ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of Harken
The directors of Harken, their ages and business experience during the past five years are listed below:
Name, Age and Business Experience
Director
Since
Michael M. Ameen, Jr.
(Age—78)—From 1989 to 1999, Mr. Ameen served as a part time consultant to Harken with regard to Middle Eastern exploration projects. He has
been an independent consultant on Middle East Affairs for the past seven years. During the past seven years, he has been director of American Near East Refugee Aid (a charitable organization); he was a past director of Amideast (a charitable
organization); he was a past director of Middle East Institute; he was a past director of International College in Beirut, Lebanon; he was a past vice president of government relations and director of the Washington office of Aramco; he was a past
president of Mobil Middle East Development Corporation.
1994
Marvin M. Chronister
(Age—51)—From August 1990 to May 2002, Mr. Chronister served as a Director of Corporate Finance with Deloitte & Touche LLP. From December
1988 to August 1990, he served as an investment banker with Kidder Peabody, and from February 1987 to December 1988, he served with Merrill Lynch.
2002
Mikel D. Faulkner
(Age—53)—From March 2003, Mr. Faulkner has served as President and from 1982 as Chief Executive Officer of Harken. From February 1991 to March
2003, Mr. Faulkner served as Chairman of the Board of Harken; and President of Harken from 1982 until February 1993. Effective March 2002, Mr. Faulkner also became the Chairman of Harken’s subsidiary, Global Energy Development plc.
1982
Dr. J. William Petty
(Age—60)—Professor of Finance and the W.W. Caruth Chairholder of Entrepreneurship at Baylor University from 1990 to the present; Dr. Petty
served as dean of the Business School at Abilene Christian University from 1979 to 1990; Dr. Petty served as a subject matter expert on a best-practices study by the American Productivity and Quality Center on the topic of shareholder value based
management and Dr. Petty served on a research team for the Australian Department of Industry to study the feasibility of establishing a public equity market for small and medium-sized enterprises in Australia.
2000
Alan G. Quasha
(Age—53)—From March 2003, Mr. Quasha has served as Chairman of the Board of Harken. President of Quadrant Management, Inc. from 1988 to the present;
director of Compagnie Financiére Richemont SA since its formation in 1988 to the present; director of American Express Funds from May 2002 to the present; director of Itech Capital Corp. from October 2002 to the present; served as a governor
of the American Stock Exchange from April 1994 to April 1997. Mr. Quasha represents Lyford Investments Enterprises Ltd. on the Board of Directors of Harken.
2003
H. A. Smith
(Age—64)—From June 1991 to the present, Mr. Smith has served as a consultant to Smith International Inc., an oil field service company; previously Mr.
Smith served as Vice President Customer Relations for Smith International, Inc.
1997
In March and April
2003, certain individuals resigned from the Board of Directors. Alan G. Quasha was elected to the Board of Directors to fill the vacancy created by the resignation of Stephen C. Voss. As a result of the
foregoing, the Board of Directors amended Harken’s Bylaws to reduce the number of directors constituting the full
Board of Directors from nine directors to six directors.
Executive Officers
of Harken
The officers of Harken are elected annually by
the Board of Directors following each Annual Meeting of Stockholders, or as soon thereafter as practicable. Each officer holds office until the earlier of such time as his or her successor is duly elected and qualified, or his or her death,
resignation or removal from office. Any officer elected or appointed by the Board of Directors may be removed by the Board of Directors whenever, in its judgment, the best interests of Harken will be served thereby, but such removal will be without
prejudice to the contract rights, if any, of the person so removed.
The executive officers of Harken, their ages and positions held with Harken and their business experience for the past five years are listed below.
Name
Age
Position Held with Harken
Alan G. Quasha
53
Chairman of the Board of Directors
Mikel D. Faulkner
53
Chief Executive Officer and President
Stephen C. Voss
53
Managing Director, Global Energy Development PLC
James W. Denny, III
55
Vice President and Chief Operating Officer
Anna M. Williams
32
Vice President and Chief Financial Officer
Richard O. Cottle
46
Vice President
Elmer A. Johnston
42
Vice President—General Counsel and Secretary
Alan G. Quasha
has served as Chairman of the Board of Harken since March 31, 2003. Mr. Quasha previously served as Chairman of the Board of Harken from June 1983 to February 1991. He has served as President of Quadrant Management, Inc. from 1988 to the present.
