately decreased.<\/p>\n
(b) In case, prior to the expiration of this Warrant by
\nexercise or by its terms, the Company is recapitalized by reclassifying its
\noutstanding Common Stock into stock with a different par value or by changing
\nits outstanding Common Stock with par value to stock without par value, or the
\nCompany or a successor corporation consolidates or merges with or conveys all
\nor substantially all of its or of any successor corporation’s property and
\nassets to any other corporation or corporations (any such corporation being
\nincluded within the meaning of the term “successor corporation” in the event of
\nany consolidation or merger of any such corporation with,<\/p>\n
G-2-2
\n 65
\nor the sale of all or substantially all of the property of any such corporation
\nto, another corporation or corporations), the Holder of this Warrant may
\nthereafter purchase, upon the terms and conditions and during the time
\nspecified in this Warrant, in lieu of the Shares theretofore purchasable upon
\nthe exercise of this Warrant, the kind and amount of shares of stock and other
\nsecurities receivable upon such recapitalization or consolidation, merger, or
\nconveyance by a Holder of the number of shares of Common Stock which the holder
\nof this Warrant might have purchased, immediately prior to such
\nrecapitalization or consolidation, merger, or conveyance.<\/p>\n
(c) Upon the occurrence of each event requiring an
\nadjustment of the Strike Price and\/or of the number of Shares purchasable
\npursuant to this Warrant in accordance with, and as required by, the terms of
\nsubdivision (a) of this Section 2, the Company shall forthwith employ a firm of
\ncertified public accountants (who may be the regular accountants for the
\nCompany) who shall compute the adjusted Strike Price and the adjusted number of
\nShares purchasable at such adjusted Strike Price by reason of such event in
\naccordance with the provisions of subdivision (a) and shall prepare a
\ncertificate setting forth such adjusted Strike Price and the adjusted number of
\nShares and showing in detail the facts upon which such conclusions are based,
\nincluding a statement of the consideration received or to be received by the
\nCompany for any additional shares of Common Stock issued or sold or deemed to
\nhave been issued or sold and of the number of shares of Common Stock
\noutstanding or deemed to be outstanding. The Company shall mail forthwith to
\nthe holder of this Warrant a copy of such certificate, and thereafter said
\ncertificate shall be conclusive and shall be binding upon such holder unless
\ncontested by such holder by written notice to the Company within ten (10) days
\nafter receipt of the certificate of the public accountants by such holder.<\/p>\n
(d) In case:<\/p>\n
(i) of any classification, reclassification, or
\nother reorganization of the capital stock of the Company, consolidation, or
\nmerger of the Company with or into another corporation, or conveyance of all or
\nsubstantially all of the assets of the Company; or<\/p>\n
(ii) of the voluntary or involuntary dissolution,
\nliquidation or winding up of the Company;<\/p>\n
then, and in any such case, the Company shall mail to the holder of this
\nWarrant a brief statement of the event giving rise to such effect and a
\ndescription thereof.<\/p>\n
(e) In case the Company at any time while this Warrant
\nremains unexpired and unexercised, sells all or substantially all of its
\nproperty or dissolves, liquidates, or winds up its affairs, the holder of this
\nWarrant may thereafter receive upon exercise hereof in lieu of each share of
\nCommon Stock of the kind and amount of any securities or assets as may be
\nissuable, distributable, or payable upon any such sale, dissolution,
\nliquidation, or winding up with respect to each share of Common Stock of the
\nCompany.<\/p>\n
G-2-3
\n 66
\n 3. Non-transferability. This Warrant may not be sold, pledged,
\nassigned, hypothecated, transferred, or disposed of in any manner other than by
\nwill or by the laws of descent and distribution. This Warrant is exercisable,
\nduring the lifetime of the Holder, only by the Holder. Any attempted
\nassignment, transfer, pledge, hypothecation, or other encumbrance of this
