HARVEST NATURAL RESOURCES, INC. (NYSE:HNR) Files An 8-K Entry into a Material Definitive Agreement
Item1.01
| Entry into a Material Definitive Agreement. |
On February17, 2017, Harvest Natural Resources, Inc., a Delaware
corporation (the Company), entered into a Rights
Agreement, dated as of February17, 2017 (the Rights
Agreement), by and between the Company and Wells Fargo Bank,
N.A., as Rights Agent (the Rights Agent). A brief
description of the material terms of the Rights Agreement is
included in Item 3.03 of this Current Report on Form 8-K, which
description is incorporated into this Item 1.01 by reference.
| Item3.03 |
Material Modification to Rights of Security Holders. |
On February16, 2017, the Board of Directors of the Company (the
Board) approved the Rights Agreement and declared a
dividend distribution of one Series D preferred stock purchase
right (a Right) for each outstanding share of common
stock, par value $0.01 per share, of the Company (the Common
Stock) as of the close of business on the Record Date (as
hereinafter defined), and authorized the issuance of one Right in
respect of each share of Common Stock issued by the Company after
the close of business on the Record Date and prior to the
Distribution Time (as hereinafter defined) (or earlier
redemption, exchange or expiration of the Rights). The dividend
distribution is payable on February17, 2017 to the stockholders
of record at the close of business on February17, 2017 (the
Record Date). Each Right entitles the registered holder to
purchase from the Company one one-hundredth of a share of Series
D Preferred Stock, par value $0.01 per share (Preferred
Stock), at a price of $26.00 per one one-hundredth of a share
of Preferred Stock (the Purchase Price), subject to
adjustment. The description and terms of the Rights are set forth
in the Rights Agreement.
The Rights Agreement was adopted to protect stockholder value by
attempting to diminish the risk that the Companys ability to use
its net operating losses, capital losses, general business
credits, alternative minimum tax credits, foreign tax credits and
certain built-in losses and other tax attributes (collectively,
the Tax Benefits) to reduce potential future federal
income tax obligations may become substantially limited. Under
the Internal Revenue Code and regulations promulgated by the U.S.
Treasury Department, the Company may carry forward or otherwise
utilize these Tax Benefits in certain circumstances to offset any
current and future taxable income and thus reduce the Companys
federal income tax liability, subject to certain requirements and
restrictions. To the extent that the Tax Benefits do not
otherwise become limited, the Company believes that it will have
available a significant amount of Tax Benefits in future years,
and therefore these Tax Benefits could be a substantial asset to
the Company. However, if the Company experiences an ownership
change (as defined in Section382 of the Internal Revenue Code),
its ability to use the Tax Benefits may be substantially limited,
and the timing of the usage of the Tax Benefits could be
substantially delayed, which could significantly impair the value
of the Tax Benefits. Generally, a company experiences an
ownership change for tax purposes if the percentage of stock
owned by its 5% stockholders (as defined for tax purposes)
increases by more than 50 percentage points over a rolling
three-year period. The Rights Agreement is intended to act as a
deterrent to any person acquiring beneficial ownership of 5% or
more of the outstanding Common Stock without the approval of the
Board.
Until the Distribution Time (as defined below), the Rights will
be evidenced by the certificates for the Common Stock registered
in the names of the holders thereof (if the Common Stock is
certificated) or the registration of shares of Common Stock in
the book entry ownership records of the transfer agent for the
Common Stock (if the Common Stock is uncertificated). Until the
Distribution Time, the Rights will be transferable only in
connection with the transfer of the Common Stock and the transfer
of any shares of Common Stock will also constitute the transfer
of the Rights associated with such shares of Common Stock.