Mr. Quasha also has served as a director of Compagnie Financiére Richemont SA since its formation in 1988 to the present, American Express Funds from May 2002 to the present, and Itech Capital Corp. from October 2002 to the present. From
April 1994 to April 1997, he served as a governor of the American Stock Exchange.
Mikel D. Faulkner
has served as President of Harken since March 31, 2003 and as a director and Chief Executive Officer of Harken since 1982. Mr. Faulkner previously served as Chairman of the Board of Harken
from February 1991 until March 31, 2003 and President of Harken from 1982 until 1993. From April 2002 to the present Mr. Faulkner has served as Chairman of Harken’s subsidiary, Global Energy Development plc.
Stephen C. Voss
has served as Managing Director of Global Energy
Development plc since March 2002. Mr. Voss previously served as a director of Harken from 1997 to March 31, 2003, and Vice Chairman of the Board of Harken from May 2000 to November 2001. From September 1998 to May 15, 2000, Mr. Voss served as
Executive Vice President and Chief Operating Officer of Harken and from 1990 to September 1998 as Senior Vice President of Harken.
James W. Denny, III
has served as Vice President and Chief Operating Officer since March 31, 2003. From October 1999 to March 2003, Mr. Denny
served as Executive Vice President—Operations of Harken. From 1998 to October 1999, Mr. Denny served as Senior Engineer/Operations Manager for XPLOR Energy, Inc. From 1995 to 1998, Mr. Denny served as Vice President, Operations &
Exploration for Polaris Exploration Corporation.
Anna M.
Williams
has served as Vice President and Chief Financial Officer of Harken since March 31, 2003. From June 2001 to April 2003 Ms. Williams served as Executive Vice President—Finance and Chief Financial Officer. Ms. Williams served as
Senior Vice President—Finance and Chief Financial Officer of Harken from June 2000 to June 2001 and as Vice President—International Finance of Harken from 1998 to 2000 and as International Finance Manager from 1996 to 1998.
Richard O. Cottle
has served as Vice President of Harken since March 31, 2003. Mr. Cottle served
as Senior Vice President—Engineering from January 2000 to March 2003. Since joining Harken in 1994, Mr. Cottle has served as Vice President of Operations/Engineering from August 1997 to January 2000 and as Operations Manager for Harken
Southwest Corporation, a wholly owned subsidiary of Harken, from December 1994 to August 1997.
Elmer A. Johnston
has served as Vice President—General Counsel and Secretary since March 31, 2003 and as Senior Counsel to Global Energy Development plc since March 2002. From 1998 to 2002, Mr. Johnston
served as Assistant General Counsel of Harken.
Compliance with
Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires Harken’s directors and executive officers, and any persons who own more than 10% of Harken’s common stock, to file with the
SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of Harken. Directors, executive officers and greater than 10% stockholders are required by SEC regulations to furnish Harken with copies
of all Section 16(a) forms they file. Based solely on its review of the copies of such forms and written representations from Harken’s directors and executive officers and certain reporting persons, Harken believes that its directors and
executive officers have complied with all applicable filing requirements during 2002.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
In 2002, each non-employee director of Harken received an annual retainer of $20,000 plus $2,000 for attendance at each regular meeting. In addition, directors serving on committees received $4,000 for chairmanship and $1,000 per committee
meeting attended. Employee directors do not receive any fees for meetings attended.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information regarding the compensation paid during fiscal years 2002, 2001, and 2000 to Harken’s Chief Executive Officer and Harken’s four most highly compensated
executive officers other than the Chief Executive Officer (the “named executive officers”).
Includes $1,831 of 401(k) matching and $86 in group term life premiums.
(31)
Relates to use of company car.
(32)
Includes $10,500 of 401(k) matching and $75 in group term life premiums.
(33)
Excludes 1,400,000 options to purchase Global Energy Development plc ordinary shares at 50 pence (British Sterling) granted by Global Energy Development plc, a subsidiary of Harken.
Approximately 466,667 of these options vested on January 31, 2003 and an additional 466,667 will vest each January 31 of 2004 and 2005.
(34)
Excludes 840,000 options to purchase Global Energy Development plc ordinary shares at 50 pence (British Sterling) granted by Global Energy Development plc, a subsidiary of Harken.