\nWarrant contrary to the provisions hereof, any execution, attachment, or
\nsimilar process upon this Warrant, will be null, void, and of no effect.<\/p>\n
4. Warrant Holder Not Stockholder. This Warrant does not confer
\nupon the Holder any right whatsoever as a stockholder of the Company.<\/p>\n
5. Loss, Theft, Destruction, or Mutilation. Upon receipt by the
\nCompany of evidence satisfactory to it (in the exercise of its reasonable
\ndiscretion) of the ownership of and the loss, theft, destruction, or
\nmutilation of this Warrant and (in the case of loss, theft, or destruction) of
\nindemnity satisfactory to it (in the exercise of its reasonable discretion),
\nand (in the case of mutilation) upon surrender and cancellation thereof, the
\nCompany will execute and deliver, in lieu thereof, a new Warrant of like tenor.<\/p>\n
6. Mailing of Notices, etc. All notices and other communications
\nfrom the Company to the Holder of this Warrant shall be mailed by first-class
\nmail, postage prepaid, to the address of the Holder set forth above or such
\nother address as may be furnished to the Company in writing by the Holder of
\nthis Warrant. All notices from the Holder of this Warrant to the Company shall
\nbe mailed to the Company by first-class mail, postage prepaid at P.O. Drawer
\n612007, Dallas, Texas 75261.<\/p>\n
7. Law Governing. This Warrant shall be construed and enforced
\nin accordance with and governed by the laws of the State of Delaware.<\/p>\n
IN WITNESS WHEREOF, the Company has caused this Warrant to be
\nexecuted, sealed, and delivered, in its name by its duly authorized officers.<\/p>\n
HARKEN ENERGY CORPORATION<\/p>\n
By: _____________________________<\/p>\n
Dated: _________________, 1994<\/p>\n
G-2-4
\n 67
\n FORM OF SUBSCRIPTION<\/p>\n
(To be signed only upon exercise of Warrant)<\/p>\n
TO: Harken Energy Corporation
\n P.O. Drawer 612007
\n Dallas, Texas 75261<\/p>\n
The undersigned, the Holder of the within Warrant numbered 94
\n_____, hereby irrevocably elects to exercise the purchase rights represented by
\nsaid Warrant for, and to purchase thereunder, __________ shares of Common Stock
\nof the Company, and herewith makes payment of $__________ therefore, and
\nrequests that the certificates for such shares be issued in the name of and be
\ndelivered to_____________________________________, whose address is
\n_____________________________________________, and if such shares do not
\nconstitute all of the shares purchasable hereunder, that a new Warrant of like
\ntenor for the balance of the shares purchasable hereunder be delivered to the
\nundersigned.<\/p>\n
Date: _______________________ ______________________________________
\n (Signature must conform in all respect
\n to name of holder as specified on the
\n face of the Warrant.)<\/p>\n
(Print Name) <\/p>\n
______________________________________<\/p>\n
Signature Guaranteed By:<\/p>\n
____________________________________<\/p>\n
G-2-5
\n 68
\n AGREEMENT AND PLAN OF MERGER<\/p>\n
EXHIBIT “N”<\/p>\n
INDEMNIFICATION AGREEMENT<\/p>\n
THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is made and entered
\ninto as of this _____ day of _____________, 1994, by and between Harken Energy
\nCorporation, a Delaware corporation (“Harken”), Search Acquisition Corp., a
\nDelaware corporation and wholly owned subsidiary of Harken (the “Company”), and
\n__________________________________, a ________________ resident (“Indemnitee”).<\/p>\n
RECITALS:<\/p>\n
A. The Company was the surviving corporation of a merger with
\nSearch Exploration Inc., a Delaware corporation (“Search”), pursuant to that
\ncertain Agreement and Plan of Merger dated as of October ___, 1994, (the
\n“Merger Agreement”), by and among Harken, the Company and Search (the
\n“Merger”).<\/p>\n
B. McCulloch Energy, Inc., a Texas corporation (“McCulloch”) was
\na wholly owned subsidiary of Search prior to the Merger and as a result of the
\nMerger is now a wholly owned subsidiary of the Company.<\/p>\n
C. Indemnitee has in the past served at the direction of one or
\nmore Search and\/or McCulloch (collectively, and together with the Company and
\nany other resulting or constituent “corporation” within the meaning of Section
\n145(h) of the Delaware General Corporation Law, the “Constituent Entities”), as