The Distribution Time will be the close of business on the tenth
(10th) business day after the Redemption Deadline. The Redemption
Deadline will be the earlier to occur of (i)the first public
announcement (by the Company or an Acquiring Person) that a
person or entity has become an Acquiring Person and (ii)the time
when a majority of the members of the Board then in office has
actual knowledge that a person or entity has become an Acquiring
Person. An Acquiring Person is a person or entity that has
acquired beneficial ownership of 5% or more of the outstanding
shares of the Common Stock, subject to certain exceptions. A
person or entity that, at the time of the first public
announcement of the Rights Agreement, was already the beneficial
owner of 5% or more of the outstanding Common Stock, will not be
considered an Acquiring Person unless that person or entity
acquires one or more additional shares of Common Stock after such
time (subject to specified exceptions). The Board may exempt
certain transactions, persons or entities from the operation of
the Rights Agreement (subject to such
conditions or limitations as may be specified by the Board) if
the Board reasonably determines that the acquisition of Common
Stock within the terms of the exemption will not jeopardize or
endanger the availability to the Company of the Tax Benefits.
As soon as practicable following the Distribution Time, separate
certificates evidencing the Rights (Right Certificates)
will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Time and, following the
Distribution Time, such separate Right Certificates alone will
evidence the Rights.
The Rights are not exercisable until the Distribution Time. The
Rights will expire on the earliest to occur of (i)February17,
2020, (ii) the time at which the Rights are redeemed in full as
provided in Section23 of the Rights Agreement or exchanged in
full as provided in Section24 of the Rights Agreement, (iii)the
effective date of the repeal of Section382 of the Internal
Revenue Code, or any successor provisions or replacement
provisions, if the Board determines that this Agreement is no
longer necessary for the preservation of the Tax Benefits,
(iv)the beginning of a taxable year of the Company for which the
Board determines that the Company has no Tax Benefits that may be
carried forward, and (v)the date of dissolution of the Company,
unless the expiration date is extended or the Rights are earlier
redeemed or exchanged by the Company, in each case as described
below.
Each share of Preferred Stock purchasable upon exercise of the
Rights will have a preferential quarterly dividend rate equal to
the greater of $10.00 per share and 100 times the dividend
declared on one share of the Common Stock. In the event of
liquidation, the holders of Preferred Stock will receive a
preferential liquidation payment of $100.00 per share plus
accrued and unpaid dividends thereon, but will be entitled to
receive an aggregate liquidation payment equal to 100 times the
payment made on one share of Common Stock. Each share of
Preferred Stock will have 100 votes voting together with the
Common Stock. Finally, in the event of any merger, consolidation
or other transaction in which shares of Common Stock are
exchanged, each share of Preferred Stock will be entitled to
receive 100 times the amount received per one share of Common
Stock. Because of the nature of the Preferred Stocks dividend,
liquidation and voting rights, the value of one one-hundredth of
a share of Preferred Stock purchasable upon exercise of each
Right should approximate the value of one share of Common Stock.
The Purchase Price payable, and the number of shares of Preferred
Stock or other securities or property issuable, upon exercise of
the Rights are subject to adjustment from time to time to prevent
dilution (i)in the event of a stock dividend on, or a
subdivision, combination or reclassification of the Preferred
Stock, (ii)upon the grant to holders of Preferred Stock of
certain rights or warrants to subscribe for shares of Preferred
Stock or convertible securities at less than the then current
market price per share of the Preferred Stock, or (iii)upon the
distribution to holders of Preferred Stock of evidences of
indebtedness or assets (excluding regular periodic cash dividends
out of earnings or retained earnings at a rate not in excess of
125% of the rate of the last cash dividend theretofore paid or
dividends payable in Preferred Stock) or of subscription rights
or warrants (other than those referred to above), in each case in
accordance with the terms of the Rights Agreement. The number of
outstanding Rights and the number of one one-hundredths of a
share of Preferred Stock issuable upon exercise of each Right are
also subject to adjustment in the event of a stock split of the
Common Stock or a stock dividend on the Common Stock payable in
shares of Common Stock or subdivisions, consolidations or
combinations as of the Common Stock occurring, in any such case,
prior to the Distribution Time.
From and after the time when any party first becomes an Acquiring
Person (the Shares Acquisition Time), any Rights that are
acquired or beneficially owned by any Acquiring Person (or any
affiliate or associate of any Acquiring Person) shall be null and
void without any further action and any holder of such Rights
(including any successor holder thereof) shall thereafter have no
right to exercise such Rights or receive any consideration
therefor under any provision of the Rights Agreement (including
any cash, securities or other property delivered by the Company
upon the redemption or exchange of the Rights).