Approximately 280,000 of these options vested on January 31, 2003 and an additional 280,000 will vest each January 31 of 2004 and 2005.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
There were no grants of options nor stock appreciation rights made to any of Harken’s executive officers during 2002.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
The following table sets forth information concerning option exercise in the fiscal year ended December 31, 2002 by the named executive officers and the
value of such officer’s unexercised options at December 31, 2002:
Number of
Shares/SARs
Acquired on
Exercise
Value
Realized
Number of Securities
Underlying Unexercised
Option/SARs at Fiscal Year
End
Value of Unexercised In-
the-Money Options/SARs at
Fiscal Year End (1)
Name
Exercisable
Unexercisable
Exercisable
Unexercisable
Mikel D. Faulkner
—
—
426,375
118,250
$
—
$
—
Bruce N. Huff
—
—
205,000
59,000
$
—
$
—
Stephen C. Voss
—
—
194,000
49,000
$
—
$
—
James W. Denny, III
—
—
33,750
31,250
$
—
$
—
Anna M. Williams
—
—
20,800
14,500
$
—
$
—
(1)
The closing price for the common stock as reported on the American Stock Exchange as of December 31, 2002 was $0.22. Value was calculated on the basis of the difference between the
option exercise price and such closing price multiplied by the number of shares of Harken common stock underlying the option.
CHANGE-IN-CONTROL ARRANGEMENTS
On April 1, 2002 (but effective as of December 30, 1999), Harken and Mikel D. Faulkner entered into that certain Amended and Restated Agreement Regarding
Compensation in the Event of Change in Control (the “Change in Control Agreement”), which was negotiated and approved by the Compensation Committee. The Change in Control Agreement provides that in the event of a “Change in
Control” of Harken, Harken shall pay to Mr. Faulkner within thirty days’ of such event, in addition to any other payments owing to Mr. Faulkner, a cash payment equal to 30 times Mr. Faulkner’s regular monthly salary which was last
paid prior to the month in which such Change in Control event occurred.
A “Change in Control” is defined as including: the sale of all or substantially all of the assets of Harken; a transaction which results in more than 50% of the voting stock of Harken being owned by a person
or party other than who owned or held such shares prior to such transaction; a “person” or “group” (within the meaning of Sections 13(d) or 14(d)(2) of the Securities Exchange Act of 1934), being or becoming the beneficial owner
of more than
50% of the voting stock of Harken outstanding; the liquidation or dissolution of Harken; any other event or series of
events that results in a change or right to change a majority of the members of Harken’s Board of Directors; and any event which causes the triggering of or a Change in Control to occur under Harken’s Stockholder Rights Plan. Under
Harken’s Stockholder Rights Plan, a triggering event occurs whenever any person (other than an employee stock option plan) becomes the beneficial owner of 15% or more of the shares of common stock then outstanding.
Mr. Faulkner has waived the application of the “Change in Control”
provisions of the Change in Control Agreement in connection with (i) the rights offering of Harken and related standby purchase agreement, (ii) the redemption of the 5% European Notes as well as the issuance of such number of shares of common stock
associated with such redemption, (iii) the issuance of 7% European Notes in exchange for outstanding securities of Harken, and (iv) past capital restructuring transactions.
On June 17, 2002, Harken entered into a Severance Agreement with Bruce N. Huff, which was negotiated and approved by the
Compensation Committee. The Severance Agreement provides that in the event Mr. Huff is involuntarily terminated by Harken during the term of the Severance Agreement, Harken will pay Mr. Huff, in addition to any other payments owing to Mr. Huff, an
amount equal to nine months’ salary (which salary shall be deemed to be the greater of Mr. Huff’s salary at the time of termination or his salary as of June 17, 2002). In connection with Mr. Huff’s termination of employment in April
2003, Mr. Huff was paid severance pursuant to his Severance Agreement.
On June 17, 2002, Harken entered into a Severance Agreement with James W. Denny III, which was negotiated and approved by the Compensation Committee. The Severance Agreement provides that in the event Mr. Denny is involuntarily terminated
by Harken during the term of the Severance Agreement, Harken will pay Mr. Denny, in addition to any other payments owing to Mr. Denny, an amount equal to nine months’ salary (which salary shall be deemed to be the greater of Mr. Denny’s
salary at the time of involuntary termination or his salary as of June 17, 2002). In April 2003, Harken agreed to extend the term of this Severance Agreement through June 17, 2004.