\nan officer, director or otherwise.<\/p>\n
D. The Certificate of Incorporation of the Company requires the
\nCompany to indemnify the officers, directors and other key employees of all
\nConstituent Entities to the fullest extent permitted by law and the Company
\ndesires to maintain and clarify its obligation to protect the officers,
\ndirectors and other key employees of the Constituent Entities.<\/p>\n
AGREEMENTS:<\/p>\n
NOW, THEREFORE, in consideration of the foregoing premises, the
\ncovenants contained in this Agreement, ten dollars paid in hand and other good
\nand valuable consideration, the receipt and sufficiency of which is hereby
\nacknowledged, the Company, Harken and Indemnitee hereby covenant and agree as
\nfollows:<\/p>\n
N-1
\n 69
\n 1. Certain Definitions.<\/p>\n
(a) Claim: any threatened, pending, or completed action,
\nsuit or proceeding (including, without limitation, securities laws actions,
\nsuits, and proceedings), or any inquiry or investigation (including discovery),
\nwhether conducted by the Company or any other Person, that Indemnitee in good
\nfaith believes might lead to the institution of any action, suit or proceeding,
\nwhether civil, criminal, administrative, investigative, or other.<\/p>\n
(b) Expenses: all costs, expenses (including attorneys’
\nand expert witnesses’ fees), and obligations paid or incurred in connection
\nwith investigation, defending (including affirmative defenses and
\ncounterclaims), or participating in (including on appeal), or preparing to
\ndefend, or participate in, any Claim relating to any Indemnifiable Event.<\/p>\n
(c) Indemnifiable Event: any event or occurrence related
\nto the fact that Indemnitee is or was a director, officer, employee, agent, or
\nfiduciary of a Constituent Entity, or is or was serving at the request of a
\nConstituent Entity as a director, officer, employee, trustee, agent, or
\nfiduciary of another corporation, partnership, joint venture, employee benefit
\nplan, trust, or other enterprise, or by reason of any thing done or not done by
\nIndemnitee in any such capacity. For purposes of this Agreement, the Company
\nagrees that Indemnitee’s service (including, without limitation, such services
\nrendered in connection with the Merger and the transaction contemplated
\nthereby) on behalf of or with respect to any Constituent Entity shall be deemed
\nto be at the request of the Company.<\/p>\n
(d) Person: any person or entity of any nature
\nwhatsoever, specifically including an individual, a firm, a company, a
\ncorporation, a limited liability company, a partnership, a trust, or other
\nentity.<\/p>\n
(e) Special Counsel: special, independent counsel
\nselected by the Company and approved by Indemnitee (which approval shall not be
\nunreasonably withheld), and who has not otherwise performed services for the
\nCompany or for Indemnitee within the last three years (other than as Special
\nCounsel under this Agreement or similar agreements).<\/p>\n
2. Basic Indemnification and Expense Reimbursement Arrangement.<\/p>\n
(a) In the event Indemnitee was, is, or becomes a party
\nto or other participant in, or is threatened to be made a party to or other
\nparticipant in, a Claim by reason of (or arising in part out of) an
\nIndemnifiable Event, the Company shall indemnify Indemnitee to the fullest
\nextent permitted by law as soon as practicable but in any event no later than
\n60 days after written demand is presented to the Company, against any and all
\nExpenses, judgments, fines, penalties, and amounts paid in settlement
\n(including all interest, assessments, and other charges paid or payable in
\nconnection with or in respect of such Expenses, judgments, fines, penalties, or
\namounts paid in settlement) of or with respect to that Claim. Notwithstanding
\nthe foregoing, the obligations of the Company under this Section 2(a) shall be
\nsubject to the condition that Special Counsel shall not have determined, in a
\nwritten opinion to the Company and Indemnitee, that Indemnitee would not be
\npermitted to be indemnified under this Agreement as construed by applicable
\nlaw. Nothing contained in this<\/p>\n
N-2
\n 70
\nAgreement shall require any determination under this Section 2(a) to be made by
\nSpecial Counsel prior to the disposition or conclusion of the Claim against the
