Purchase and Sale Agreement - Republic Resources Inc. and Harken Energy Corp.
PURCHASE AND SALE AGREEMENT
dated
January 31, 2002
between
REPUBLIC RESOURCES, INC.
as
Seller
and
HARKEN ENERGY CORPORATION
as
Buyer
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TABLE OF CONTENTS
1. PURCHASE AND SALE........................................................ 1
1.1. PURCHASE AND SALE............................................. 1
1.2. INTERESTS..................................................... 1
1.3. RESERVED INTERESTS............................................ 2
1.4. EFFECTIVE TIME................................................ 2
2. PURCHASE PRICE........................................................... 3
2.1. PURCHASE PRICE................................................ 3
2.2. ADJUSTMENTS TO PURCHASE PRICE................................. 3
3. REPRESENTATIONS AND WARRANTIES........................................... 4
3.1. REPRESENTATIONS AND WARRANTIES OF SELLER...................... 4
3.2. REPRESENTATIONS AND WARRANTIES OF BUYER....................... 5
4. COVENANTS AND AGREEMENTS................................................. 6
4.1. COVENANTS AND AGREEMENTS OF SELLER............................ 6
4.2. COVENANTS AND AGREEMENTS OF BUYER............................. 7
5. TITLE MATTERS............................................................ 8
5.1. DEFENSIBLE TITLE.............................................. 8
5.2. TITLE DEFECT ADJUSTMENTS...................................... 9
5.3. CASUALTY LOSS................................................. 9
5.4. CONSENTS..................................................... 10
6. ENVIRONMENTAL MATTERS................................................... 10
7. TAX MATTERS............................................................. 11
8. CONDITIONS TO CLOSING................................................... 11
8.1. SELLER'S CONDITIONS.......................................... 11
8.2. BUYER'S CONDITIONS........................................... 11
9. CLOSING................................................................. 12
9.1. DATE OF CLOSING.............................................. 12
9.2. PLACE OF CLOSING............................................. 12
9.3. CLOSING OBLIGATIONS.......................................... 12
10. OBLIGATIONS AFTER CLOSING............................................... 13
10.1. POST-CLOSING ADJUSTMENT PROCEDURE............................ 13
10.2. FILES AND RECORDS............................................ 14
10.3. FURTHER ASSURANCES........................................... 14
10.4. ASSUMPTION OF OBLIGATIONS.................................... 14
10.5. INDEMNIFICATION.............................................. 15
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11. TERMINATION OF AGREEMENT................................................ 15
11.1. TERMINATION................................................. 15
11.2. LIABILITIES UPON TERMINATION OR BREACH...................... 15
12. MISCELLANEOUS........................................................... 16
12.1. EXHIBITS.................................................... 16
12.2. EXPENSES.................................................... 16
12.3. NOTICES..................................................... 16
12.4. WIRE TRANSFER INSTRUCTIONS.................................. 17
12.5. AMENDMENTS.................................................. 17
12.6. ASSIGNMENT.................................................. 17
12.7. CONDITIONS.................................................. 17
12.8. COUNTERPARTS................................................ 17
12.9. GOVERNING LAW............................................... 17
12.10. ENTIRE AGREEMENT............................................ 18
12.11. PARTIES IN INTEREST......................................... 18
12.12. SURVIVAL.................................................... 18
12.13. ARBITRATION................................................. 18
EXHIBIT NO. DESCRIPTION
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EXHIBIT A Description of Seller's oil and gas wells
EXHIBIT B Seller's oil and gas leases
EXHIBIT C Contracts and agreements
EXHIBIT D Contingent Payment Agreement
EXHIBIT E Form of assignment, conveyance and bill of sale
EXHIBIT F Debenture Exchange Subscription Agreement
EXHIBIT G Registration Rights Agreement
(ii)
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PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "Agreement"), dated January 31, 2002,
is between Republic Resources, Inc. ("Seller"), a Nevada corporation and Harken
Energy Corporation ("Buyer"), a Delaware corporation, and is made with reference
to the following agreed facts:
A. Seller holds an undivided interest in various oil and natural gas
properties in the states of Texas and Louisiana in which there were, as of
January 1, 2002, estimated proved reserves of oil and natural gas totaling
approximately 3.1 Bcfe.
B. As of the date of this Agreement, there are outstanding $2,645,500 of
Seller's 11% Convertible Debentures ("Debentures") and approximately $5.1
million in Seller's Series C Redeemable Preferred Stock, including accrued but
unpaid dividends ("Series C Preferred").
C. Seller intends to sell and transfer to Buyer or Buyer's Subsidiary all
of Seller's interests in certain oil and natural gas reserves in accordance with
the terms and conditions set forth below and to have the purchase price paid to
the holders of its outstanding Debentures and Series C Preferred.
IN CONSIDERATION OF the mutual promises contained herein, the benefits to
be derived by each party hereunder and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller
agree as follows:
1. PURCHASE AND SALE.
1.1. PURCHASE AND SALE.
Seller agrees to sell and convey and Buyer agrees to purchase and pay for
the all of Seller's right, title and interest in and to those certain oil and
natural gas properties (the "Interests" as defined in Section 1.2), subject to
the terms and conditions of this Agreement.
1.2. INTERESTS.
Subject to the reservations set forth in Section 1.3, all of Seller's,
right, title and interest in and to the following shall herein be called the
Interests:
(a) The oil and gas wells described in EXHIBIT A hereto (the "Wells"),
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together with all oil, gas and mineral production from the Wells;
(b) The leasehold estates created by the leases, licenses, permits and
other agreements described in EXHIBIT B, (the "Leases"); together with all
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overriding royalty interests, production payments and other payments out of
or measured by the value of oil and gas production;
(c) All oil, gas, casinghead gas, condensate, distillate, liquid
hydrocarbons, gaseous hydrocarbons and all products refined therefrom,
together with all minerals produced in association with these substances
(collectively called the "Hydrocarbons") in and under and which may be
produced and saved from or attributable to the Leases or Wells, and all
rents, issues, profits, proceeds, products, revenues and other income from
or attributable thereto;
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(d) All of the personal property, fixtures and improvements
appurtenant to the Wells, or the Leases or used or obtained in connection
with the operation of the Wells, or the Leases or with the production,
treatment, sale or disposal of hydrocarbons or water produced therefrom or
attributable thereto, including without limitation, pipelines, disposal
systems, gathering systems and compression facilities (the "Equipment")
appurtenant to or located upon the Leases; and
(e) All the property, rights, privileges, benefits and appurtenances
in any way belonging, incidental to, or pertaining to the property,
interests and rights described in Sections 1.2(a) through 1.2(d) including
the Wells, the Leases and reserves of unproduced oil and natural gas in
place, including, to the extent transferable, all exploration agreements,
letter agreements, product purchase and sale contracts, surface leases, gas
gathering contracts, processing agreements, compression agreements,
equipment leases, permits, gathering lines, rights-of-way, easements,
licenses, farmouts and farmins, options, orders, pooling, spacing or
consolidation agreements and operating agreements and all other agreements
relating thereto, including those listed on EXHIBIT C (the "Contracts");
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and
(f) All of the files, records, data (including seismic data and
related information) and other documentary information maintained in the
normal course of business by Seller pertaining to the Wells, Leases,
Equipment, Hydrocarbons and the Contracts (collectively, the "Data") in the
format maintained by Seller. The Data shall not, however, include any
information, which, if disclosed, would cause Seller to breach any contract
or agreement. Seller will use reasonable efforts to obtain any required
consent to disclose such information.
1.3. RESERVED INTERESTS.
Seller shall reserve and except from the sale and conveyance of the
Interests in favor of itself, its successors and assigns the following:
(a) All accounts receivable attributable to the Interests that are, in
accordance with generally accepted accounting principles, attributable to
the period prior to the Effective Time;
(b) All claims and rights relating to overpayments of costs and
expenses attributable to periods prior to the Effective Time, including,
without limitation, the right to initiate, prosecute or participate, at
Seller's sole cost and expense, in all audits, audit claims and tax claims
or proceedings relating to or including periods prior to the Effective
Time, regardless of when commenced, arising under applicable law, operating
or product sale agreements or otherwise, and to recover all costs and
expenses claimed or shown by such audits or proceedings as owing to the
owner of the Interests for periods prior to the Effective Time; and
(c) All rights, if any, to recover additional production or proceeds
or requirements to refund monies attributable to such production or
proceeds therefrom attributable to the Interests for any production month
prior to the Effective Time, resulting from any adjustment to the net
revenue interest attributable to the Interests in the applicable division
orders.
1.4. EFFECTIVE TIME.
The purchase and sale of the Interests shall be deemed to be effective as
of January 1, 2002 at 12:01 a.m. at the location of the Interests (the Effective
Time).
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2. PURCHASE PRICE.
2.1. PURCHASE PRICE.
The purchase price ("Purchase Price") for the Interests shall consist of
the following:
(a) A number of shares of Buyer's $0.01 par value common stock (the
"Common Stock") determined by dividing $2,645,500 by the average reported
closing price for Buyer's common stock for the 20 trading days ending on
the day before the Closing Date of this Agreement (the "Common Stock Value
Per Share"), provided that under no circumstances shall the Common Stock
Value Per Share be less than $1.00, such that no more than a maximum of
2,645,500 shares of Buyer's common stock shall be issued;
(b) The cash adjustment required for any adjustments described in
Section 2.2(c) below (the "Cash Adjustment"); and
(c) A "Contingent Payment" payable within 45 days of December 31, 2003
which shall be made to holders of Seller's outstanding Series C Preferred .
A description of the factors to be used to determine the amount of the
Contingent Payment, the payees and other details concerning Buyer's
obligation to pay the Contingent Payment are described in EXHIBIT D
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attached hereto and incorporated herein by reference (the "Contingent
Payment Agreement").
2.2. ADJUSTMENTS TO PURCHASE PRICE.
The Cash Adjustment portion of the Purchase Price shall be adjusted at
Closing as follows:
(a) The Purchase Price shall be adjusted upward by the following:
(1) the value of any oil in storage above the pipeline connection
as of the Effective Time and not previously sold by Seller that is
attributable to the Interests, such value to be the actual amount received
by Seller.
(2) the amount of all expenditures; rentals and other charges; ad
valorem, property, production, excise, severance and similar taxes based
upon or measured by the ownership of property or the production of
hydrocarbons or the receipt of proceeds therefrom; expenses billed under
applicable operating agreements and, in the absence of an operating
agreement, expenses of the sort customarily billed under such agreements
paid by the Seller in connection with the operation of the Interests,
attributable to the period after the Effective Time and paid before
Closing, which shall be evidenced by billings, statements or other like
written evidence;
(3) an amount equal to all prepaid expenses attributable to the
Interests that are paid by or on behalf of Seller that are attributable to
the period after the Effective Time and paid before Closing, including
without limitation cash calls for wells to be drilled in accordance with
the Contracts;
(4) any other amount agreed upon by Seller and Buyer; and
(b) The Purchase Price shall be adjusted downward by the following:
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(1) proceeds received by Seller before Closing attributable to
the Interests that are attributable to production sold from and after the
Effective Time and received by Seller before Closing;
(2) an amount equal to the sum of all Title Defect adjustments;
(3) any other amount agreed upon by Seller and Buyer.
(c) In the event of Cash Adjustment of the purchase price required by
Sections 2.2(a) or (b), the net amount of any such adjustments shall be
determined and Buyer shall pay to Seller, or Seller shall pay to Buyer, as
appropriate, the net amount of any Cash Adjustment, to be paid at the
Closing or, as described in Sections 8.3(b) and 9.1 not later than 90 days
from the Closing Date of this Agreement.
3. REPRESENTATIONS AND WARRANTIES.
3.1. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants as of the date hereof and as of the Closing
Date to Buyer as follows:
(a) The consummation of the transactions contemplated by this
Agreement will not violate, or be in conflict with any provision of any
agreement or instrument to which Seller is a party or by which it is bound.
(b) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada, and is duly qualified
to carry on its business in each state where the Interests are located, or
where the ownership of the Interests located in such state require Seller
to be so qualified.
(c) Seller has all requisite corporate power and authority to carry on
its business as presently conducted, and to perform its obligations under
this Agreement. The consummation of the transactions contemplated by this
Agreement will not violate, or be in conflict with, (i) any provision of
its articles of incorporation or bylaws; (ii) any provision of any
agreement or instrument to which it is a party or by which it is bound,
noncompliance with which would have a material adverse effect upon Buyer's
ownership or operation of the Interests, or upon any of the transactions
contemplated by this Agreement, and (iii) to its knowledge, any judgment,
decree, order, statute, rule or regulation applicable to Seller.
(d) This Agreement has been, subject to the receipt of approval of
Seller's stockholders which will be received before Closing, duly
authorized, executed and delivered on behalf of Seller and constitutes the
legal, valid and binding obligation of Seller, enforceable in accordance
with its terms, subject, however, to the effects of bankruptcy, insolvency,
reorganization and other laws for the protection of creditors.
(e) Seller has incurred no liability, contingent or otherwise, for
brokers or finders fees relating to the transactions contemplated by this
Agreement for which Buyer shall have any responsibility whatsoever.
(f) There are no bankruptcy, reorganization or arrangement proceedings
pending, being contemplated by or, to the knowledge of Seller, threatened
against Seller.
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(g) Seller has, and shall deliver to Buyer at Closing, Defensible
Title to the Interests as defined in Section 5 below.
(h) Seller is in compliance in all material respects with all the
Contracts and with all operating agreements, productions sales agreements,
and other material contractual obligations and commitments which relate to
the Interests.
(i) The Seller has, and to the best of the Seller's information and
belief each operator of the Interests has, complied with all rules,
regulations, laws, judgments, orders, or other restrictions applicable to
the Interests and in the operations thereon, including any environmental
laws, rules or regulations. The Seller has received no notice or other
information from any operator of any of the Interests or any other person
that is contrary to the preceding sentence.
