EXHIBIT 10.1

 

PREFERRED STOCK PURCHASE AGREEMENT

 

THIS PREFERRED STOCK PURCHASE AGREEMENT (“Agreement”) is made as of the 7th day
of October, 2004 by and among HARKEN ENERGY CORPORATION, a Delaware corporation
(the “Company”), and the Purchasers set forth on the signature page affixed
hereto (each a “Purchaser” and collectively the “Purchasers”).

 

Recitals

 

A. The Company and the Purchasers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D (“Regulation D”), as promulgated by the U.S.
Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933,
as amended;

 

B. The Purchasers wish to purchase, and the Company wishes to sell and issue to
the Purchasers, upon the terms and subject to the conditions stated in this
Agreement (i) an aggregate of 50,000 shares (“Preferred Shares”) of the
Company’s Series M Cumulative Convertible Preferred Stock, liquidation
preference $100 per share, having the rights, designations and preferences set
forth in the Certificate of Designations in the form attached hereto as Exhibit
A (the “Certificate”), which Preferred Shares shall be convertible into shares
of common stock of the Company, $0.01 par value per share (the “Common Stock”),
in accordance with the terms of the Certificate, and (ii) warrants (“Warrants”)
to purchase an aggregate of up to 4,385,965 shares of Common Stock at an
exercise price equal to $0.57, in the form attached hereto as Exhibit B, in each
case as are set forth on the signature page(s) attached hereto and executed by
each such Purchaser for an aggregate purchase price of up to $5,000,000;

 

C. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as Exhibit C (the “Registration Rights Agreement”),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder, and applicable state securities laws; and

 

In consideration of the mutual promises made herein and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

 

Definitions. In addition to those terms defined above and elsewhere in this
Agreement, for the purposes of this Agreement, the following terms shall have
the meanings here set forth:

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“Affiliate” means, with respect to any Person, any other Person which directly
or indirectly controls, is controlled by, or is under common control with, such
Person, where “control” means the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise

 

“Agreements” means this Agreement, the Registration Rights Agreement, the
Certificate and the Warrants.

 

1.1. “Approved Market” means the American Stock Exchange, the New York Stock
Exchange, or the Nasdaq National Market or the Nasdaq Small-Cap Market.

 

1.2. “Certificate” shall have the meaning set forth in the recitals to this
Agreement.

 

1.3. The “Company” shall refer to the Company (as defined in the first paragraph
hereof) together with its subsidiaries wherever applicable (including without
limitation with respect to all representations of the Company unless the context
otherwise requires).

 

1.4. “Closing” means the consummation of the transactions contemplated by this
Agreement, and “Closing Date” means the date of such Closing.

 

1.5. “Convertible Securities” means any convertible securities, warrants,
options or other rights to subscribe for or to purchase or exchange for, shares
of Common Stock.

 

1.6. “Material Adverse Effect” means a material adverse effect on the (i)
condition (financial or otherwise), business, assets, prospects or results of
operations of the Company; (ii) ability of the Company to perform any of its
material obligations under the terms of the Agreements; or (iii) material rights
and remedies of a Purchaser under the terms of the Agreements.

 

1.7. “Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.

 

1.8. “SEC” means the U.S. Securities and Exchange Commission.

 

1.9. “SEC Filings” means the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2003 and all other reports filed by the Company pursuant
to the 1934 Act since December 31, 2003.

 

1.10. “Securities” means the Preferred Shares, Underlying Shares, Warrants and
Warrant Shares.

 

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1.11. “Underlying Shares” means the shares of Common Stock issued or issuable
upon conversion of, as payment for dividends on, upon redemptions of, or
otherwise pursuant to, the Preferred Shares.

 

1.12. “Warrants” shall have meaning set forth in the recitals to this Agreement.

 

1.13. “Warrant Shares” means the shares of Common Stock issuable upon exercise
of or otherwise pursuant to the Warrants.

 

1.14. “1933 Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

1.15. “1934 Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

Purchase and Sale of the Preferred Shares and Warrants. Subject to the terms and
conditions of this Agreement and on the basis of the representations and
warranties made herein, each of the Purchasers hereby severally, and not
jointly, agrees to purchase, and the Company hereby agrees to sell and issue to
each of the Purchasers, the number of Preferred Shares set forth on such
Purchaser’s signature page attached hereto and Warrants to purchase the number
of shares of Common Stock as is equal to 50% of the Purchase Price paid by such
Purchaser divided by 95% of the Conversion Price (as defined in the
Certificate). Each Purchaser’s aggregate purchase price (the “Purchase Price”)
for the Preferred Shares and Warrants to be purchased hereunder is set forth on
such Purchaser’s signature page attached hereto.

 

Closing.