\nIndemnitee; provided, however, that Expense Advances shall continue to be made
\nby the Company pursuant to and to the extent required by the provisions of
\nSection 2(b).<\/p>\n
(b) If so requested by Indemnitee, the Company shall pay
\nany and all Expenses incurred by Indemnitee (or, if applicable, reimburse
\nIndemnitee for any and all Expenses incurred by Indemnitee and previously paid
\nby Indemnitee) within two business days after such request (an “Expense
\nAdvance”). The Company shall be obligated to make or pay an Expense Advance in
\nadvance of the final disposition or conclusion of any Claim. In connection
\nwith any request for an Expense Advance, if requested by the Company,
\nIndemnitee or Indemnitee’s counsel shall submit an affidavit stating that the
\nExpenses incurred were reasonable. Any dispute as to the reasonableness of any
\nExpense shall not delay an Expense Advance by the Company, and the Company
\nagrees that any such dispute shall be resolved only upon the disposition or
\nconclusion of the underlying Claim against the Indemnitee. If, when, and to
\nthe extent that Special Counsel determines that Indemnitee would not be
\npermitted to be indemnified with respect to a Claim under applicable law, the
\nCompany shall be entitled to be reimbursed by Indemnitee and Indemnitee hereby
\nagrees to reimburse the Company without interest (which agreement shall be an
\nunsecured obligation of Indemnitee) for all related Expense Advances
\ntheretofore made or paid by the Company. Any determination by Special Counsel
\nhereunder shall be conclusive and binding on the Company and Indemnitee.<\/p>\n
(c) The Company agrees that, until it shall receive
\nwritten opinion of Special Counsel so directing, it shall not deny any
\nindemnification payments (and Expense Advances shall continue to be paid by the
\nCompany pursuant to Section 2(b)) that Indemnitee requests or demands under
\nthis Agreement or any other agreement or law now or hereafter in effect
\nrelating to Claims for Indemnifiable Events. The Company further agrees not to
\nrequest or seek reimbursement from Indemnitee of any related Expense Advances
\nunless, with respect to a denied indemnification payment, Special Counsel has
\nrendered its written opinion to the Company and Indemnitee that the Company
\nwould not be permitted under applicable law to pay Indemnitee such
\nindemnification payment. The Company agrees to pay the reasonable fees of
\nSpecial Counsel referred to in this Section 2 and to indemnify fully Special
\nCounsel against any and all expenses (including attorneys’ fees), claim,
\nliabilities, and damages arising out of or relating to this Agreement or
\nSpecial Counsel’s engagement pursuant hereto.<\/p>\n
3. Indemnification for Additional Expenses. The Company shall
\nindemnify Indemnitee against any and all costs and expenses (including
\nreasonable attorneys’ and expert witnesses’ fees) and, if requested by
\nIndemnitee, shall (within 60 days of that request) advance those costs and
\nexpenses to Indemnitee, that are incurred by Indemnitee in connection with any
\nclaim asserted against or action brought by Indemnitee for (i) indemnification
\nor advance payment of Expenses by the Company under this Agreement or any other
\nagreement or provision of the Company’s Certificate of Incorporation or By-laws
\nnow or hereafter in effect relating to Claims for Indemnifiable Events or (ii)
\nrecovery under any directors’ and officers’ liability insurance policies
\nmaintained by the Company, regardless of whether Indemnitee ultimately is
\ndetermined to be entitled to that indemnification, advance expense payment, or
\ninsurance recovery, as the case may be.<\/p>\n
N-3
\n 71
\n 4. Partial Indemnity. If Indemnitee is entitled under any
\nprovision of this Agreement to indemnification by the Company for some or a
\nportion of the Expenses, judgments, fines, penalties, and amounts paid in
\nsettlement of a Claim but not, however, for all of the total amount thereof,
\nthe Company shall nevertheless indemnify Indemnitee for the portion thereof to
\nwhich Indemnitee is entitled. Moreover, notwithstanding any other provision of
\nthis Agreement, to the extent that Indemnitee has been successful on the merits