(j) To the best of Seller's information and belief, all holders of
Debentures qualify as Accredited Investors under Rule 501 of Regulation D
adopted under the Securities Act of 1933, as amended ("Securities Act").
3.2. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants as of the date hereof and as of the Closing
Date to Seller as follows:
(a) The consummation of the transactions contemplated by this
Agreement will not violate, or be in conflict with any provision of any
agreement or instrument to which Buyer is a party or by which it is bound.
(b) Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and is duly
qualified to the extent legally necessary to carry on its business in each
state where the Interests are located, or where the ownership of the
Interests located in such state require Buyer to be so qualified.
(c) Buyer has all requisite corporate power and authority to carry on
its business as presently conducted, and to perform its obligations under
this Agreement. The consummation of the transactions contemplated by this
Agreement will not violate, or be in conflict with, (i) any provision of
its articles of incorporation or bylaws; (ii) any provision of any
agreement or instrument to which it is a party or by which it is bound,
noncompliance with which would have a material adverse effect upon its
ownership or operation of the Interests, or upon any of the transactions
contemplated by this Agreement, and (iii) to its knowledge, any judgment,
decree, order, statute, rule or regulation applicable to Buyer.
(d) This Agreement constitutes the legal, valid and binding obligation
of Buyer, enforceable in accordance with its terms, subject, however, to
the effects of bankruptcy, insolvency, reorganization and other laws for
the protection of creditors.
(e) Buyer has incurred no liability, contingent or otherwise, for
brokers or finders fees relating to the transactions contemplated by this
Agreement for which Seller shall have any responsibility whatsoever.
(f) The Interests to be acquired by Buyer pursuant to this Agreement
are being acquired by it for its own account for investment purposes and
not for distribution within the meaning of any securities law. In acquiring
the Interests, it is acting in the conduct of its own business and not
under
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any specific contractual commitment to any third party, or any specific
nominee agreement with any third party, to transfer to, or to hold title on
behalf of, such third party, with respect to all or any part of the
Interests.
(g) There are no bankruptcy, reorganization or arrangement proceedings
pending, being contemplated by or, to the knowledge of Buyer, threatened
against Buyer.
(h) The Common Stock of Buyer to be issued as part of the Purchase
Price, shall, at the time of Closing, be duly authorized by all necessary
corporate action and such securities shall be validly issued such that the
holders to whom the securities shall be issued shall have the rights set
forth on the certificates delivered by Buyer at the Closing.
4. COVENANTS AND AGREEMENTS.
4.1. COVENANTS AND AGREEMENTS OF SELLER.
Seller covenants and agrees with Buyer as follows:
(a) Upon execution of this Agreement, Seller will make available to
Buyer for examination at Seller's Grand Junction, Colorado office during
normal business hours, all of Seller's title information, production
information and other information relating to the Interests, including
without limitation, accounting files, production files, land files, lease
files, well files, division order files, contract files and marketing
files, and, subject to the consent and cooperation of operators and other
third parties, will cooperate with Buyer in Buyer's efforts to obtain, at
Buyer's expense, such additional information relating to the Interests as
Buyer may reasonably desire, to the extent in each case that Seller may do
so without violating legal constraints or any obligation of confidence or
other contractual commitment of Seller to a third party.
(b) Seller shall use reasonable efforts to cause the operators of the
Interests to permit Buyer's authorized representative to conduct, at
Buyer's sole risk and expense, on-site inspections of the Interests. All
such inspections shall be conducted at the sole risk, cost and expense of
Buyer, and Buyer shall indemnify and defend Seller from and against any and
all losses arising from such inspections.
(c) During the period from the date of this Agreement to the Closing
Date, Seller agrees, unless specifically waived by Buyer in writing, as
follows:
(1) Subject to the provisions of applicable operating and other
agreements, Seller shall continue to administer the Interests in a good and
workmanlike manner consistent with its past practices, and shall carry on
its business with respect to the Interests in substantially the same manner
as before execution of this Agreement.
(2) Seller shall, except for emergency action taken in the face
of risk to life, property or the environment, submit to Buyer for prior
written approval, all requests for operating or capital expenditures and
all proposed contracts and agreements relating to the Interests that
involve individual commitments of more than $20,000.00 net to Seller's
interest, or a cumulative total of $75,000 net to Seller's interest. Seller
will timely notify Buyer of any and all such expenditures and commitments
made which relate to the Interests.
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(3) Buyer acknowledges that Seller owns an undivided interest in
all of the Interests, and Buyer agrees that the acts or omissions of the
other working interest owners who are not affiliated with Seller shall not
constitute a violation of the provisions of this Agreement, nor shall any
action required by a vote of working interest owners constitute such a
violation so long as Seller has voted its interest in a manner that
complies with the provisions of this Section. To the extent that Seller is
not the operator of any of the Interests, the obligations of Seller in this
Agreement shall be construed to require that Seller use reasonable efforts
(without being obligated to incur any expense or institute any cause of
action) to cause the operator of such Interests to take such actions or
render such performance within the constraints of the applicable operating
agreements and other applicable agreements.
4.2. COVENANTS AND AGREEMENTS OF BUYER.
Buyer covenants and agrees with Seller that:
(a) Buyer shall use its best efforts to ensure that as of the Closing
Date it will not be under any material legal or contractual restriction
that would prohibit or delay the timely consummation of such transaction.
(b) Buyer shall, subject to the applicable terms of existing operating
agreements, become the working or other interest owner of the Interests as
of 12:01 a.m. local time at the wellsites on the Closing Date, effective as
of the Effective Time.
(c) After this Agreement is signed, Buyer shall provide reasonable
assistance to Seller to solicit from Seller's Debenture holders Debenture
Exchange Subscription Agreements (in the form approved by both parties and
attached hereto as EXHIBIT F, hereafter the "Exchange Agreements") pursuant
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to which the holders shall agree to exchange the Debentures for Common
Stock of Buyer (as described in Section 7.1(a) (2) below), subject to
Closing of the Agreement in a manner which is intended to be exempt from
registration under Rule 506 of Regulation D adopted under the Securities
Act. Buyer shall prepare, with reasonable assistance from Seller, a
disclosure document for delivery to the holders. Buyer and Seller shall
take reasonable steps to comply with Regulation D; however Buyer shall have
no obligation to Seller or to any such holder with respect to the number of
holders who enter into the Exchange Agreements. At the Closing of the
transaction, Buyer shall issue the appropriate number of shares of Buyer's
Common Stock as determined under Section 2.1(a) above. Such shares shall be
issued to Seller and the holders of Seller's Debentures, as directed in
writing by Seller on or before the Closing Date.
(d) Buyer shall cause the Common Stock of Buyer that is issued
pursuant to this Agreement to be registered on Form S-3 (or other
appropriate form) for resale by the holders of such stock within 60 days
following the Closing Date. Buyer shall use reasonable commercial efforts
to have the registration statement covering the Common Stock declared
effective by the United States Securities and Exchange Commission within a
reasonable time after filing such registration statement. The terms and
conditions of the Registration Rights Agreement, attached hereto as EXHIBIT
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G, which shall run to the benefit of the former holders of the Debentures,
-
shall govern the obligations of the Buyer and the rights of the holders of
the Common Stock.
(e) If Buyer issues Common Stock to Seller under Section 11.2 of this
Agreement, or in accordance with its obligations under the Contingent
Payment Agreement, then in either such case, Buyer shall file a
registration statement to register such shares for resale within three (3)
months after
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issuance and the obligations of Buyer under the Registration Rights
Agreement shall be deemed to be obligations of Buyer to the holders in any
such registration.
5. TITLE MATTERS.
5.1. DEFENSIBLE TITLE.
(a) The term Defensible Title shall mean, as to the Interests, such
title, whether held by Seller or for the benefit of Seller, that, except
for and subject to the Permitted Encumbrances (as defined in Section
5.1(b)): (i) entitles Seller to receive as to each Well set forth in
EXHIBIT A not less than the Net Revenue Interest set forth in EXHIBIT A as
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to the oil, gas and associated liquid and gaseous hydrocarbons produced,
saved and marketed therefrom as to its presently producing formations; (ii)
obligates Seller to bear costs and expenses relating to the maintenance,
development and operation of each Well or Lease in an amount not greater
than the Working Interest set forth in EXHIBIT A without a proportionate
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increase in the Net Revenue Interest, and (iii) is free and clear of liens
and material encumbrances and defects.
(b) The term Permitted Encumbrances, as used herein, shall mean, as
follows:
(1) lessors' royalties, overriding royalties, unitization and
pooling designations and agreements, reversionary interests and similar
burdens;
(2) required third party consents to assignments, preferential
rights to purchase, and similar agreements with respect to which prior to
Closing (i) waivers or consents have been or will be obtained from the
appropriate parties prior to the closing date, or (ii) the appropriate time
period for asserting such rights has expired without an exercise of such
rights;
(3) all rights to consent by, required notices to, filings with,
or other actions by governmental entities in connection with the sale or
conveyance of oil and gas leases or interests therein if the same are
customarily obtained subsequent to such sale or conveyance;
(4) easements, rights-of-way, servitudes, permits, surface leases
and other rights with respect to surface operations, pipelines, grazing,
logging, canals, ditches, reservoirs or the like; conditions, covenants or
other restrictions; and easements for streets, alleys, highways, pipelines,
telephone lines, power lines, railways and other easements and
rights-of-way, on, over or in respect of any of the Interests;
(5) materialmen's, mechanics', repairmen's, employees',
contractors', operators', tax and other similar liens or charges arising in
the ordinary course of business incidental to construction, maintenance or
operation of any of the Interests: (i) if they have not been filed pursuant
to law, (ii) if filed, they have not yet become due and payable or payment
is being withheld as provided by law, or (iii) if their validity is being
contested in good faith in the ordinary course of business by appropriate
action;
(6) any other liens, charges, encumbrances, contracts,
agreements, instruments, obligations, defects or irregularities of any kind
whatsoever affecting the Interests that individually or in the aggregate
are not such as to have a materially adverse effect, do not prevent Seller
and after Closing will not prevent Buyer from receiving the proceeds of
production and that do not and after Closing will not operate to (i) reduce
the net revenue interest of Seller below that set forth on EXHIBIT A, or
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(ii) increase the working interest above that set forth on EXHIBIT A
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without a proportionate increase in the Net Revenue Interest; and
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(7) the limitations included in the contracts, agreements and
other matters, if any, described on EXHIBIT C.
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(c) The term Title Defect as used herein shall mean any material
encumbrance or defect in Seller's title to the Interests (expressly
excluding Permitted Encumbrances), that renders Seller's title to the
Interests less than Defensible Title. The term Allocated Value as used
herein means the value allocated to the Well as set forth in the
Netherland, Sewell Reserve Report on the Interests as of the Effective
Time, to be prepared after the date of this Agreement.
5.2. TITLE DEFECT ADJUSTMENTS.
(a) No adjustment to the Purchase Price for Title Defects shall be
made unless and until, and only to the extent that the individual value of
each Title Defect exceeds $25,000 net to Seller's Working Interest in the
Well or Lease affected by the Title Defect or exceeds $75,000 in the
aggregate for all such Title Defects in all Wells or Leases.
(b) Buyer shall give Seller written notice of Title Defects ten (10)
days prior to the Closing Date. Such notice shall be in writing and shall
include (i) a description of the Title Defect, and (ii) the amount by which
Buyer believes the Value of such Well or Lease has been reduced because of
such Title Defect. Buyer shall be deemed to have waived all Title Defects
of which Seller has not been given timely notice by Buyer and all Title
Defects that do not meet the thresholds for an adjustment set forth in
Section 5.2(a).
(c) Subject to the limitation contained in Section 5.2(a), a Title
Defect of a Well and the Leases comprising the production unit or proration
unit for the Well shall be cured to the reasonable satisfaction of Buyer
before the Closing, provided that Seller may cure the Title Defect to
Buyer's reasonable satisfaction within 30 days following Closing. If the
Title Defect cannot be cured before the Closing or within the 30 day period
following Closing to the reasonable satisfaction of Buyer, then the parties
shall negociate a reduction of the Purchase Price to reflect the diminution
of value due to the Title Defect in accordance with Section 2.2 unless
prior to closing, (i) Buyer agrees to waive the relevant Title Defect and
purchase the affected Interests notwithstanding the defect, or (ii) Seller
agrees to indemnify Buyer against all losses, costs, expenses and
liabilities with respect to such Title Defect.
5.3. CASUALTY LOSS.
If subsequent to the date of this Agreement and, prior to the Closing, all
or any material portion of the Interests to be conveyed to Buyer at the Closing
is destroyed by fire or other casualty, is taken in condemnation or under the
right of eminent domain or proceedings for such purposes are pending or
threatened, subject to the limitations set forth in Section 5.2, Buyer shall
purchase such Interests notwithstanding any such destruction, taking or pending
or threatened taking and the Purchase Price shall be adjusted in accordance with
the diminution in value. Seller shall, at the Closing, pay to Buyer all sums
paid to Seller by third parties by reason of the destruction or taking of such
Interests to be assigned to Buyer, and shall assign, transfer and set over unto
Buyer all of the right, title and interest of Seller in and to any unpaid awards
or other payments from third parties arising out of the destruction, taking or
pending or threatened taking as to such Interests to be conveyed to Buyer.
Seller shall not voluntarily compromise, settle or adjust any material amounts
payable by reason of any material destruction, taking or pending or threatened
taking as to the Interests to be conveyed to Buyer without first obtaining the
written consent of Buyer.
9
<PAGE>
5.4. CONSENTS.
Some of the Leases are subject to consent of assignment by the Lessor.
Seller will use its best efforts to obtain consents prior to Closing and will
assist Buyer in obtaining any required consents after Closing. Any such consent
not obtained prior to Closing will be deemed to be a Title Defect under Section
5.2 above, without need of further notice from Buyer. Seller shall have the
right to cure Title Defects arising under this Section within the time limits
described in Section 5.2(c) above.