 

Closing Procedure. The Company shall promptly deliver to Purchasers’ counsel, in
trust, Preferred Shares and Warrants, registered in the names of the Purchasers
as indicated on the signature pages to this Agreement, representing all of the
Preferred Shares and all of the Warrants, with instructions that such Preferred
Shares and Warrants are to be held in escrow for release to the Purchasers only
upon payment of the Purchase Price to the Company and confirmation of receipt by
the Company or its counsel. Upon receipt by counsel to the Purchasers of the
Preferred Shares, Warrants and the execution and/or delivery of such other
documents contemplated hereby to be executed and/or delivered on or prior to the
Closing, each Purchaser shall promptly cause a wire transfer in immediately
available funds to be sent to the account of the Company, in an amount
representing the Purchase Price, as follows:

 

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J.P. Morgan Chase Bank

Houston, Texas

 

ABA No.: 113000609

 

For credit to account No.: 08805216221

For credit to the account of Harken Energy Corporation

 

Reference: Tail Wind

 

On the date the Company receives all such funds, the Preferred Shares and the
Warrants shall be released to the Purchasers (and such date shall be deemed the
“Closing Date”).

 

Closing Date Deliveries.

 

On the Closing Date, the Company shall deliver to the Purchasers:

 

(i) Certificates for the Preferred Shares;

 

(ii) Warrants in the form attached as Exhibit B;

 

(iii) The executed Registration Rights Agreement in the form attached as Exhibit
C;

 

(iv) A stamped copy of the Certificate duly filed with the Secretary of State of
the State of Delaware;

 

(v) The opinion(s) of counsel referred to in Section 7.4 below; and

 

(vi) An officer’s certificate in form and substance reasonably satisfactory to
the Purchasers and the Purchasers’ counsel, executed by an officer of the
Company, certifying as to satisfaction of applicable closing conditions,
incumbency of signing officers, the true, correct and complete nature of the
Certificate of Incorporation and By-laws, good standing and authorizing
resolutions.

 

On the Closing Date, the Purchasers shall deliver to the Company:

 

(vii) The Purchase Price set forth on the Purchasers’ signature page hereto; and

 

(viii) The executed Registration Rights Agreement.

 

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Representations and Warranties of the Company. The Company hereby represents and
warrants to the Purchasers that:

 

Organization, Good Standing and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now conducted and own its properties. The
Company is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property makes such qualification or licensing necessary
unless the failure to so qualify would not be reasonably likely to result in a
Material Adverse Effect.

 

Authorization. The Company has full power and authority and has taken all
requisite action on the part of the Company, its officers, directors and
stockholders necessary for (i) the authorization, execution and delivery of the
Agreements, (ii) authorization of the performance of all obligations of the
Company hereunder and thereunder, and (iii) the authorization, issuance (or
reservation for issuance) and delivery of the Securities. The Agreements
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability, relating to or affecting creditors’ rights generally.

 

Capitalization. The capitalization of the Company as of September 29, 2004 is as
described in Schedule 4.3 attached hereto. The Company has not issued any
capital stock since such date other than pursuant to the exercise of employee
stock options under the Company’s stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company’s stock option plans and
pursuant to the conversion or exercise of outstanding Convertible Securities.
All of the issued and outstanding shares of the Company’s capital stock have
been duly authorized and validly issued and are fully paid and nonassessable,
except to the extent that the failure of the foregoing to be true and correct
would not have a Material Adverse Effect. Other than as set forth in the SEC
Filings, no Person is entitled to preemptive or similar statutory or contractual
rights with respect to any securities of the Company. Other than as set forth in
the SEC Filings, there are no outstanding warrants, options, convertible
securities or other rights, agreements or arrangements of any character under
which the Company is or may be obligated to issue any equity securities of any
kind. Other than as set forth in the SEC Filings, the Company has no knowledge
of any voting agreements, buy-sell agreements, option or right of first purchase
agreements or other agreements of any kind among any of the securityholders of
the Company relating to the securities of the Company held by them. Other than
as set forth in the SEC Filings, the Company has not granted any Person the
right to require the Company to register any securities of the Company under the
1933 Act, whether on a demand basis or in connection with the registration of
securities of the Company for its own account or for the account of any other
Person.

 

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Valid Issuance. As of the Closing, the Company has reserved a sufficient number
of shares of Common Stock for the issuance upon conversion of, as payment for
dividends on, for redemption of, and otherwise pursuant to, the Preferred
Shares, and upon exercise of or otherwise pursuant to the Warrants. The
Preferred Shares, Warrants, Underlying Shares and Warrant Shares are duly
authorized, and such Securities, when issued in accordance herewith and, in
respect of the Underlying Shares and Warrant Shares pursuant to the terms of the
Certificate and Warrants, respectively, will be validly issued, fully paid,
non-assessable and free and clear of all encumbrances and restrictions, except
for restrictions on transfer imposed by applicable securities laws. The number
of shares to be reserved hereunder shall be determined without regard to any
restrictions on beneficial ownership contained in the Agreements.

 

Consents. The execution, delivery and performance by the Company of the
Agreements and, subject to the truth and accuracy of the representations made by
the Purchasers in Sections 5 of this Agreement, the offer, issuance and sale of
the Securities, require no consent of, action by or in respect of, or filing
with, any Person, governmental body, agency, or official, other than (i)
approval by the American Stock Exchange (“AMEX”) for the listing of the Common
Shares on the AMEX, (ii) filings that have been made pursuant to applicable
state securities laws and (iii) post-sale filings pursuant to applicable state
and federal securities laws, which the Company undertakes to file within the
applicable time periods.