\nor otherwise in defense of any or all Claims relating in whole or in part to an
\nIndemnifiable Event or in defense of any issue or matter therein, including
\ndismissal without prejudice, Indemnitee shall be indemnified against all
\nExpenses incurred in connection therewith.<\/p>\n
5. Burden of Proof. In connection with any determination by
\nSpecial Counsel or otherwise as to whether Indemnitee is entitled to be
\nindemnified under any provision of this Agreement, the burden of proof shall be
\non the Company to establish that Indemnitee is not so entitled.<\/p>\n
6. No Presumption. For purposes of this Agreement, the
\ntermination of any claim, action, suit, or proceeding, by judgment, order,
\nsettlement (whether with or without court approval), or conviction, or upon a
\nplea of nolo contendere, or its equivalent, shall not create a presumption that
\nIndemnitee did not meet any particular standard of conduct or have any
\nparticular belief or that a court has determined that indemnification is not
\npermitted by applicable law.<\/p>\n
7. Non-exclusivity. The rights of indemnitee hereunder shall be
\nin addition to any other rights Indemnitee may have under the Company’s By-laws
\nor Certificate of Incorporation or the Delaware General Corporation Law or
\notherwise.<\/p>\n
8. Liability Insurance. Except as otherwise agreed to by the
\nCompany and Indemnitee in a written agreement, to the extent the Company
\nmaintains an insurance policy or policies providing directors’ and officers’
\nliability insurance, Indemnitee shall be covered by that policy or those
\npolicies, in accordance with its or their terms, to the maximum extent of the
\ncoverage available for any Company director or officer.<\/p>\n
9. Guaranty. Harken hereby unconditionally guarantees the prompt
\npayment of all obligations of the Company arising hereunder; provided that
\nHarken’s guaranty obligations hereunder shall terminate at such time as the
\nCompany has advanced or paid pursuant to the indemnity provided herein
\n(together with the aggregate amount advanced or paid by the Company pursuant to
\nthe indemnity provided for in the other Indemnification Agreements entered into
\nin connection with the Merger) an amount equal to the value of the shares of
\ncommon stock, $.01 par value, of Harken based on the Strike Price (as defined
\nin the Merger Agreement) issued at the Effective Time in exchange for the
\nSearch Common Stock and Search Preferred Stock (as defined in the Merger
\nAgreement) and will not include, without limitation, any value attributable to
\nthe Contingent Shares (as defined in the Merger Agreement).<\/p>\n
10. Period of Limitations. No legal action shall be brought and
\nno cause of action shall be asserted by or on behalf of a Constituent Entity or
\nany affiliate of a Constituent Entity against Indemnitee or Indemnitee’s
\nspouse, heirs, executors, or personal or legal representatives after the<\/p>\n
N-4
\n 72
\nexpiration of three years from the date of accrual of that cause of action, and
\nany claim or cause of action of a Constituent Entity or their affiliates shall
\nbe extinguished and deemed released unless asserted by the timely filing of a
\nlegal action within that three-year period; provided, however, that, if any
\nshorter period of limitations is otherwise applicable to any such cause of
\naction, the shorter period shall govern.<\/p>\n
11. Indemnification Term. Harken’s indemnification guaranty
\nhereunder shall continue in full force and effect from the date hereof until
\nthe latter of (i) the fifth anniversary of the date of this Agreement (the
\n“Claims Date”), or (ii) the date on which any and all Claims existing as of
\nthe Claims Date against Indemnitee for which Indemnitee has given Harken
\nnotice (whether by virtue of the Merger or otherwise) have been finally
\nresolved and all obligations of the Company hereunder to Indemnitee with
\nrespect to such Claims have been satisfied.<\/p>\n
12. Amendments. No supplement, modification, or amendment of this
\nAgreement shall be binding unless executed in writing by both of the parties
\nhereto. No waiver of any of the provisions of this Agreement shall be deemed
\nor shall constitute a waiver of any other provisions hereof (whether or not