6. ENVIRONMENTAL MATTERS.
Buyer acknowledges that Seller is a non-operator of the Interests and has
no direct control over any matter or circumstance relating to environmental
laws, environmental conditions or environmental claims, the release of materials
into the environment or protection of the environment or health. Buyer hereby
agrees to assume the risk that the Interests may contain waste materials,
including naturally occurring radioactive materials, or hazardous substances,
that adverse physical conditions, including the presence of unknown abandoned
oil and gas wells, water wells, sumps and pipelines may not have been revealed
by Buyer's investigation, and that liabilities under environmental claims or
environmental conditions or environmental laws could in the future be asserted
against persons who hold working interests in any of the Interests. Seller shall
protect, release, defend and indemnify and hold Buyer free and harmless from and
against any and all costs, expenses, claims, demands, litigation costs,
attorneys' fees and causes of action of every kind and character which result,
or may be claimed to result from, environmental claims, or environmental
conditions or claimed breach of environmental laws or regulations which occurred
or existed on or in connection with any of the Interests as of the Closing Date
of this Agreement, provided, however, that this obligation of Seller to
indemnify Buyer shall apply only to claims, demands, expenses or costs which are
asserted by third parties on or before December 31, 2002.
Except for Seller's obligation to indemnify and hold harmless the Buyer for
liabilities associated with claims made on or before December 31, 2002 for
claims which arose or would be deemed to have arisen prior to the Closing Date,
Buyer hereby releases and discharges, and shall be deemed to release Seller at
Closing from and against, any and all other claims at law or in equity,
including but not limited to environmental claims and environmental conditions,
known or unknown, whether now existing or arising in the future, contingent or
otherwise, against Seller with respect to any matter or circumstance relating to
environmental laws, the release of materials into the environment or protection
of the environment or health.
Assuming the occurrence of Closing, Buyer hereby expressly agrees to
protect, release, defend, indemnify and hold Seller, its officers, directors,
representatives, agents and its employees free and harmless from and against any
and all costs, expenses, claims, demands, litigation costs, attorneys fees, and
causes of action of every kind and character, including but not limited to
injuries or death to persons, damages to or loss of property, environmental
claims or environmental conditions, arising out of or in connection with the
use, operation, occupancy, occupation, resale or abandonment of the Interests to
be assigned to Buyer hereunder regardless of whether the claim is a result of an
act or omission occurring or condition existing prior to or after the Closing
Date, and from any violation of environmental laws, provided that Buyer has no
obligation to Seller with respect to any liabilities for environmental claims,
environmental conditions or alleged violation of environmental laws or
regulations related to any of the Interests which are asserted against Buyer or
Seller by any third party and which may have occurred prior to the Closing Date
and are asserted on or before December 31, 2002. The parties acknowledge and
agree that the indemnity provided for in this section complies with the express
negligence rule.
10
<PAGE>
Buyer represents that it has had an adequate opportunity to review the
indemnity and waiver provisions contained in this Section including the
opportunity to submit the same to legal counsel for review and comment, and
understands the indemnity obligations contained herein. Buyer acknowledges that,
except for Seller's representations and warranties expressly set forth in this
Agreement, it accepts the Interests "AS IS, WHERE IS" with all faults and
existing conditions.
7. TAX MATTERS
All ad valorem, severance, personal property taxes or any other taxes
assessed against the Interests prior to the Effective Time shall be the
obligation of Seller no matter when invoiced by the operator of any of the
Interests. All ad valorem, severance, personal property taxes or any other taxes
assessed against the Interests after the Effective Time shall be the obligation
of Buyer.
8. CONDITIONS TO CLOSING.
8.1. SELLER'S CONDITIONS.
The obligations of Seller at the Closing are subject to the satisfaction,
at or prior to the Closing, of the following conditions:
(a) Each of the following shall have occurred:
(1) Holders of a majority of the outstanding voting common stock
of the Seller shall have voted, at a special meeting of stockholders called
for that purpose, to approve this Agreement and the transfer of the
Interests by the Buyer to the Seller;
(2) Holders of at least 90% of the outstanding principal amount
of Seller's Debentures shall have conditionally agreed to exchange the
Seller's Debentures held by them in exchange for the following: for each
$10,000 in principal amount of the Debentures, the holder will receive at
Closing of this Agreement, out of the Purchase Price, a number of shares of
Buyer's Common Stock determined by dividing $10,000 by the Common Stock
Value Per Share, and rounded to the nearest whole share; and
(3) Holders of 100% of the outstanding Series C Preferred shall
have voted or consented in writing to approve this transaction.
(b) No order shall have been entered by any court or governmental
agency having jurisdiction over the parties or the subject matter of this
Agreement that restrains or prohibits the purchase and sale contemplated by
this Agreement and which remains in effect at the time of such Closing; and
(c) The aggregate sum of Title Defect adjustments, if any, shall not
exceed $100,000.
8.2. BUYER'S CONDITIONS.
The obligations of Buyer at the Closing are subject to the satisfaction at
or prior to the Closing of the following conditions:
11
<PAGE>
(a) All representations of Seller contained in this Agreement shall be
true in all material respects at and as of the Closing as if such
representations were made at and as of the Closing, and Seller shall have
performed and satisfied all material agreements in all material respects
required by this Agreement to be performed and satisfied by Seller at or
prior to the Closing;
(b) No order shall have been entered by any court or governmental
agency having jurisdiction over the parties or the subject matter of this
Agreement that restrains or prohibits the purchase and sale contemplated by
this Agreement and which remains in effect at the time of such Closing; and
(c) The aggregate sum of Title Defect adjustments, if any, shall not
exceed $100,000; and
(d) Each of the following shall have occurred:
(1) Holders of at least 90% of the outstanding principal amount
of Seller's Debentures shall have conditionally agreed to exchange the
Seller,s Debentures held by them in exchange for the following: for each
$10,000 in principal amount of the Debentures, the holder will receive at
Closing of this Agreement, out of the Purchase Price, a number of shares of
Buyer's Common Stock determined by dividing $10,000 by the Common Stock
Value Per Share, and rounded to the nearest whole share; and
(2) Holders of 100% of the outstanding Series C Preferred shall
have voted or consented in writing to approve this transaction.
9. CLOSING.
9.1. DATE OF CLOSING.
Subject to the conditions stated in this Agreement, the consummation of the
transactions described herein (the "Closing") shall be held on the first
business day following the Seller's Stockholders meeting at which this agreement
is approved or at such later date as may be agreed upon by the parties. The date
the Closing actually occurs is called the Closing Date.
9.2. PLACE OF CLOSING.
The Closing shall be held at the offices of Buyer in Houston, Texas.
9.3. CLOSING OBLIGATIONS.
At the Closing the following events shall occur, each being a condition
precedent to the others and each being deemed to have occurred simultaneously
with the others:
(a) Seller and Buyer shall execute, acknowledge and deliver an
assignment, bill of sale and conveyance (in sufficient counterparts to
facilitate recording) in substantially the form of EXHIBIT E hereto
---------
conveying to Buyer or Buyer's Subsidiary the Interests; and
12
<PAGE>
(b) Seller and Buyer shall execute and deliver a settlement statement,
prepared in accordance with this Agreement (the "Settlement Statement")
prepared by Seller that shall set forth any Cash Adjustments required under
Section 2.2 then known to the parties and the means used to determine such
amount. Seller shall provide Buyer with the preliminary Settlement
Statement three business days prior to Closing for Buyer's review and
approval, using for such adjustments the best information then available.
(c) Buyer shall deliver to Seller, or if appropriate, Seller shall
deliver to Buyer, the Cash Adjustments to Purchase Price, subject to any
further amounts which may be later determined under Section 10.1 below.
(d) Buyer shall issue the appropriate number of shares of Buyer's
Common Stock determined in accordance with Section 2.1(a) above. The Common
Stock shall be issued as designated by Seller to Buyer in writing at or
prior to the Closing Date. At the written request of Seller, Buyer shall
transmit certificates for the Common Stock to the appropriate holders of
Seller's Debentures conditional upon Buyer having received a fully executed
Debenture Exchange Subscription Agreement as set forth in EXHIBIT F.
---------
(e) Buyer shall enter into the Contingent Payment Agreement EXHIBIT D
---------
with each holder of Seller's Series C Preferred Stock, pursuant to written
instructions from Seller to be delivered at or before the Closing Date.
(f) Buyer shall deliver to Seller the balance of the Purchase Price
not paid to holders of Seller's Debentures.
(g) Seller and Buyer shall execute, acknowledge and deliver letters in
lieu of transfer orders directing all purchasers of production to make
payment to Buyer of proceeds attributable to production from the Interests
assigned to Buyer after the Effective Time.
(h) Seller shall prepare such notices to third-party operators of the
change in ownership of the Interests from Seller to Buyer.
10. OBLIGATIONS AFTER CLOSING.
10.1. POST-CLOSING ADJUSTMENT PROCEDURE.
As soon as practicable after the Closing Date, but no later than 90 days
after the Closing Date, Seller shall prepare and deliver to Buyer, in accordance
with this Agreement, a statement (the Final Settlement Statement) setting forth
each adjustment or payment under Section 2.2 that was not finally determined as
of the Closing Date and showing the calculation of such adjustments. Within
fifteen days after receipt of the Final Settlement Statement, or if Seller fails
to deliver a Final Settlement Statement, Buyer shall deliver to Seller a written
report containing any changes that Buyer proposes be made to the Final
Settlement Statement. The parties shall undertake to agree with respect to the
amounts due pursuant to such post-closing adjustment no later than fifteen days
after Seller has received Buyer's proposed changes. The date upon which such
agreement is reached or upon which the Final Purchase Price is established,
shall be called the Final Settlement Date. In accordance with Section 2.1(d), if
(i)Buyer owes a net amount to Seller, Buyer shall pay in immediately available
federal funds the amount of such difference to Seller or to Seller's account (as
designated by Seller), or (ii) Seller owes a net amount to Buyer, Seller shall
pay in immediately available federal funds the amount of such difference to
Buyer or to Buyer's account (as designated by Buyer). Payment by Buyer or Seller
of this portion, if any, of the Cash Adjustment shall be made within five days
after the Final Settlement Date.
13
<PAGE>
10.2. FILES AND RECORDS.
Within thirty days after the Closing Date, Seller shall deliver to Buyer
originals of all of Seller's files and records relating to the Interests in the
format maintained by Seller, but excluding any records or data that cannot be
transferred because of prior contractual restrictions. Seller shall have the
right to retain copies of any or all files and records delivered to Buyer. Buyer
shall make available to Seller, in Buyer's office during normal hours, Buyer's
files and records relating to the Interests so long as Buyer retains such files
and records.
10.3. FURTHER ASSURANCES.
After Closing, Seller and Buyer shall execute, acknowledge and deliver or
cause to be executed, acknowledged and delivered such instruments, and shall
take such other action as may be necessary or advisable to carry out their
obligations under this Agreement and under any document, certificate or other
instrument delivered pursuant hereto.
10.4. ASSUMPTION OF OBLIGATIONS.
(a) Transfer and assignment of the Interests to Buyer or Buyer's
Subsidiary shall constitute an express assumption by Buyer of, and Buyer
expressly agrees to pay, perform, fulfill and discharge all claims, costs,
expenses, liabilities and obligations (including but not limited to
environmental claims and environmental conditions) accruing or relating to
the owning, developing, exploring, operating and maintaining of the
Interests conveyed to Buyer at the Closing, including without limitation,
all violations of environmental law and all obligations arising under
operating agreements, product sales agreements and the other agreements
covering or relating to the Interests, except as specifically stated to the
contrary in Section 6 above.
(b) Buyer acknowledges that Seller has not made, and Seller hereby
expressly disclaims and negates, any representation or warranty, express or
implied, relating to the condition of any real or immovable property,
personal or movable property, equipment, inventory, machinery and fixtures
constituting part of the interests including, without limitation, (i) any
implied or express warranty of merchantability, (ii) any implied or express
warranty of fitness for a particular purpose, (iii) any implied or express
warranty of conformity to models or samples of materials, (iv) any rights
of Buyer under appropriate statutes to claim diminution of consideration or
return of the Purchase Price, and (v) any implied or express warranty
regarding environmental laws, the release of materials into the environment
including naturally occurring radioactive material, or protection of the
environment or health, it being the express intention of Buyer and Seller
that the real or immovable property, personal or movable property,
equipment, inventory, machinery and fixtures shall be conveyed to Buyer as
is and in their present condition and state of repair. Buyer represents to
Seller that Buyer has made or caused to be made such inspections with
respect to the real or immovable property, personal or movable property,
equipment, inventory, machinery and fixtures as Buyer deems appropriate and
Buyer will accept the real or immovable property, personal or movable
property, equipment, inventory, machinery and fixtures as is, in their
present condition and state of repair.
(c) Seller hereby expressly negates and disclaims, and Buyer hereby
waives and acknowledges that Seller has not made, any representation or
warranty, express or implied, relating to (i) the accuracy, completeness or
materiality of any information, data or other materials (written or oral)
furnished to Buyer by or on behalf of Seller or (ii) production rates,
recompletion opportunities, decline rates, geological or geophysical data
or interpretations, the quality, quantity, cost of recovery of any
hydrocarbon reserves, any product pricing assumptions, or the ability to
sell or market any hydrocarbons after Closing.
14
<PAGE>
(d) Buyer shall also indemnify Seller for all liabilities which are
assessed against Seller for federal, state, or local taxes, (not including
income taxes) together with penalties or interest thereon (provided the
penalties and interest do not result from the negligence, late filing,
fraud or other acts of malfeasance of Seller), which relate to all
operations of the property transferred hereunder and which arise on or
after the Effective Time.