On June 17, 2002, Harken entered into a Severance Agreement with Anna M. Williams, which was negotiated and approved by the
Compensation Committee. This Severance Agreement provides that in the event Ms. Williams is involuntarily terminated by Harken during the term of the Severance Agreement, Harken will pay Ms. Williams, in addition to any other payments owing to Ms.
Williams, an amount equal to nine months’ salary (which salary shall be deemed to be the greater of Ms. Williams’ salary at the time of involuntary termination or her salary as of June 17, 2002). In April 2003, Harken agreed to extend the
term of this Severance Agreement through June 17, 2004 and to provide for a payment to Ms. Williams of an amount approximately equal to six months of her annual salary upon her voluntary termination of employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2002, Dr. J. William Petty, Larry G. Akers and James Frizell were
members of Harken’s Compensation Committee and participated in all deliberations concerning executive compensation. No executive officer of Harken served as a member of the Compensation Committee. As described above under “Certain
Relationships and Related Transactions,” on October 21, 1997, Harken loaned Stephen C. Voss, a director of Harken, $80,000 at an interest rate of 7% per annum. The outstanding principal balance of such loan is $80,000, and such loan is payable
on demand.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Security Ownership of Certain
Beneficial Owners
As of June 24, 2003, Harken had
outstanding 123,451,279 shares of common stock. As of that date, the only persons known by Harken to beneficially own 5% or more of the outstanding shares of common stock (or potentially own 5% or more of the outstanding shares of common stock upon
conversion of convertible securities of Harken) were:
Represents shares issuable upon conversion of Harken’s 7% Senior Convertible Notes due 2007.
Security Ownership of Directors and Management
The following table sets forth information regarding the number of shares of Common Stock beneficially owned by each
director, each named executive officer, and all of Harken’s directors and executive officers as a group as of June 24, 2003:
Name
Number of Shares
Beneficially
Owned
Percent
of
Class
Michael M. Ameen, Jr.
35,127
(1)
*
Marvin M. Chronister
5,000
(2)
*
Richard O. Cottle
8,000
(3)
*
James W. Denny, III
74,801
(4)
*
Mikel D. Faulkner
871,295
(5)
*
Elmer A. Johnston
9,500
(6)
*
Dr. J. William Petty
32,767
(7)
*
Alan G. Quasha
0
(8)
*
H. A. Smith
50,905
(9)
*
Stephen C. Voss
244,000
(10)
*
Anna M. Williams
35,300
(11)
*
All directors and executive officers as a group (11 persons)
Includes 25,000 shares issuable within 60 days upon exercise of options.
(2)
Includes 5,000 shares issuable within 60 days upon exercise of options.
(3)
Includes 8,000 shares issuable within 60 days upon exercise of options.
(4)
Includes 65,000 shares issuable within 60 days upon exercise of options.
(5)
Includes 544,625 shares issuable within 60 days upon exercise of options.
(6)
Includes 9,500 shares issuable within 60 days upon exercise of options.
(7)
Includes 5,000 shares issuable within 60 days upon exercise of options.
(8)
Does not include 68,123,184 shares held by Lyford Investments Enterprises Ltd. Mr. Quasha represents Lyford Investments Enterprises Ltd on the Board of Directors of Harken.
(9)
Includes 25,000 shares issuable within 60 days upon exercise of options.
(10)
Includes 243,000 shares issuable within 60 days upon exercise of options.
(11)
Includes 35,300 shares issuable within 60 days upon exercise of options.
(12)
Includes 947,925 shares issuable within 60 days upon exercise of options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 21, 1997, Harken loaned Stephen C. Voss, a former director of Harken, $80,000 at an interest rate of 7% per annum. This loan is a recourse loan
secured by options to purchase common stock granted to Mr. Voss. The outstanding principal balance of such loan is $80,000, and such loan is payable on demand.
In May 2002, Harken entered into a severance agreement and agreed to forgive the repayment of a short-term loan in the
amount of $64,000 to Larry E. Cummings, who was then an Executive Vice President and General Counsel of Harken, related to his resignation as an officer of Harken due to health reasons.
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