Ed, from their last 10Q:
Pursuant to the Development Finance Agreements, the Institutional Investors have the right, for a period of two years beginning
in October 1998, to convert all or part of the Institutional Participation into shares of Harken common stock. The number of
shares of Harken common stock to be issued upon conversion of the Institutional Participation will be equal to the quotient of
(i) the Payment Amount (less any distributions made in respect of the Institutional Participation) plus an amount equal to 15%
interest per annum on the net Payment Amount compounded monthly (the "Invested Amount"), divided by (ii) the market price
of the Harken common stock at the time of conversion. During the same two year period, Harken also has the right to convert
the Institutional Participation into shares of Harken common stock with the number of shares of Harken common stock to be
issued to be equal to the quotient of (i) the Payment Amount (less any distribution made in respect of the Institutional
Participation) plus an amount equal to 25% interest per annum on the net Payment Amount compounded monthly, divided by
(ii) the market price of Harken common stock at the time of conversion. Harken can also elect to pay cash upon any
conversion of the Institutional Participation in lieu of issuing Harken common stock. The Development Finance Agreements also
provide for additional shares of Harken common stock to be issued by Harken in the event of a conversion to the extent that
the Institutional Investors do not, under certain circumstances, realize the Invested Amount from the sale of shares of Harken
common stock issued at the conversion.
At the present time, it is not known whether the Institutional Investors or Harken will exercise their rights to convert the
Institutional Interest into Harken common stock, nor can Harken determine the number of shares of Harken common stock
which would be required to be issued in the event that Harken or the Institutional Investors elect to convert the Institutional
Participation into shares of Harken common stock.
On April 9, 1998, Harken entered into a Securities Purchase Agreement with RGC International Investors, LDC ("RGC"),
pursuant to which Harken issued to RGC 15,000 shares of its Series F Convertible Preferred Stock (the "Series F Preferred")
in exchange for $15,000,000. The Series F Preferred is convertible into shares of Harken common stock at a conversion price
based upon the market price of Harken common stock at the time of conversion. The number of shares of Harken common
stock issuable upon conversion of the Series F Preferred will also include a premium amount equal to an increase calculated on
the face value of the Series F Preferred at 5% per annum. The Series F Preferred does not pay dividends.
Harken has the option to redeem for cash any shares of Series F Preferred presented for conversion if (a) prior to January 9,
1999, the closing price of Harken common stock on the conversion date is less than $4.80, or (b) on or after January 9, 1999,
the then applicable conversion price is less than $4.80, for an amount equal to the number of shares of Harken common stock
that would otherwise be issuable upon conversion multiplied by the closing price of Harken common stock on the conversion
date.
As far as I understand, these are floorless, anytime the conversion ratio depends on the recent price of the stock prior to conversion and there is no floor to that price, the conversion is floorless. The $85 MM European convertible is at a fixed rate of $6.5, and for the next year or so (until these are callable) you can assume that everytime the stock gets close to $6.5 the holders of the debenture will short against the block.
Zeev |