10.5. INDEMNIFICATION.
From and after the Closing date, Buyer and Seller shall indemnify each
other as follows:
(a) Seller shall defend, indemnify and save and hold harmless Buyer,
its officers, directors, employees and agents, against all losses, damages,
claims, demands, suits, costs, expenses, liabilities and sanctions of every
kind and character, including without limitation reasonable attorneys'
fees, court costs and costs of investigation, which arise from or in
connection with any breach by Seller of this Agreement.
(b) Buyer shall defend, indemnify and save and hold harmless Seller,
its officers, directors, employees and agents against all losses, damages,
claims, demands, suits, costs, expenses, liabilities and sanctions of every
kind and character, including without limitation reasonable attorneys'
fees, court costs and costs of investigation, which arise from or in
connection with (i) any of the claims, costs, expenses, liabilities and
obligations assumed by Buyer pursuant to Section 6 or (ii) any breach by
Buyer of this Agreement.
11. TERMINATION OF AGREEMENT.
11.1. TERMINATION.
This Agreement and the transactions contemplated hereby may be terminated
in the following instances:
(a) By Seller if any of the conditions set forth in Section 8.1 are
not satisfied in all material respects or waived as of the Closing Date.
(b) By Buyer if any of the conditions set forth in Section 8.2 are not
satisfied in all material respects or waived as of the Closing Date.
(c) At any time by the mutual written agreement of Buyer and Seller.
(d) By either party at its written election if the Closing Date has
not occurred by April 15, 2002.
11.2. LIABILITIES UPON TERMINATION OR BREACH.
In the event of the termination of this Agreement by Seller in accordance
with Section 11.1(a), Seller shall pay Buyer $25,000 cash as liquidated damages
for termination. If Buyer terminates this Agreement for any reason other than
those described in Section 11.1(b) above, it shall pay Seller $200,000 as
liquidated damages for termination. Any obligation under this Section 11.2 shall
be payable immediately upon termination of this Agreement. In the event Buyer
shall owe Seller liquidated damages under this Section, Buyer may at its sole
election pay up to one-half of such liquidated damages in shares of Buyer's
Common Stock
15
<PAGE>
12. MISCELLANEOUS.
12.1. EXHIBITS.
The Exhibits referred to in this Agreement are hereby incorporated in this
Agreement by reference and constitute a part of this Agreement.
12.2. EXPENSES.
Except as otherwise specifically provided, all fees, costs and expenses
incurred by Buyer or Seller in negotiating this Agreement or in consummating the
transactions contemplated by this Agreement shall be paid by the party incurring
the same, including, without limitation, legal and accounting fees, costs and
expenses.
12.3. NOTICES.
All notices and communications required or permitted under this Agreement
shall be in writing and any communication or delivery hereunder shall be deemed
to have been duly made when personally delivered to the individual indicated
below, or if mailed, when received by the party charged with such notice and
addressed as follows:
IF TO SELLER:
REPUBLIC RESOURCES, INC.
743 Horizon Court, Suite 333
Grand Junction, Colorado 81506
Attention: Patrick J. Duncan, President
With a copy to:
ALAN W. PERYAM, ESQ.
1120 Lincoln Street, Suite 1000
Denver, Colorado 80203
IF TO BUYER:
HARKEN ENERGY CORPORATION
580 WestLake Park Boulevard, Suite 600
Houston, Texas 77079
Attention: Bruce N. Huff, President and Chief Operating Officer
16
<PAGE>
With a copy to:
HARKEN ENERGY CORPORATION
580 WestLake Park Boulevard, Suite 600
Houston, Texas 77079
Attention: Larry E. Cummings, Vice President, General Counsel
Any party may, by written notice so delivered to the other parties, change
the address or individual to which delivery shall thereafter be made.
12.4. WIRE TRANSFER INSTRUCTIONS.
In the event a party is required to pay cash to the other party, payments
shall be by wire transfer unless otherwise agreed by the parties at the time.
When a wire transfer payment is required, the party to whom payment is to made
shall furnish written wire transfer instructions to the other party.
12.5. AMENDMENTS.
This Agreement may not be amended nor any rights hereunder waived except by
an instrument in writing signed by the party to be charged with such amendment
or waiver and delivered by such party to the party claiming the benefit of such
amendment or waiver.
12.6. ASSIGNMENT.
Neither party may assign all or any portion of its rights or delegate all
or any portion of its duties hereunder unless it continues to remain liable for
the performance of its obligations hereunder and obtains the prior written
consent of the other party, which consent shall not be unreasonably withheld.
12.7. CONDITIONS.
The inclusion in this Agreement of conditions to Seller's and Buyer's
obligations at the Closing shall not, in and of itself, constitute a covenant of
either Seller or Buyer to satisfy the conditions to the other party's
obligations at the Closing.
12.8. COUNTERPARTS.
This Agreement may be executed by Buyer and Seller in any number of
counterparts, each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same instrument.
12.9. GOVERNING LAW.
This Agreement and the transactions contemplated hereby shall be construed
and enforced in accordance with the laws of the state of Colorado, but without
regard to laws or principles of conflicts of laws that would cause application
of the laws of another jurisdiction. The parties hereby consent to the exclusive
venue of the proper state or federal court located in the Denver, Colorado, and
hereby waive all other venues.
17
<PAGE>
12.10. ENTIRE AGREEMENT.
This Agreement (including the Exhibits hereto) constitutes the entire
understanding among the parties with respect to the subject matter hereof,
superseding all negotiations, prior discussions and prior agreements and
understandings relating to such subject matter.
12.11. PARTIES IN INTEREST.
This Agreement shall be binding upon, and shall inure to the benefit of,
the parties hereto, and their respective successors and assigns, and nothing
contained in this Agreement, express or implied, is intended to confer upon any
other person or entity any benefits, rights or remedies.
12.12. SURVIVAL.
The representations, warranties, covenants, agreements and indemnities
provided for in this Agreement shall survive the Closing and shall not be
extinguished by the doctrine of merger by deed or any similar doctrine and no
waiver, release, or forbearance of the application of the provisions of those
paragraphs in any given circumstance shall operate as a waiver, release, or
forbearance of the provisions of the paragraphs as to any other circumstance.
12.13. ARBITRATION.
All disputes arising out of or in connection with this agreement, or any
determination required to be made by the parties as to which the parties are
unable to agree (including, without limitation, the determination of Defects),
shall be settled by arbitration in Denver, Colorado. Any matter to be submitted
to arbitration hereunder may be submitted to arbitration by either party. Any
matter submitted to arbitration shall be conducted in accordance with the rules
of the American Arbitration Association. Any award by the arbitrator(s) shall be
final, binding and not appealable, and judgment may be entered thereon in any
court of competent jurisdiction. Notwithstanding the above, neither Seller or
Buyer shall be required to resolve any disputes relating to this Agreement
through arbitration if an unrelated third party files suit against both Buyer
and Seller relating to the interests conveyed pursuant to this Agreement, in
such event, it being understood and agreed that Buyer and Seller may assert any
claims and/or defenses arising out of this Agreement against each other in the
lawsuit.
18
<PAGE>
Executed as of the date stated on the first page of this Agreement.
SELLER:
REPUBLIC RESOURCES, INC.
By: /s/ Patrick J. Duncan
------------------------
Patrick J. Duncan, President
BUYER:
HARKEN ENERGY CORPORATION
By: /s/ Bruce N. Huff
-----------------------
Bruce N.Huff, President and
Chief Operating Officer
19
<PAGE>
EXHIBIT A
[Ommited]
<PAGE>
EXHIBIT B
[Ommited]
<PAGE>
EXHIBIT C
[Ommited]
<PAGE>
EXHIBIT D
EXHIBIT D
CONTINGENT PAYMENT AGREEMENT
This Contingent Payment Agreement (this "Agreement") is made and entered
into as of the day of , 2002, by and between Republic
----------- -----------
Resources, Inc. ("Republic"), a Nevada corporation, and Harken Energy
Corporation ("Harken"), a Delaware corporation.
RECITALS
A. Republic and Harken have entered into that certain Purchase and Sale
Agreement (the "Purchase Agreement") dated January 31, 2002, pursuant to which
Republic is selling to Harken all of Republic's interest in and to certain oil
and natural gas properties in the states of Texas and Louisiana, as further
described therein;
B. Pursuant to Section 2.1 (c) of such Purchase Agreement, Harken is
entering into this Agreement (which is attached as Exhibit D to the Purchase
Agreement) to pay, subject to the terms and conditions herein, to Republic a
"Contingent Payment" (as defined herein).
AGREEMENT
NOW, THEREFORE, for and in consideration of the foregoing Recitals and the
mutual agreements contained herein, the sufficiency of which is hereby
acknowledged and confirmed, the parties hereto, intending to be legally bound,
hereby agree as follows:
Section 1. Contingent Payment.
------------------
(a) Subject to the terms and conditions of this Agreement, Harken hereby
covenants and agrees to pay, within forty five (45) days after December 31,
2003, to Republic or its permitted assigns (as provided in Section 3 of this
Agreement), the Contingent Payment (as hereinafter defined). The Contingent
Payment may be payable in either cash, shares of Harken Common Stock, $.01 par
value (the valuation of such shares as determined below), or any combination
thereof, as Harken in its sole and absolute discretion determines. In the event
some or all of the Contingent Payment is made in the form of shares of Harken
Common Stock, the value per share of such shares shall be equal to the average
reported closing price for Harken's Common Stock for the 20 trading days
immediately prior to the Valuation Date.
(b) The Contingent Payment shall be determined as follows (all the amounts
below will be determined or calculated either: a) as of December 31, 2003; or b)
through December 31, 2003, as appropriate);
Revenues XXX
Less Costs (XXX)
----
Equals the (Excess Cost)
or the Excess Revenue (XXX) or XXX
Less 15% of Excess Cost, if any (XXX)
Plus: PV15 of the PDP Reserves XXX
PV30 of the PDNP Reserves XXX
PV50 of the PUD Reserves XXX
----
Subtotal XXX
Times the Contingent Payment % 50%
----
Equals the Contingent Payment XXX
====
Should the above calculation result in a negative number for the Contingent
Payment, there will be no liability by either Republic or Harken. In no event
shall the Contingent Payment exceed $3,968,250.
(c) In the event Harken elects to make any portion of the payment which may
become due hereunder in the form of its shares of Common Stock, Harken shall
execute and deliver to Republic (or its permitted assigns) a Registration Rights
Agreement in a form substantially similar to the Registration Rights Agreement
entered into in connection with the Purchase Agreement, provided that Harken
shall not be obligated to execute and deliver such Registration Rights Agreement
unless and until the recipient of such Registration Rights Agreement agrees to
execute and be bound by the terms and provisions of such Registration Rights
Agreement.
<PAGE>
(d) Notwithstanding anything in this Agreement, in no event shall Harken
have any duty, commitment or obligation to develop or participate in the
Properties, and Harken may develop or participate in the Properties as it
determines in its sole and absolute discretion (using such reasonable business
judgment as Harken uses in connection with its other properties). In the event
Harken determines in its sole and absolute discretion not to participate in
development of the Properties, then the Proved Reserves Value will be calculated
on the non-consenting, reversionary or other retained interest (if any) held by
Harken in such Properties. If the Proved Reserves Value after application of the
Adjusted Costs is zero, then Harken shall not be obligated to make any
Contingent Payment hereunder.
Section 2. Definitions and References.When used in this Agreement, the following
--------------------------
terms shall have the respective meanings assigned hereto:
"Lookback Properties" shall mean Harken's right, title and interest in
-------------------
and to acquired pursuant to the Purchase Agreement: (i) the Wilcox
Prospects located in Jackson County, Texas, currently known as the
Matterhorn Prospect, the W1 and W2 prospects, the WR (Wilcox River)
prospect, the W3 prospect, the W4 prospect, and the W5 prospect, and (ii)
the Yegua Prospects located in Jackson County, Texas, currently known as
the Yegua 17-C prospect, and the River prospect, all of these prospects and
corresponding leases being more particularly described on Exhibit A
attached hereto.
"Revenues" shall mean any proceeds received or receivable by Harken
--------
from any production or sale of the Lookback Properties between January 1,
2002 and December 31, 2003.
"Costs" shall mean any and all costs (including without limitation
-----
geophysical, geological and land costs), expenses, obligations,
liabilities, and all other associated costs incurred by Harken relating to
or incurred in connection with the development and production of the
Lookback Properties between January 1, 2002 and December 31, 2003.
"Proved Reserves" shall mean the estimated quantities of oil and/or
---------------
natural gas from of any interests held by Harken in the Lookback Properties
that, with reasonable certainty, appear to be recoverable in the future
under the economic and operating conditions as of December 31, 2003. The
Parties agree that this estimate of proved reserves will be determined by
either Netherland, Sewell and Associates or some other mutually agreeable
petroleum engineering firm.
"Proved Reserves Value" shall mean the undiscounted pre-tax value of
---------------------
any interests held by Harken in the Proved Reserves as of the December 31,
2003. In determining the Proved Reserves Value, the oil and gas shall be
priced by using the average of (x) the average strip price for the 12
months immediately preceding the Valuation Date (as published in Inside
------
FERC (or other publications acceptable to Harken and Republic) on the
----
Valuation Date) and (y) the projected average strip price for the 12 months
immediately following the Valuation Date (as published in The Wall Street
---------------
Journal (or other publications acceptable to Harken and Republic) on the
-------
December 31, 2003). In addition, the Proved Reserve Values will be
categorized between Proved Developed Producing ("PDP"), Proved Developed
Non-producing ("PDNP"), and Proved Underdeveloped ("PUD") in accordance
with generally accepted petroleum-engineering methods. The Parties agree
that the estimate of Proved Reserves Value will be determined by the same
petroleum-engineering firm that determines the Proved Reserves.
"PV15 of the PDP Reserves" shall mean the value of the Proved
------------------------
Developed Producing Reserve Value discounted on an annual basis at 15%.
"PV30 of the PDNP Reserves" shall mean the value of the Proved
-------------------------
Developed Non-producing Reserve Value discounted on an annual basis at 30%.