\nsimilar) nor shall that waiver constitute a continuing waiver. During the term
\nof this Agreement, the Company agrees to keep in effect a provision in its
\nCertificate of Incorporation providing for the exculpation of liability for,
\nand the indemnification of, Indemnitee to the fullest extent permitted under
\napplicable law, which provision shall not be amended or repealed except as
\nrequired by applicable law or except to make changes permitted by law that
\nwould enlarge Indemnitee’s right of indemnification.<\/p>\n
13. Subrogation. In the event of payment under this Agreement,
\nthe Company shall be subrogated to the extent of that payment to all of the
\nrights of recovery of Indemnitee, who shall execute all papers required and
\nshall do everything that may be necessary to secure those rights, including the
\nexecution of the documents necessary to enable the Company effectively to bring
\nsuit to enforce those rights.<\/p>\n
14. No Duplication of Payments. The Company shall not be liable
\nunder this Agreement to make any payment in connection with any claim made
\nagainst Indemnitee to the extent Indemnitee has otherwise actually received
\npayment (under any insurance policy, provision of the Company’s Certificate of
\nIncorporation or By-laws, or otherwise) of the amounts otherwise Indemnifiable
\nhereunder.<\/p>\n
15. Binding Effect. This Agreement shall be binding upon and
\ninure to the benefit of and be enforceable by the parties hereto and their
\nrespective successors, assigns (including any direct or indirect successor by
\npurchase, merger, consolidation, or otherwise to all or substantially all of
\nthe business or assets of the Company), spouses, heirs, and personal and legal
\nrepresentatives. This Agreement shall continue in effect regardless of whether
\nIndemnitee continues to serve as an officer or director of the Company or
\nanother enterprise at the Company’s request.<\/p>\n
16. Severability. If any provision of this Agreement is held to
\nbe illegal, invalid, or unenforceable under present or future laws effective
\nduring the terms hereof, that provision shall be fully severable; this
\nAgreement shall be construed and enforced as if that illegal, invalid, or<\/p>\n
N-5
\n 73
\nunenforceable provision had never comprised a part hereof; and the remaining
\nprovisions shall remain in full force and effect and shall not be affected by
\nthe illegal, invalid or unenforceable provision or by its severance from this
\nAgreement. Furthermore, in lieu of this illegal, invalid, or unenforceable
\nprovision, there shall be added automatically as a part of this Agreement a
\nprovision as similar in terms to the illegal, invalid or unenforceable
\nprovision as may be possible and be legal, valid and enforceable.<\/p>\n
17. Governing Law. This Agreement shall be governed by and
\nconstrued and enforced in accordance with the laws of the State of Delaware
\napplicable to contracts made and to be performed in that state without giving
\neffect to the principles of conflicts of laws.<\/p>\n
18. Headings. The headings contained in this Agreement are for
\nreference purposes only and shall not affect in any way the meaning or
\ninterpretation of this Agreement.<\/p>\n
19. Notices. Whenever this Agreement requires or permits notice
\nto be given by one party to the other, such notice must be in writing to be
\neffective and shall be deemed delivered and received by the party to whom it is
\nsent upon actual receipt (by any means) of such notice. Receipt of a notice by
\nany officer of the Company shall be deemed receipt of such notice by the
\nCompany.<\/p>\n
20. Counterparts. This Agreement may be executed in any number of
\ncounterparts, each of which shall be deemed an original, but in making proof
\nhereof it shall not be necessary to produce or account for more than one such
\ncounterpart.<\/p>\n
N-6
\n 74
\n EXECUTED as of the date first written above.<\/p>\n
SEARCH ACQUISITION CORP.<\/p>\n
By:_____________________________________
\n Name:
\n Title:<\/p>\n
HARKEN ENERGY CORPORATION<\/p>\n
By:_____________________________________
\n Name:
\n Title:<\/p>\n
________________________________________
\n ____________________________, Indemnitee<\/p>\n
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