From and after the Shares Acquisition Time, each holder of a
Right will thereafter have the right to receive, upon exercise of
a Right and payment of the Purchase Price, a number of shares of
the Common Stock equal to the Purchase Price divided by 50% of
the current market price for a shares of Common Stock (that is,
Common Stock having a market value of two times the Purchase
Price) in lieu of receiving shares of Preferred Stock.
2
If, after the Shares Acquisition Time, the Company is party to a
merger or consolidation in which the Company does not survive or
in which its Common Stock is exchanged for cash or the securities
of another entity or the Company sells assets aggregating 50% or
more of the assets or earning power of the Company and its
subsidiaries (taken as a whole) (a Section13
Transaction), proper provision will be made so that each
holder of a Right will thereafter have the right to receive, upon
the exercise thereof at the Purchase Price, a number of shares of
the senior voting stock of the principal acquiring party equal to
the Purchase Price divided by 50% of the market price (as of the
date of the Section13 Transaction) for a share of such senior
voting stock (that is, such senior voting stock having a market
value of two times the Purchase Price).
With certain exceptions, no adjustment in the Purchase Price will
be required until cumulative adjustments require an adjustment of
at least 1% in such Purchase Price. No fractional shares of
Preferred Stock, Common Stock or other securities for which a
Right may be exercisable will be issued upon the exercise of any
Right or Rights (other than fractions that are integral multiples
of one one-hundredths of a share of Preferred Stock, which may,
at the election of the Company, be evidenced by depositary
receipts) and, in lieu thereof, a cash payment will be made based
on the market price of the Preferred Stock, Common Stock or such
other securities, as applicable, on the last trading date prior
to the date of exercise.
At any time prior to the Redemption Deadline, the Board may, but
is not required to, redeem the Rights in whole, but not in part,
at a price of $0.01 per Right (subject to adjustment) (the
Redemption Price). The redemption of the Rights may be
made effective at such time, on such basis and with such
conditions as the Board in its sole discretion may establish. The
Company may, at its option, pay the Redemption Price in cash,
shares of Common Stock, any other form of consideration or any
combination thereof. In addition, if any term, provision,
covenant or restriction of the Rights Agreement is held by any
court or authority to be invalid, void or unenforceable and the
Board determines in good faith that severing the invalid language
from the Rights Agreement would adversely affect the purpose or
effect of the Rights Agreement, the Board may, but is not
required to, redeem the Rights, in whole but not in part, for the
Redemption Price until the close of business on the tenth (10th)
Business Day following the date of such determination by the
Board (even if after the Redemption Deadline).
At any time after the Redemption Deadline, the Board may, at its
option, exchange the Rights, in whole or in part, for shares of
Common Stock at an exchange ratio of one share of Common Stock
per Right (subject to adjustment), or for shares of Preferred
Stock or other consideration having an equivalent value. The
Boards exchange right may not be exercised after an Acquiring
Person becomes the beneficial owner of 50% or more of the voting
power of the shares of Common Stock then outstanding or after a
Section13 Transaction.
Immediately upon the action of the Board to redeem or exchange
the Rights, the Company shall make announcement thereof, and upon
such action, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the
Redemption Price, or the shares of Common Stock (or Preferred
Stock or other consideration) exchangeable for the Rights, as
applicable.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including,
without limitation, the right to vote or to receive dividends.
At any time when the Rights are redeemable, the Company may, in
its sole and absolute discretion, supplement or amend the Rights
Agreement in any respect without the approval of any holders of
the Rights. At any time when the Rights are not redeemable, the
Company may supplement or amend the Rights Agreement without the
approval of any holders of the Rights in order to cure any
ambiguity, correct or supplement any defective or inconsistent
provision, shorten or lengthen any time period, or change or
supplement the provisions of the Rights Agreement in any manner
that the Company may deem necessary or desirable;
provided, that, in each such case, such supplement or
amendment does not in any manner adversely affect the interests
of the holders of Rights (which will not include Rights that have
become null and void as a result of a party becoming an Acquiring
Person), cause the Rights Agreement to become otherwise
amendable, or cause the Rights to again become redeemable.