"PV50 of the PUD Reserves" shall mean the value of the Proved
------------------------
Undeveloped Reserve Value discounted on an annual basis at 50%.
"Contingent Payment" shall be the amount payable by Harken, as
------------------
computed and described in Section 1 of this Agreement. In no event shall
the Contingent Payment exceed $3,968,250.
"Valuation Date" shall mean December 31, 2003.
--------------
2
<PAGE>
Section 3. Miscellaneous.
(a) Except as otherwise specifically provided, all fees, costs and expenses
incurred by Republic or Harken in negotiating this Agreement or in consummating
the transactions contemplated by this Agreement shall be paid by the party
incurring the same, including, without limitation, legal and accounting fees,
costs and expenses.
(b) All notices and communications required or permitted under this
Agreement shall be in writing and any communication or delivery hereunder shall
be deemed to have been duly made when personally delivered to the individual
indicated below, or if mailed, when received by the party charged with such
notice and addressed as follows:
IF TO REPUBLIC:
REPUBLIC RESOUCES, INC.
743 Horizon Court, Suite 333
Grand Junction, Colorado 81506
Attention: Patrick J. Duncan, President
With a copy to:
ALAN W. PERYAM, ESQ.
1120 Lincoln Street, Suite 1000
Denver, Colorado 80203
IF TO HARKEN:
HARKEN ENERGY CORPORATION
580 WestLake Park Boulevard, Suite 600
Houston, Texas 77079
Attention: Bruce N. Huff, President and Chief Operating Officer
With a copy to:
HARKEN ENERGY CORPORATION
580 WestLake Park Boulevard, Suite 600
Houston, Texas 77079
Attention: Larry E. Cummings, Vice President, General Counsel
Any party may, by written notice so delivered to the other parties, change
the address or individual to which delivery shall thereafter be made.
(c) This Agreement may not be amended nor any rights hereunder waived
except by an instrument in writing signed by the party to be charged with such
amendment or waiver and delivered by such party to the party claiming the
benefit of such amendment or waiver.
(d) Neither party may assign all or any portion of its rights or delegate
all or any portion of its duties hereunder unless it continues to remain liable
for the performance of its obligations hereunder and obtains the prior written
consent of the other party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, Republic may assign this Agreement to the holders
of its Series C Redeemable Preferred Stock (the "Series C Preferred"), provided
that Republic provides prior notice of such assignment and provided further that
Harken receives prior to such assignment evidence to Harken's reasonable
satisfaction that the holders of such Series C Preferred are "accredited
investors" as that term is defined in Regulation D promulgated under the
Securities Act of 1933 and such other evidence as Harken may reasonably require
that such assignment does not violate federal and state securities laws.
Further, notwithstanding the foregoing, Harken may assign this Agreement to any
of its subsidiaries if Harken shall also assign the Properties under this
Agreement to such subsidiairy. Harken shall provide notice of such assignment to
Republic following making of the same.
(e) This Agreement may be executed by Republic and Harken in any number of
counterparts, each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same instrument.
3
<PAGE>
(f) This Agreement and the transactions contemplated hereby shall be
construed and enforced in accordance with the laws of the state of Colorado, but
without regard to laws or principles of conflicts of laws that would cause
application of the laws of another jurisdiction. The parties hereby consent to
the exclusive venue of the proper state or federal court located in Denver,
Colorado, and hereby waive all other venues.
(g) All disputes arising out of or in connection with this Agreement, or
any determination required to be made by the parties as to which the parties are
unable to agree, shall be settled by arbitration in Denver, Colorado. Any matter
to be submitted to arbitration hereunder may be submitted to arbitration by
either party. Any matter submitted to arbitration shall be conducted in
accordance with the rules of the American Arbitration Association. Any award by
the arbitrator(s) shall be final, binding and not appealable, and judgment may
be entered thereon in any court of competent jurisdiction. In the event Republic
initiates such arbitration and it is determined in such arbitration that Harken
has failed to pay any amounts required to be paid under this Agreement to
Republic by an amount of 5% or more, then Harken shall be required to pay the
costs of the arbitrators.
(h) Notwithstanding anything in this Agreement to the contrary, in no event
shall Harken have any duty, commitment or obligation to develop or participate
in the Properties, and Harken may develop or participate in the Properties as it
determines in its sole and absolute discretion (using such reasonable business
judgment as Harken uses in connection with its other properties).
(i) All references in this Agreement to sections, subsections and other
subdivisions refer to corresponding sections, subsections and other subdivisions
of this Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any such subdivisions are for convenience only and shall not
constitute part of such subdivisions and shall be disregarded in construing the
language contained herein. Words in the singular form shall be construed to
include the plural and vice versa, unless the context otherwise requires.
----------
(j) Harken shall provide to Republic (or its permitted assigns)
semi-annually, on a calendar year basis, a status report on the current value of
the proved oil and natural gas reserves in the Properties (as of the date of
such report), using the calculations as described herein to determine the Proved
Reserves Value and determining the value of such proved reserves as of the date
of the report instead of the Valuation Date. Harken shall also include with such
report the assumptions used in calculating the Proved Reserves Value. Harken may
base such report upon its own internal reserve valuations if such report is
provided for any time other than as of a calendar year end. Any such report
provided as of a calendar year end will be based upon a third party outside
engineering report.
Executed as of the date stated on the first page of this Agreement.
END OF EXHIBIT D
4
<PAGE>
EXHIBIT E
---------
Form of Assignment, Conveyance and Bill of Sale
-----------------------------------------------
KNOW ALL MEN BY THESE PRESENTS:
Republic Resources, Inc.,
743 Horizon Court, Suite 333
Grand Junction, CO 81506-8715
(hereinafter referred to as "Assignor") for and in consideration of the sum of
Ten Dollars ($10.00) and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, does hereby sell, assign, convey,
transfer, and set over, subject to the reservations herein set forth, unto
Xplor Energy SPV-I, Inc.
an Oklahoma corporation,
580 WestLake Park Boulevard, Suite 600
Houston, TX 77079
(hereinafter referred to as "Assignee") and subject to the following terms and
provisions, all of its right, title and interest in and to the "Subject
Property" described as follows:
(a) The oil and gas wells described in EXHIBIT A hereto (the "Wells"),
---------
together with all oil, gas and mineral production from the Wells;
(b) The leasehold estates created by the leases, licenses, permits and
other agreements described in EXHIBIT B, (the "Leases"); together with all
---------
overriding royalty interests, production payments and other payments out of or
measured by the value of oil and gas production;
(c) All oil, gas, casinghead gas, condensate, distillate, liquid
hydrocarbons, gaseous hydrocarbons and all products refined therefrom, together
with all minerals produced in association with these substances (collectively
called the "Hydrocarbons") in and under and which may be produced and saved from
or attributable to the Leases or Wells, and all rents, issues, profits,
proceeds, products, revenues and other income from or attributable thereto;
(d) All of the personal property, fixtures and improvements appurtenant to
the Wells, or the Leases or used or obtained in connection with the operation of
the Wells, or the Leases or with the production, treatment, sale or disposal of
hydrocarbons or water produced therefrom or attributable thereto, including
without limitation, pipelines, disposal systems, gathering systems and
compression facilities (the "Equipment") appurtenant to or located upon the
Leases; and
(e) All the property, rights, privileges, benefits and appurtenances in any
way belonging, incidental to, or pertaining to the property, interests and
rights described in(a) through (d) including the Wells, the Leases and reserves
of unproduced oil and natural gas in place, including, to the extent
transferable, all exploration agreements, letter agreements, product purchase
and sale contracts, surface leases, gas gathering contracts, processing
agreements, compression agreements, equipment leases, permits, gathering lines,
rights-of-way, easements, licenses, farmouts and farmins, options, orders,
pooling, spacing or consolidation agreements and operating agreements and all
other agreements relating thereto, including those listed on EXHIBIT C (the
---------
"Contracts");
(f) All of the files, records, data (including seismic data and related
information) and other documentary information maintained in the normal course
of business by Seller pertaining to the Wells, Leases, Equipment, Hydrocarbons
and the Contracts (collectively, the "Data") in the format maintained by
Assignor. The Data shall not, however, include any information, which, if
disclosed, would cause Seller to breach any contract or agreement. Assignor will
use reasonable efforts to obtain any required consent to disclose such
information; and
<PAGE>
(g) All other rights and interests in, to or under or derived from the
Subject Property, even though improperly described in the Exhibits. It is the
expressed intent of the parties that all of Assignor's right, title and interest
in any and all of the Subject Property, whether or not the same may be correctly
described on the Exhibits hereto be assigned to Assignee hereunder.
This Assignment, Conveyance and Bill of Sale is made subject to the
following terms and provisions:
(a) NOTWITHSTANDING ANY PROVISION IN THIS ASSIGNMENT, CONVEYANCE AND BILL
OF SALE OR ANY DOCUMENT DELIVERED IN CONNECTION HEREWITH TO THE CONTRARY, THE
SUBJECT PROPERTY AND ANY OTHER PROPERTY OR RIGHTS CONVEYED HEREUNDER ARE
CONVEYED "AS IS, WHERE IS," "WITH ALL FAULTS," AND IN THEIR PRESENT CONDITION
AND STATE OF REPAIR, AND WITHOUT WARRANTY, EITHER EXPRESS OR IMPLIED (EXCEPT
WARRANTY OF TITLE BY, THROUGH OR UNDER ASSIGNOR, BUT NOT OTHERWISE) INCLUDING
WARRANTY OF MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER
SORT OF WARRANTY. ASSIGNEE HAS INSPECTED, OR HAS HAD THE OPPORTUNITY TO INSPECT,
THE ASSIGNED PREMISES FOR ALL PURPOSES.
(b) Assignor reserves from this Assignment, Conveyance and Bill of Sale in
favor of itself the following:
(i) All accounts receivable attributable to the Subject Property that
are attributable to the period prior the Effective Time;
(ii) All claims and rights relating to overpayments of costs and
expenses attributable to period prior to the Effective Time,
including, without limitation, the right to initiate, prosecute
or participate, at Assignor's sole cost and expense, in all
audits, audit claims and tax claims or proceedings relating to or
including periods prior to the Effective Time, regardless of when
commenced, arising under applicable law, operating or product
sale agreements or otherwise, and to recover all costs and
expenses claimed or shown by such audits or proceedings as owing
to the owner of the Subject Property for periods prior to the
Effective Time; and
(iii)All rights, if any, to recover additional production or proceeds
or requirements to refund monies attributable to such production
or proceeds therefrom attributable to the Subject Property for
any production month prior to the Effective Time, resulting from
any adjustment to the net revenue interest attributable to the
Subject Property in the applicable division orders.
Assignee, its successors and assignees, shall observe, perform and comply
with the terms, provisions, covenants and conditions, express or implied, of the
oil and gas leases described on EXHIBIT B, together with any related contracts,
---------
and all laws, rules, regulations and orders, both state and federal, applicable
to the ownership and enjoyment of the rights herein assigned.
Effective from and after the Effective Time of this instrument, Assignee
hereby agrees to assume and shall assume, pay and perform all liabilities and
obligations arising in connection with the ownership or operations of the
Subject Property. Commencing from and after the Effective Time of this
instrument, Assignee shall indemnify and hold harmless Assignor against and from
any and all loss, cost, expense, liability or damage (including fees and
expenses of attorneys, technical experts and expert witnesses) incurred or
suffered by Assignor arising out of or relating to Assignee's failure to
discharge any such liabilities and obligations.
All saleable gas, oil and/or condensate at the Effective Time of this
instrument is owned by the Assignor and is not to be considered a part of this
sale.
This Assignment, Conveyance and Bill of Sale is to be treated as an
occasional sale, and no sales tax is being collected from Assignee. If however,
this transaction is later deemed to be subject to sales or use tax, Assignee
agrees to be solely responsible for any and all sales or use taxes due on
equipment, material and property hereby assigned and sold, and Assignee shall
remit such taxes to the proper taxing authority.
2
<PAGE>
This Assignment, Conveyance and Bill of Sale is subject to the terms and
provisions of that certain Purchase and Sale Agreement dated January 31, 2002 by
and between Assignor and Assignee.
This instrument shall be binding upon and inure to the benefit of Assignor
and Assignee, their personal representatives, executors, successors and assigns.
The provisions hereof shall be covenants running with the lands and leases
assigned.
EXECUTED this day of , 2002, but effective
--------- ---------------------
for all purposes as of January 1, 2002, at 12:01 A.M. at the location of the
Subject Property ("Effective Time").
ASSIGNOR:
Attest: REPUBLIC RESOURCES, INC.
By: By:
----------------------------- ----------------------------
Marilyn L. Adams, Secretary Patrick J. Duncan, President
ASSIGNEE:
Attest: Xplor Energy SPV-I, Inc.
an Oklahoma corporation,
By: By:
----------------------------- ------------------------
ACKNOWLEDGMENTS
STATE OF COLORADO)
)ss
COUNTY OF MESA)
This instrument was acknowledged before me, a Notary Public, by Patrick J.
Duncan, President of Republic Resources, Inc., a Nevada corporation, on behalf
of said corporation.
Witness my hand and official seal this day of , 2002.
-------- -------
My Commission Expires:
---------------------------------------------------------------------
------------------------------
Notary Public in and for the State of
--------------
STATE OF TEXAS)
)ss
COUNTY OF)
This instrument was acknowledged before me, a Notary Public, by
----------------- , President of Xplor Energy SPV-I, Inc., an Oklahoma
corporation, on behalf of said corporation.
Witness my hand and official seal this day of , 2002.
--------- --------
My Commission Expires:
---------------------------------------------------------------------
------------------------------
Notary Public in and for the State of
--------------
END OF EXHIBIT E
3
<PAGE>
EXHIBIT F
---------
Debenture Exchange Subscription Agreement
------------------------------
Name of Debenture Holder
------------------------------
Principal Amount
DEBENTURE EXCHANGE SUBSCRIPTION AGREEMENT
This Debenture Exchange Subscription Agreement (the "Agreement") is between
the debenture holder identified on the signature page of this Agreement
("Subscriber"), Republic Resources, Inc. ("Republic") and Harken Energy
Corporation ("Harken") and is made with reference to the following agreed facts:
A. The undersigned Subscriber is the holder of a 11% Convertible Debenture,
due April 15, 2003 (the "Debenture") of Republic (formerly Pease Oil and Gas
Company) in the principal amount set forth on the signature page of this
Agreement.
B. There are outstanding $2,645,500 of the Debentures held by Subscriber
and other holders of the Debentures.
C. Republic has agreed to sell to Harken, pursuant to a Purchase and Sale
Agreement dated January 31, 2002 (the "Asset Sale Agreement"), all of Republic's
interests in its oil and natural gas properties located in the states of
Louisiana and Texas that have "proved reserves" as of January 1, 2002. The
properties to be sold include all of Republic's income-producing assets as of
January 1, 2002. In exchange for these assets, Harken will deliver at closing up
to 2,645,500 shares of Harken common stock that will be distributed to the
Subscriber and other holders of the Debentures on a pro-rata basis in full
satisfaction of Republic's principal obligation under the outstanding
Debentures.
D. The number of shares of Harken Common Stock to be issued at the closing
of the Asset Sale Agreement will be determined by dividing the total principal
amount of Republic's outstanding Debentures by the average reported closing
price for Harken's Common Stock for the 20 trading days ending on the day before
the Closing of the Asset Sale Agreement (hereafter the "Common Stock Value Per
Share"). However, under no circumstances shall the Common Stock Value Per Share
be less than $1.00.
E. The completion of the sale of the Republic assets to Harken is
contingent upon: (i) the approval of the Asset Sale Agreement by stockholders of
Republic at a special meeting of stockholders to be called for that purpose, and
(ii) acceptance of the exchange offer described in this Agreement by the holders
of substantially all of the outstanding Debentures.
F. The parties intend that this Agreement shall be irrevocable by
Subscriber unless the Asset Sale Agreement is not closed by at least June 1,
2002.
G. In addition to the proved oil and gas properties, Republic will also
convey to Harken the Company's interest in certain exploratory prospects in
Jackson County, Texas that have not been given any initial value in the
contemplated transaction. These exploratory prospects will be evaluated for
additional value at the end of 2003 using a "Lookback" formula as defined in the
P&S Agreement, and a future "Lookback Payment" may be made in early 2004. The
amount of any "Lookback Payment" will be contingent on, among other things,
future exploratory successes in the Jackson County prospects, of which there can
be no assurance. In addition, there can be no assurance that the operators of
those prospects will actually drill any wells on the prospects by the end of the
Lookback period (which is at the end of 2003) and if so whether Harken will
agree to participate in exploration of the prospects since it will be under no
obligation to do so. Accordingly, the amount of any "Lookback Payment", if any,
cannot be reasonablely determined at this time. In any case, Republic
anticipates that the contingent Lookback Payment ultimately will be assigned to
the holders of its Series C Redeemable Preferred Stock in connection with a
restructuring of that security. It is expressly understood that neither the
Subscriber nor any other holder of the Debentures will haveany right, title or
interest in the contingent Lookback Payment regardless of its ultimate value, if
any, and regardless of whether it is ultimately assigned to the Series C
Preferred stockholders or retained by Republic.
IN CONSIDERATION, of the covenants and agreements of the parties and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
<PAGE>
1. Agreement to Exchange. Subscriber hereby agrees to exchange and
surrender the Debenture held by Subscriber effective on the day of Closing of
the Asset Sale Agreement. In exchange for surrender and cancellation of
Subscriber's Debenture, Subscriber shall receive the following:
(a) Payment of all unpaid interest on Subscriber's Debenture through
the date of the Closing, to be paid by Republic at such time as
Subscriber's Debenture certificate is delivered to Republic for
cancellation; and
(b) An amount of common stock of Harken determined by dividing the
principal amount of Subscriber's Debenture by the "Common Stock
Value Per Share" determined as described above. The shares of
Harken Common Stock shall be issued effective as of the closing
of the Asset Sale Agreement and shall be delivered to Subscriber
at such time as Subscriber's Debenture certificate is delivered
to Republic for cancellation.
Republic shall pay the interest to Subscriber through the date of the Closing of
the Asset Sale Agreement and Subscriber's Debenture shall be deemed surrendered
and canceled as of such date, subject only to delivery to Subscriber of the
Harken Common Stock in exchange for surrender of Subscriber's Debenture
certificate.
2. Irrevocable Subscription; Acceptance. Subscriber understands and
acknowledges that this subscription to exchange Subscriber's Debenture in the
manner described in this Agreement is irrevocable by Subscriber unless Republic
and Harken have not closed the Asset Sale Agreement by June 1, 2002. Acceptance
of this subscription by Republic and Harken is subject to: (i) approval of the
Asset Sale Agreement by Republic stockholders, (ii) receipt of Debenture
Exchange Subscriptions from holders of at least 90% of the outstanding principal
amount of Republic's Debentures (provided that Harken and Republic may, in their
discretion, waive this condition), and (iii) Closing of the Asset Sale
Agreement. Until and unless the foregoing conditions are satisfied, Subscriber's
Debenture shall continue to earn interest and to represent an obligation of
Republic to Subscriber as described in the Debenture.
3. Acknowledgment of Disclosure. Subscriber acknowledges the receipt of
Harken's Disclosure Memorandum, dated January 31, 2002, including Harken's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 2001, and
Quarterly Report on Form 10-QSB for the quarter ended September 30, 2001, which
are the last publicly-filed reports of Harken. Subscriber acknowledges receipt
from Republic of Republic's letter dated January 11, 2002, together with copies
of Republic's Quarterly Report on Form 10-QSB for the quarter ended September
30, 2001 and Form 8-K dated February , 2002, the most recent public reports
--
filed by Republic. Subscriber has also been given access to full and complete
information regarding Republic and Harken and has utilized such access to the
Subscriber's satisfaction for the purpose of obtaining such information
regarding Republic and Harken as the Subscriber has reasonably requested; and,
particularly, Subscriber has been given reasonable opportunity to ask questions
of, and receive answers from, representatives of Republic and Harken concerning
the terms and conditions of the exchange offer described in this Agreement, the
business and affairs of Republic and of Harken and all additional information
requested by Subscriber to the extent it would be reasonably available.
4. Investment Intent. Subscriber represents and warrants that the common
stock of Harken which will be issued upon completion fo the exchange described
in this Agreement will be held for the Subscriber's own account and for
investment purposes only, and without the intention of reselling or
redistributing the same except as may be effected in compliance with the
registration requirements of the Securities Act of 1933, as amended ("Securities
Act"); Subscriber has made no agreement with others regarding any of the
securities to be obtained in the exchange and Subscriber's financial condition
is such that it is not likely that it will be necessary for Subscriber to
dispose of any of such securities in the foreseeable future. Subscriber further
represents and agrees that if, contrary to the foregoing intentions, Subscriber
should later desire to dispose of or transfer any of the Harken Common Stock
received by Subscriber in the exchange in any manner, Subscriber shall not do so
unless and until (i) such securities have been registered under the Securities
Act and all applicable securities laws; or (ii) Subscriber shall first deliver
to Harken a written notice declaring such holders's intention to effect such
transfer and describe in sufficient detail the manner and circumstances of the
proposed transfer, which notice shall be accompanied either by: (A) written
opinion of legal counsel who shall be reasonably satisfactory to Harken, which
opinion shall be addressed to Harken and reasonably satisfactory in form and
substance to Harken's counsel, to the effect that the proposed sale or transfer
is exempt from the registration provisions of the Securities Act and all
applicable state securities laws, or (B) a "no-action letter" from the
Securities and Exchange Commission to the effect that the transfer of the Harken
Common Stock without registration would not result in a recommendation by the
staff of the Commission that action be taken with respect thereto.
5. Residence of Subscriber. Subscriber represents and warrants that
Subscriber is a bona fide resident of, is domiciled in, and received the
exchange offer and made the decision to exchange securities in the state of
residence set out on the signature page of this Agreement.
6. Subscriber is Accredited Investor. Subscriber acknowledges that at the
time the Debenture was initially acquired, and at the time that Republic and
Subscriber agreed to extend the maturity and otherwise modify the terms of the
Debentures in March 2001, Subscriber qualified as a Accredited Investor as
described in Rule 501 of Regulation D adopted by the United States Securities
and Exchange Commission under the Securities Act. Subscriber represents to
Republic and Harken that as of the date of this Agreement set forth on the
signature page below, Subscriber continues to qualify as an Accredited Investor.
2
<PAGE>
7. Acknowledgment of Certain Risks. Subscriber acknowledges that upon
Closing of the Asset Sale Agreement, Subscriber shall have exchanged the
Republic Debenture now held, a debt security of Republic, for Harken Common
Stock, an equity security in a different entity. Following the exchange Republic
shall have no obligation to Subscriber and Subscriber will, instead, hold an
equity investment in Harken with no assurance that he will be able to liquidate
the investment and no right to receive the existing principal amount of the
Debenture. Subscriber acknowledges that holding the Harken Common Stock involves
certain risks, some of which are summarized or referred to in the Harken
Disclosure Memorandum. Likewise, Subscriber acknowledges that continuing to hold
the Republic Debenture would involve risk to Subscriber and other holders of the
Debentures, some of which are summarized in the information furnished to
Subscriber as summarized or described above. Subscriber is accepting the
exchange offer described in this Agreement notwithstanding such risks.
8. No Tax Advice. Subscriber acknowledges that an exchange of Subscriber's
Debenture for Harken Common Stock as described in this Agreement is likely to be
deemed to be a taxable transaction to Subscriber. Subscriber is likely to have
taxable gain or loss equal to the difference between Subscriber's tax basis in
the Debenture and the fair market value of the Harken Common Stock to be
received in the exchange. While it is expected that the fair market value of the
Harken Common Stock is likely to be approximately equal to the principal balance
of the Debenture, Republic and Harken have made no representations to Subscriber
as to the tax implications to Subscriber from the exchange described in this
Agreement and Subscriber has been advised to seek his own tax counsel regarding
the exchange. Subscriber has received, from Subscriber's own tax or other
advisors, all information Subscriber requires concerning the tax consequences of
the exchange described in this Agreement and has not, and does not, rely upon
Republic or Harken with respect to tax implications of the exchange.
9. No Transfer or Assignment. Neither this Agreement nor any of the rights
of Subscriber, Republic or Harken may be transferred or assigned by any party.
This Agreement shall survive the death or disability of Subscriber and shall be
binding upon Subscriber's heirs, executors, administrators, successors and
attempted assigns.
10. Arbitration of Disputes. In the event that a dispute arises between
Subscriber and Republic or Harken arising out of or in connection with exchange
by Subscriber of the Debenture for Harken Common Stock, Subscriber, Republic and
Harken hereby expressly agree that such dispute shall be resolved through
arbitration rather than litigation. The undersigned hereby agrees to submit the
dispute to binding arbitration through the American Arbitration Association
("AAA") in Denver, Colorado, to be conducted in accordance with the rules of
commercial arbitration adopted by AAA. Such a dispute shall be submitted to
arbitration by any party by filing a written request for arbitration with AAA.
Subscriber, Republic and Harken agree that the Federal Arbitration Act shall
govern the disposition of all issues raised in the arbitration proceeding. A
decision in the arbitration proceeding shall be final and binding on the
parties.
11. Notices. All notices or other communications required under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered personally or mailed by certified or registered mail, return receipt
requested, postage prepaid as follows: if to Subscriber, to the address set
forth on the signature page to this Agreement; and if to Republic or Harken to
their address as set forth in the Harken Disclosure Memorandum.
[The balance of this page is blank]
3
<PAGE>
SIGNATURE PAGE TO
DEBENTURE EXCHANGE SUBSCRIPTION AGREEMENT
-----------------------------------------
By signing this Agreement in the place indicated below, Subscriber
represents to Republic and Harken that Subscriber has read this entire
Agreement, that the information set forth below is accurate, and that Subscriber
agrees to exchange his or her Debenture for Harken Common Stock as described in
this Agreement.
INDIVIDUAL
----------
----------------------------------------- Address to Which Correspondence
Name of Registered Owner of Should be Directed
Debenture ("Subscriber")
-------------------------------------------
-------------------------------------------
----------------------------------------- -------------------------------------------
Signature (Individual) City, State, and Zip Code
----------------------------------------- --------------------------------------------
Signature (Second Signature if Joint Owner) Tax Identification or Social Security Number
----------------------------------------- --------------------------------------------
Name Typed or Printed Second Name Type or Printed
( ) ( )
----------------------------------------- --------------------------------------------
Fax Number Telephone Number
$
----------------------------------------- -------------------------------------------
Date Principal Amount of Debenture
ACCEPTANCE
----------
This Debenture Exchange Subscription Agreement is accepted as of
-----------
, 2002 (the date of Closing of the Purchase and Sale Agreement dated
January 31, 2002).
REPUBLIC RESOURCES, INC. HARKEN ENERGY CORPORATION
By By
------------------------------ ---------------------------------
Patrick J. Duncan, President Bruce N. Huff, President
4
<PAGE>
SIGNATURES
----------
By signing this Agreement in the place indicated below, Subscriber
represents to Republic and Harken that Subscriber has read this entire
Agreement, that the information set forth below is accurate, and that Subscriber
agrees to exchange his or her Debenture for Harken Common Stock as described in
this Agreement.