The Rights have certain anti-takeover effects. The Rights will
cause substantial dilution to a person or group that attempts to
acquire the Company without conditioning the offer on the
redemption of the Rights by the Board. The Rights should not
interfere with any merger or other business combination that is
in the best interests of the Company and its shareholders because
the Board may, at its option, at any time prior to the Redemption
Deadline, redeem all, but not less than all, of the then
outstanding Rights at the Redemption Price.
3
The above summary of the Rights, Preferred Stock, and Rights
Agreement does not purport to be complete and is qualified in its
entirety by reference to the Amended and Restated Certificate of
Incorporation of the Company, as amended (the Articles of
Incorporation), the Certificate of Designations of Series D
Preferred Stock of the Company (the Certificate of
Designations), and the Rights Agreement, each of which are
incorporated herein by reference. Copies of the Articles of
Incorporation, the Certificate of Designations, and the Rights
Agreement are attached as Exhibits 3.1, 3.2, 3.3 and 4.1,
respectively, to this Current Report on Form 8-K.
| Item5.03 |
Amendments to Articles of Incorporation or By-Laws; Change in Fiscal Year. |
In connection with the adoption of the Rights Agreement, the
Board approved a Certificate of Designations setting forth the
rights, powers and preferences of the Series D Preferred Stock of
the Company and designating 2,000,000 shares as Series D
Preferred Stock. The Company filed the Certificate of Designation
with the Secretary of State of the State of Delaware on
February17, 2017.
This summary of the Certificate of Designation does not purport
to be complete and is qualified in its entirety by reference to
the Certificate of Designation attached hereto as Exhibit 3.1,
which is incorporated herein by reference.
| Item7.01 | Regulation FD Disclosure. |
The Company issued a press release on February17, 2017 announcing
the Boards adoption of the Rights Agreement. A copy of the press
release is attached as Exhibit 99.1 to this Current Report on
Form 8-K, and is incorporated herein by reference.
The information in this Item 7.01, including Exhibit 99.1, is
being furnished to Item 7.01 of Form 8-K and shall not be deemed
filed for purposes of Section18 of the Exchange Act, or otherwise
subject to liabilities of that section, nor shall it be deemed
incorporated by reference into any filing under the Securities
Act or the Exchange Act, unless specifically identified therein
as being incorporated therein by reference.
| Item9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits |
| 3.1 |
Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to our Form 10-Q filed on November9, 2010). |
|
| 3.2 |
Certificate of Amendment of Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to our Registration Statement on Form S-3 filed on September29, 2015). |
|
| 3.3 |
Certificate of Designations of Series D Preferred Stock of Harvest Natural Resources, Inc. |
|
| 4.1 |
Rights Agreement, dated as of February17, 2017, by and between Harvest Natural Resources, Inc. and Wells Fargo Bank, N.A. |
|
| 99.1 | Press release, dated February17, 2017. |
4
About HARVEST NATURAL RESOURCES, INC. (NYSE:HNR)
Harvest Natural Resources, Inc. (Harvest) is a petroleum exploration and production company. The Company focuses on acquiring exploration, development and producing properties in geological basins with proven active hydrocarbon systems. The Company has interest in the Bolivarian Republic of Venezuela (Venezuela). In addition to its interests in Venezuela, it holds exploration acreage offshore of Republic of Gabon (Gabon).The Company has operations in Venezuela and Gabon. Venezuela operations are conducted through its investment in affiliate Petrodelta. It holds interest in fields, including Uracoa Field, Tucupita Field, Bombal Field, Isleno Field, Temblador Field and El Salto Field. The Dussafu Production Sharing Contract (Dussafu PSC) contract area is located offshore Gabon, adjacent to the border with the Republic of Congo. It contains approximately 680,000 acres with water depths to over 1,650 feet. HARVEST NATURAL RESOURCES, INC. (NYSE:HNR) Recent Trading Information
HARVEST NATURAL RESOURCES, INC. (NYSE:HNR) closed its last trading session up +0.08 at 6.64 with 26,776 shares trading hands.