CORPORATION, PARTNERSHIP, TRUST OR OTHER ENTITY
-----------------------------------------------
Address to Which Correspondence
----------------------------------------- Should be Directed
Name of Registered Owner of
Debenture ("Subscriber")
-------------------------------------------
-------------------------------------------
----------------------------------------- -------------------------------------------
Signature (Individual) City, State, and Zip Code
----------------------------------------- --------------------------------------------
Signature (Second Signature if Joint Owner) Tax Identification or Social Security Number
----------------------------------------- --------------------------------------------
Name Typed or Printed Second Name Type or Printed
( ) ( )
----------------------------------------- --------------------------------------------
Fax Number Telephone Number
$
----------------------------------------- -------------------------------------------
Date Principal Amount of Debenture
*The Certificate of Signatory must also be completed.
CERTIFICATE OF SIGNATORY
------------------------
To be completed if the Debentures are owned by an entity
--------------------------------------------------------
I, , am the of
-------------------------------------- ------------------
[Name printed]
(the "Entity")
------------------------------------------------------------------
I certify that I am empowered and duly authorized by the Entity to execute
anc carry out the terms of this Agreement and to exchange the Debentures as
described in this Agreement, and certify that this Agreement has been duly and
validly executed on behalf of the Entity and constitutes a legal and binding
obligation of the Entity.
IN WITNESS WHEREOF, I have hereto set my hand this day of
-----
, 200 .
-------- --
--------------------------------------------
Signature
ACCEPTANCE
----------
This Debenture Exchange Subscription Agreement is accepted as of
, 2002 (the date of Closing of the Purchase and Sale Agreement dated
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January 31, 2002).
REPUBLIC RESOURCES, INC. HARKEN ENERGY CORPORATION
By By
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Patrick J. Duncan, President Bruce N. Huff, President
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EXHIBIT G
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is made and entered into as of
the day of , 2002, by and among Harken Energy Corporation, a
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Delaware corporation ("Harken"), and Republic Resources, Inc., a Nevada
corporation ("Republic").
RECITALS:
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A. Reference is hereby made to that certain Purchase and Sale Agreement dated
as of the date hereof (the "Purchase Agreement") by and among Harken and
Republic pursuant to which Republic will upon Closing, receive a certain
number of Shares of Harken Common Stock, which Shares are the subject of
this Agreement.
B. Pursuant to the terms of the Agreement, Harken has agree to provide
Republic and the holders of the Registrable Securities (as defined herein)
with the registration rights set forth herein.
AGREEMENT:
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NOW, THEREFORE, for and in consideration of the foregoing Recitals and the
mutual agreements contained herein, the sufficiency of which is hereby
acknowledged and confirmed, the parties hereto, intending to be legally bound,
agree as follows:
Section 1. Definitions and References.
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(1) When used in this Agreement, the following terms shall have the respective
meanings assigned to them in this Section 1 or in the Sections referred to
below:
"Agreement" shall mean this Registration Rights Agreement, as
hereafter amended or modified in accordance with the terms hereof.
"Commission" shall mean the Securities and Exchange Commission (or any
successor body thereto).
"Common Stock" shall mean the common stock, par value $0.01 per share,
of Harken.
"Purchase Agreement" shall mean the Purchase and Sale Agreement dated
as of the date hereof between Harken and Republic.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated under such Act.
"Harken" shall have the meaning assigned to it in the preamble to this
Agreement.
"Harken Indemnified Parties" shall have the meaning assigned to it in
Section 5(b).
"Holder" shall mean any Person that holds Registrable Securities.
"Holder Indemnified Parties" shall have the meaning assigned to it in
Section 5(a).
"Republic" shall have the meaning assigned to it in the preamble to
this Agreement.
"Person" shall mean any individual, corporation, partnership, joint
venture, limited partnership, limited liability company, trust,
unincorporated organization, government or any agency or political
subdivision thereof or other entity.
"Prospectus" shall mean the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A
promulgated pursuant to the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered
by such Registration Statement, and all other amendments and
supplements to any such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference, if any, in such prospectus.
<PAGE>
"Registrable Securities" shall mean the Shares issued to Republic
under the Purchase Agreement or pursuant to that certain Contingent
Payment Agreement attached as EXHIBIT D to the Purchase Agreement.
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"Registration Expenses" shall mean all fees and expenses incident to
Harken's performance of or compliance with the registration rights
granted hereunder, including (without limitation) all registration and
filing fees, fees and expenses of compliance with securities and blue
sky laws, printing and engraving expenses, messenger, telephone and
delivery expenses, fees and disbursements of counsel for Harken, and
fees and disbursements of all independent certified public accountants
and underwriters (excluding discounts and commissions); provided,
however, that Registration Expenses shall not include any Selling
Expenses.
"Registration Statement" shall mean any registration statement of
Harken that covers any of the Registrable Securities pursuant to this
Agreement, including the Prospectus, amendments and supplements to
such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference,
if any, in such registration statement.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and all rules and regulations promulgated under such Act.
"Selling Expenses" shall mean underwriting discounts or commissions,
any selling commissions and stock transfer taxes attributable to sales
of Registrable Securities and the fees and expenses of counsel for any
Holder.
(2) All references in this Agreement to sections, subsection and other
subdivisions refer to corresponding sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any such subdivisions are for convenience
only and shall not constitute part of such subdivisions and shall be
disregarded in construing the language contained herein. The words "this
Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder"
and words of similar import refer to this Agreement as a whole and not to
any particular subdivision unless expressly so limited. Words in the
singular form shall be construed to include the plural and vice versa,
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unless the context otherwise requires.
Section 2. Registration Shares.
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Harken shall prepare and file with the Commission as soon as reasonably
practicable and in any event no later than sixty (60) days after Closing the
Purchase Agreement and the issuance contemplated thereunder to Republic of the
Shares, a registration statement on Form S-3 or other appropriate form pursuant
to Rule 415 under the Securities Act covering the sale by Republic of such
Registrable Securities. Harken shall use its reasonable best efforts to cause
each such Registration Statement to be declared effective as soon as reasonably
practicable after the filing thereof and to keep each such Registration
Statement effective for no less than the later of 365 days or the expiration of
the Selling Period (as defined in the Exchange Agreement) applicable to the
Registrable Securities covered thereby.
Section 3. Registration Procedures.
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(a) In connection with Harken's registration obligations hereunder, Harken
will use its reasonable best efforts to effect the registration of the
Registrable Securities in accordance with the intended methods of
disposition thereof as quickly as practicable, and pursuant thereto
Harken will a expeditiously as possible:
(1) prepare and file with the Commission not later than the time
specified in this Agreement, a Registration Statement on the
appropriate form with respect to the Registrable Securities and
use its reasonable best efforts to cause such Registration
Statement to become effective as soon as reasonably practicabl
after the filing thereof (provided, that before filing a
Registration Statement or Prospectus or any amendments or
supplements thereto, Harke will furnish copies of all such
documents proposed to be file to all Holders of Registrable
Securities covered by such Registration Statement);
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(2) prepare and file with the Commission such amendments an
supplements to such Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep such
Registration Statement effective for a period of not less than
the period set fort in this Agreement or such shorter period
which will terminate when all Registrable Securities covered by
such Registration Statement have been sold (but not before the
expiration of the applicable Prospectus deliver period) and
comply with the provisions of the Securities Act with respect to
the disposition of all Registrabl Securities covered by such
Registration Statement during such period in accordance with the
intended methods of disposition by the Holders thereof set forth
in such Registration Statement:
(3) furnish to each Holder of Registrable Securities such number of
copies of such Registration Statement, each amendment and
supplement thereto, the Prospectus included in such Registration
Statement (including, without limitation, each preliminary
prospectus) and such other documents as such Holde may reasonably
request in order to facilitate the disposition of the Registrable
Securities owned by such Holder.
(4) use its reasonable best efforts to register or qualif such
Registrable Securities under such other securities or blue sky
laws of such jurisdictions within the United States as any Holder
reasonably requests and do an and all other acts and things which
may be reasonably necessary or advisable to enable such Holder to
consummate the disposition in such jurisdictions of the
Registrable Securities owned by such Holder (provided that Harken
will not be required to qualify generally to do business or
subject itself to any general service of process in any
jurisdiction where it is otherwise not the so subject);
(5) notify each Holder of such Registrable Securities, at an time
when a Prospectus relating thereto is required to be delivered
under the Securitie Act, of the happening of any event which
requires the making of any change in the Prospectus included in
such Registration Statement so that such document will not
contain an untrue statement of a materia fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading, and, at the request
of any such Holder, Harken will prepare a supplement or amendment
to such Prospectus so that such Prospectus will not contain a
untrue statement of a materia fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading;
(6) use its reasonable best efforts to cause all such Registrable
Securities to be listed on each securities exchange or exchanges,
automated quotatio system or over-the-counter market upon which
securities of Harken of the same class are then listed;
(7) enter into such customary agreements (including, withou
limitation, underwriting agreements in customary form, substance
and scope) and take all such other actions as the Holders of a
majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities;
(8) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make
generally available to its security holders an earnings statement
no later than ninety (90) day after the end of the 12-month
period beginning with the first day of Harken's first full
calendar quarter after the effective date of the Registration
Statement, which earnings statement shall satisfy the provisions
of Section 11(a) o the Securities Act and Rule 158 thereunder;
(9) in the event of the issuance or threatened issuance of any stop
order suspending the effectiveness of a Registration Statement,
or an order suspending or preventin the use of any related
Prospectus or suspending the qualification of any Registrable
Securities included in such Registration Statemen for sale in any
jurisdiction, promptly notify each Holder o Registrable
Securities of the issuance or threatened issuance of such order
and us its reasonable best efforts promptly to prevent the entry
of such order or obtain the withdrawal of such order if issued;
(10) use its reasonable best efforts to cause such Registrable
Securities covere by such Registration Statement to be registered
with or approved by such other governmental agencies or
authorities as may be necessary to enable the Holders thereof to
consummate the disposition of such Registrable Securities;
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(11) make available at all reasonable times and in a reasonable manner
for inspection by any Holder of Registrable Securities, any
underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney, accountant or other
agent retained by an such Holder or underwriter (collectively,
the "Inspecto", all fi records, corporate documents and
properties of Harken (collectively, the "Records") and cause the
officers, directors and employees of Harken to supply all
information reasonably requested by any such Inspector in
connection with such Registration Statement prior to its
effectiveness, in each case to the extent that such Records and
information are pertinent to the information disclosed in the
Registration Statement; provided, that eac such Inspector shall
execute and deliver to Harken a Confidentiality Agreement in the
form attached hereto as EXHIBIT A. Records which Harken
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determines, in good faith, to be confidential and which Harken
notifies the Inspectors are confidential shall not be disclosed
by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in the
Registration Statement or (ii the release of such Records i
ordered pursuant to a subpoen or other order from a court of
competent jurisdiction; each Holder of Registrable Securities
agrees that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give
notice to Harken and allow Harken, at Harken's expense, to
undertake appropriate action to prevent disclosure of the Records
deemed confidential; and
(12) use its reasonable best efforts to obtain, if require by said
underwriters in connection with an underwritten offering, a
comfort letter from Harken's independent public accountant in
customary form and covering such matters of the type customarily
covered by comfor letters with respect to offerings of the type
being made pursuant to the Registration Statement as the Holders
of the Registrable Securities reasonably request
(b) In connection with each Registration Statement, Republic agrees and
each Holder of Registrable Securities (including Registrable
Securities in any Registration Statement filed pursuant to this
Agreement) will be deemed to have agreed, as follows:
(1) upon receipt of any notice from Harken of the happening of any
event of the kind described in Section 3(a)(5) or the issuance of
any order of the kind described in Section 3(a 9), the Holders of
Registrable Securities covered by such Registration Statement
will forthwith discontinue disposition of such Registrable
Securities until the Holders of Registrable Securities receive
copies of the supplemented or amended Prospectus contemplated by
Section 3(a)(5), or until the are advised in writing by Harken
that the use of the applicable Prospectus may be resumed, an they
have received copies of any additional or supplementa filings
that are incorporated or deemed to be incorporated by reference
in such Prospectus (it being the agreement of the parties hereto,
however, that the obligation of Harken with respect to
maintaining the subject Registration Statement curren and
effective, and the Sellin Period (as defined in the Exchange
Agreement) with respect to such Registrable Securities, shall be
extended by a number of trading days equal to the period the
Holders of Registrable Securities are required by this Section
3(b)(1) to discontinue disposition of such Registrable
Securities; and
(2) furnish to Harken such information regarding each Holder, the
Registrable Securities held by such Holder and the intended
method of disposition thereof as Harken shall reasonably request
and as shall be reasonably required in connection with the
preparation of the applicable Registration Statement and other
actions taken by Harken under this Agreement, and it shall be a
condition precedent to the obligation of Harken to take any
action pursuant to this Agreement in respect of the Registrable
Securities that such information has been furnished to Harken by
the Holders of Registrable Securities.
Section 4. Expenses. Harken shall pay all Registration Expenses whether or not
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any Registration Statement is filed or becomes effective and whether or not any
securities are sold pursuant to any Registration Statement and, in any event,
shall pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal and accounting duties),
the expense of any annual audit and the fees and expenses incurred in connection
with the listing of the securities to be registered on each securities exchange
on which similar securities of Harken are then listed. All Selling Expenses
incurred in connection with a registration effected pursuant to the terms hereof
shall be borne by the seller or sellers of Registrable Securities pro rata based
upon the number of Registrable Securities included in such registration.
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Section 5. Indemnification.
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(a) Harken shall indemnify and hold harmless, with respect to any and all
Registration Statements, each Holder of Registrable Securities covered
by such Registration Statement, and each other Person, if any, who
controls such Holder within the meaning of Section 15 of the
Securities Act (collectively, "Holder Indemnified Parties"), against
all losses, claims, damages, liabilities and expenses, joint or
several, to which any such Holder Indemnified Party may become subject
under the Securities Act, the Exchange Act, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions or proceedings, whether commenced or threatened,
in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in
any Registration Statement in which such Registrable Securities were
included or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or
alleged untrue statement of a material fact contained in any
preliminary, final or summary Prospectus, together with the documents
incorporated by reference therein (as amended or supplemented if
Harken shall have filed with the Commission any amendment thereof or
supplement thereto), or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or (iii) any
violation by Harken of any federal, state or common law rule or
regulation applicable to Harken and relating to action of or inaction
by Harken in connection with any such registration; and in each such
case, Harken shall reimburse each such Holder Indemnified Party for
any reasonable legal or other expenses incurred by any of them in
connection with investigating or defending any such loss, claim,
damage, liability, expense, action or proceeding; provided, however,
that Harken shall not be liable to any such Holder Indemnified Party
in any such case to the extent that any such loss, claim, damage,
liability or expense (or action or proceeding, whether commenced or
threatened, in respect thereof) arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged
omission made in such Registration Statement or amendment thereof or
supplement thereto or in any such preliminary, final or summary
Prospectus in reliance upon and in conformity with written information
furnished to Harken by or on behalf of any such Holder Indemnified
Party for use in the preparation thereof. Such indemnity and
reimbursement of expenses and other obligations shall remain in full
force and effect regardless of any investigation made by or on behalf
of the Holder Indemnified Parties and shall survive the transfer of
such securities by such Holder Indemnified Parties.
(b) Each Holder of Registrable Securities participating in any
registration hereunder shall severally (and not jointly or jointly and
severally) indemnify and hold harmless Harken, its directors,
officers, employees and agents, and each Person who controls Harken
(within the meaning of Section 15 of the Securities Act)
(collectively, "Harken Indemnified Parties") against all losses,
claims, damages, liabilities and expenses to which any Harken
Indemnified Party may become subject under the Securities Act, the
Exchange Act, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or
are based upon (i) any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement in which such
Holder's Registrable Securities were included or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary, final or summary
Prospectus, together with the documents incorporated by reference
therein ( as amended or supplemented if Harken shall have filed with
the Commission any amendment thereof or supplement thereto), or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, to the extent, in the cases described in clauses (i)
and (ii), that such untrue statement or omission was furnished in
writing by such Holder for use in the preparation thereof, or (iii)
any violation by such Holder of any federal, state or common law rule
or regulation applicable to such Holder and relating to action of or
inaction by such Holder in connection with any such registration. Such
indemnity obligation shall remain in full force and effect regardless
of any investigation made by or on behalf of the Harken Indemnified
Parties (except as provided above) and shall survive the transfer of
such securities by such Holder.
(c) Promptly after receipt by an indemnified party under subsection 5(a)
or (b) of written notice of the commencement of any action, suit,
proceeding, investigation or threat thereof made in writing with
respect to which a claim for indemnification may be made pursuant to
this Section 5, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written
notice to the indemnifying party of the threat or commencement
thereof; provided, however, that the failure to so notify the
indemnifying party shall not relieve it from any liability which it
may have to any indemnified party except to the extent that the
indemnifying party is actually prejudiced by such failure to give
notice. If any such claim or action referred to under subsection (a)
or (b) is brought against any indemnified party and it then notifies
the indemnifying party of the threat or commencement thereof, the
indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other indemnifying party
similarly notified, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. After notice from
the indemnifying party to such indemnified party of its election so to
assume the defense of any such claim or action, the indemnifying party
shall not be liable to such indemnified party under this Section 5 for
any legal expenses of counsel or any other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation unless the
indemnifying party has failed to assume the defense of such claim or
action or to employ counsel reasonably satisfactory to such
indemnified party. Under no circumstances will the indemnifying party
be obligated to pay the fees and expenses of more than one law firm
for all indemnified parties. The indemnifying party shall not be
required to indemnify the indemnified party with respect to any
amounts paid in settlement of any action, proceeding or investigation
entered into without the written consent of the indemnifying party,
which consent shall not be unreasonably withheld. No indemnifying
party shall consent to the entry of any judgment or enter into any
settlement without the consent of the indemnified party unless (i)
such judgment or settlement does not impose any obligation or
liability upon the indemnified party other than the execution,
delivery or approval thereof, and (ii) such judgment or settlement
includes as an unconditional term thereof the giving by the claimant
or plaintiff to such indemnified party of a full release and discharge
from all liability in respect of such claim for all persons that may
be entitled to or obligated to provide indemnification or contribution
under this Section 5.
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(d) Indemnification similar to that specified in the preceding subsections
of this Section 5 (with appropriate modifications) is hereby given by
Harken and each Holder of Registrable Securities with respect to any
required registration or qualification of securities under any state
securities or blue sky laws.
(e) If the indemnification provided for in this Section 5 is unavailable
to or insufficient to hold harmless an indemnified party under
subsection (a) or (b), then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of
the losses, claims, damages, liabilities or expenses (or actions or
proceedings in respect thereof) referred to in subsection (a) or (b)
in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and the indemnified party on
the other in connection with the statements, omissions, actions or
inactions which resulted in such losses, claims, damages, liabilities
or expenses as well as any other relevant equitable considerations.
The relative fault of the indemnifying party and the indemnified party
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information
supplied by the indemnifying party or the indemnified party, any
action or inaction by any such party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement, omission, action or inaction. The amount paid
or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) pursuant to this subsection (e) shall be deemed to include,
without limitation, any reasonable legal or other expenses incurred by
such indemnified party in connection with investigating or defending
any such action or claim (which shall be limited as provided in
subsection (c) if the indemnifying party has assumed the defense of
any such action in accordance with the provisions thereof) which is
the subject of this subsection (e). No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. Promptly after
receipt by an indemnified party under this subsection (e) of written
notice of the commencement of any action, suit, proceeding,
investigation or threat thereof made in writing with respect to which
a claim for contribution may be made against an indemnifying party
under this subsection (e), such indemnified party shall, if a claim
for contribution in respect thereof is to be made against an
indemnifying party, give written notice to the indemnifying party in
writing of the commencement thereof (if the notice specified in
subsection (c) has not been given with respect to such action);
provided, however, that the failure to so notify the indemnifying
party shall not relieve it from any obligation to provide contribution
which it may have to any indemnified party under this subsection (e)
except to the extent that the indemnifying party is actually
prejudiced by the failure to give notice.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this paragraph were determined by pro rata
allocation or by any other method of allocation which does not take
account the equitable considerations referred to in the immediately
preceding paragraph.
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If indemnification is available under Section 5, the indemnifying
parties shall indemnify each indemnified party to the fullest extent
provided in subsections (a) or (b), without regard to the relative
fault of said indemnifying party or any other equitable consideration
provided for in this paragraph. The provisions of this paragraph
shall be in addition to any other rights to indemnification or
contribution which any indemnified party may have pursuant to law or
contract, shall remain in full force and effect regardless of any
investigation made by or on behalf of any indemnified party, and
shall survive the transfer of securities by any such party.
(f) In connection with any underwritten offering contemplated by this
Agreement which includes Registrable Securities, Harken and all
Holders of Registrable Securities included in any Registration
Statement shall agree to customary provisions for indemnification and
contribution (consistent with the other provisions of this Section 5)
in respect of losses, claims, damages, liabilities and expenses of the
underwriters of such offering.
(g) The indemnification obligations hereunder with respect to any
Registration Statement shall terminate three (3) years after the
termination of the offering of Registrable Securities covered by such
Registration Statement.
Section 6. Selection of Underwriters. The Holders of Registrable Securities
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shall have the right to elect that the offering of Registrable Securities
pursuant to a Registration Statement filed under this Agreement be in the form
of an underwritten offering or a best efforts offering. If any registration
hereunder is an underwritten offering or a best efforts offering, the investment
banker or investment bankers and manager or managers that will administer the
offering shall be selected by Harken; provided, that such investment bankers and
managers must be reasonably satisfactory to the Holders of a majority of the
Registrable Securities to be registered in such registration.
Section 7. Rule 144. Harken covenants to each Holder that, to the extent that
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Harken shall be required to do so under the Exchange Act, Harken shall (a)
timely file the reports required to be filed by it under the Exchange Act or the
Securities Act (including, but not limited to, the reports under Sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted
by the Commission under the Securities Act) and the rules and regulations
adopted by the Commission thereunder, and (b) take such further action as any
Holder may reasonably request, all to the extent required from time to time to
enable such Holder to sell Registrable Securities without registration under the
Securities Act within the limitations of the exemption provided by Rule 144
under the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any Holder, Harken shall deliver to such Holder a written statement as to
whether it has complied with such requirements.
Section 8. Transferability. Republic may transfer any or all of the Registrable
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Securities issued under the Purchase Agreement to other parties who are Holders
of Republic's outstanding Debentures ("Debenture Holder"), and Republic may
transfer any or all of the Registrable Securities issued under the Contingent
Payment Agreement (attached as EXHIBIT D to the Purchase Agreement) to the
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holders of Republic's Series C Redeemable Preferred Stock (the "Preferred
Holders"), provided such Debenture Holder or Preferred Holder, as the case may
be, first provides to Harken written representation that such party constitutes
an Accredited Investor as such term is defined in the Securities Act. To the
extent Republic does transfer any or all of the Registrable Securities to one or
more Debenture Holders or Preferred Holders in accordance with this Section 8,
then such Debenture Holders or Preferred Holders shall accrue the rights,
benefits and obligations of this Agreement to the same extent as if they had
originally been signature parties hereto.
Republic agrees and warrants to Harken that any and all transfers of Registrable
Securities to Debenture Holders and Preferred Holders will be expressly made
subject to the terms of this Agreement.
Transfers of any or all of the Registrable Securities except to Debenture
Holders or Preferred Holders as provided in this Section 8, or under an
effective registration as provided under this Agreement, may only be made with
Harken's prior written consent, for which consent Harken my require
representations, indemnifications and warranties regarding the proposed party to
whom such transfer is requested.
Section 9. Miscellaneous.
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(1) >From and after the date of this Agreement, Harken will not, without
the prior written consent of the Holders of a majority of the
Registrable Securities then outstanding, enter into any agreement with
respect to its securities which is inconsistent with or violates the
rights granted to the Holders of Registrable Securities in this
Agreement.
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(2) Investors agree, and each other Holder of Registrable Securities
(including Registrable Securities in any Registration Statement filed
pursuant to this Agreement) will be deemed to have agreed, as follows:
(1) if any Registrable Securities are being registered in any
registration pursuant to this Agreement, the Holder thereof will
comply with all anti-stabilization, manipulation and similar
provisions of Section 10 of the Exchange Act, and any rules
promulgated thereunder by the Commission, and, at the request of
Harken, will execute and deliver to Harken and to any underwriter
participating in such offering, an appropriate agreement to such
effect; and
(2) at the end of any period during which Harken is obligated to keep
a Registration Statement current and effective as described
herein, the Holders of Registrable Securities included in this
Registration Statement shall discontinue sales thereof pursuant
to such Registration Statement.
(3) All questions concerning the construction, validity and interpretation
of this Agreement and all actions, proceedings and matters arising out
of this Agreement shall be governed by the internal law, and not the
law of conflicts, of the State of Texas.
(4) All covenants and agreements in this Agreement by or on behalf of any
of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether
expressed or not.
(5) This Agreement is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement
of the agreement and understanding of the parties hereto in respect of
the subject matter herein contained. There are no restrictions,
promises, warranties or undertakings, other than those set forth or
referred to herein, with respect to the registration rights granted by
Harken to the Holders of the Registrable Securities. This Agreement
supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
(6) All notices, demands or other communications to be given or delivered
under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered
personally or sent by reputable express courier service (charges
prepaid), or mailed to the recipient by certified or registered mail,
return receipt requested and potage prepaid, or sent by telefax, to
the parties at the following address (or to such other address or to
the attention of such other person as the recipient party has
specified by prior like notice to the sending party):
If to Harken:
------------
Harken Energy Corporation
580 WestLake Park Blvd., Suite 600
Houston, Texas 77079
Telecopier No.: (281) 504-4110
Attention: Bruce N. Huff President and
Larry E. Cummings, General Counsel
If to Republic:
--------------
Republic Resources, Inc.
743 Horizon Ct., Suite 333
Grand Junction, Colorado 81506-8715
Tel: (970) 245-5917
Telecopier No.: (970) 243-8840
Attention: Patrick J. Duncan, President
8
<PAGE>
With a copy to:
--------------
Alan W. Peryam, Esq.
1120 Lincoln Street, Suite 1000
Denver, Colorado 80203
Tel: (303) 866-0900
Telecopier No.: (303) 866-0999
(7) If any provision of this Agreement is held to be unenforceable, this
Agreement shall be considered divisible and such provision shall be
deemed inoperative to the extent it is deemed unenforceable, and in
all other respects of this Agreement shall remain in full force and
effect; provided, however, that if any such provision may be made
enforceable by limitation thereof, then such provision shall be deemed
to be so limited and shall be enforceable to the maximum extent
permitted by applicable law.
(9) This Agreement may be executed by the parties hereto in any number of
counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same agreement. Each counterpart
may consist of a number of copies hereof each signed by less than all,
but together signed by all, the parties hereto.
(9) Each Holder of Registrable Securities, in addition to being entitled
to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this
Agreement. Harken agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of breach by it of the
provisions of this Agreement and hereby agree to waive (to the extent
permitted by law) the defense in any action for specific performance
that a remedy of law would be adequate.
(10) In any action or proceeding brought to enforce any provision of this
Agreement, or where any provision hereof is validly asserted as a
defense, the successful party shall be entitled to recover reasonable
attorney's fees in addition to any other available remedy.
(11) Harken agrees to remove any legends on certificates representing
Registrable Securities describing transfer restrictions applicable to
such securities upon the sale of such securities (i) pursuant to an
effective Registration Statement under the Securities Act or (ii) in
accordance with the provisions of Rule 144 under the Securities Act.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
HARKEN ENERGY CORPORATION
By:
--------------------------
Name: Bruce N. Huff
Title: President
REPUBLIC RESOURCES, INC.
By:
--------------------------
Name: Patrick. J. Duncan
Title: President
9