 

Delivery of SEC Filings; Business. The SEC Filings represent all filings
required of the Company pursuant to the 1934 Act since December 31, 2003. The
SEC Filings complied as to form in all material respects with the requirements
of the 1934 Act and did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. The Company is engaged only in the business described in the SEC
Filings and the SEC Filings contain a complete and accurate description of the
business of the Company in all material respects. The Company has not provided
to any Purchaser (i) any information required to be filed under the 1934 Act
that has not been so filed or (ii) any material nonpublic information.

 

Use of Proceeds. The proceeds of the sale of the Securities hereunder shall be
used by the Company for working capital and general corporate purposes.

 

No Material Adverse Change. Since December 31, 2003, except as disclosed and
described in the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2003 and or any other reports filed by the Company subsequent to
such Form 10-K pursuant to the 1934 Act and filed at least ten (10) days prior
to the date hereof, there has not been:

 

(i) any change in the consolidated assets, liabilities, financial condition or
operating results of the Company from that reflected in the financial statements
included in the Company’s Form 10-K for the fiscal year ended December 31,

 

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2003, except changes in the ordinary course of business which have not had, in
the aggregate, a Material Adverse Effect;

 

(ii) any declaration or payment of any dividend, or any authorization or payment
of any distribution, on any of the capital stock of the Company, or any
redemption or repurchase of any securities of the Company;

 

(iii) any material damage, destruction or loss, whether or not covered by
insurance, to any assets or properties of the Company or any of its
Subsidiaries;

 

(iv) any waiver by the Company of a material right or of a material debt owed to
it;

 

(v) any satisfaction or discharge of any lien, claim or encumbrance or payment
of any obligation by the Company, except in the ordinary course of business and
which is not material to the assets, properties, financial condition, operating
results or business of the Company taken as a whole (as such business is
presently conducted and as it is proposed to be conducted);

 

(vi) any material change or amendment to a material contract or arrangement by
which the Company or any of its assets or properties is bound or subject;

 

(vii) any material labor difficulties or labor union organizing activities with
respect to employees of the Company;

 

(viii) any transaction entered into by the Company other than in the ordinary
course of business; or

 

(ix) any other event or condition of any character that may have a Material
Adverse Effect.

 

Registration Statements; Material Contracts.

 

During the preceding two years, each registration statement and any amendment
thereto filed by the Company pursuant to the 1933 Act, as of the date such
statement or amendment became effective, complied as to form in all material
respects with the 1933 Act and did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading; and each prospectus
filed pursuant to Rule 424(b) under the 1933 Act, as of its issue date and as of
the closing of any sale of securities pursuant thereto did not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.

 

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Other than the shares of the Company’s Series G-4 Preferred Stock or as
otherwise set forth in the SEC Filings, there are no agreements or instruments
currently in force and effect that constitute a warrant, option, convertible
security or other right, agreement or arrangement of any character under which
the Company is or may be obligated to issue any material amounts of any equity
security of any kind, or to transfer any material amounts of any equity security
of any kind.

 

Form S-3 Eligibility. The Company is eligible to register the resale of its
Common Stock on a registration statement on
Form S-3 under the 1933 Act.

 

No Conflict, Breach, Violation or Default; Compliance with Law. The execution,
delivery and performance of the Agreements by the Company and the issuance and
sale of the Securities will not conflict with or result in a breach or violation
of any of the terms and provisions of, or constitute a default under (i) the
Company’s Certificate of Incorporation (including any certificates of
designation) or the Company’s Bylaws, both as in effect on the date hereof
(copies of which have been provided to the Purchasers before the date hereof),
or (ii) except where it would not have a Material Adverse Effect, (A) any
statute, rule, regulation or order of any governmental agency or body or any
court, domestic or foreign, having jurisdiction over the Company or any of its
properties, or (B) any agreement or instrument to which the Company is a party
or by which the Company is bound or to which any of the properties of the
Company is subject. Except where it would not have a Material Adverse Effect,
the Company (i) is not in violation of any statute, rule or regulation
applicable to the Company or its assets, (ii) is not in violation of any
judgment, order or decree applicable to the Company or its assets, and (iii) is
not in breach or violation of any agreement, note or instrument to which it or
its assets are a party or are bound or subject. The Company has not received
notice from any Person of any claim or investigation that, if adversely
determined, would render the preceding sentence untrue or incomplete.

 

Tax Matters. The Company has timely prepared and filed all tax returns required
to have been filed by the Company with all appropriate governmental agencies and
timely paid all taxes owed by it, in each case taking into account permitted
extensions. The charges, accruals and reserves on the books of the Company in
respect of taxes for all fiscal periods are adequate, and there are no unpaid
assessments against the Company nor, to the knowledge of the Company, any basis
for the assessment of any additional taxes, penalties or interest for any fiscal
period or audits by any federal, state or local taxing authority. All taxes and
other assessments and levies that the Company is required to withhold or to
collect for payment have been duly withheld and collected and paid to the proper
governmental entity or third party when due. There are no tax liens or claims
pending or threatened against the Company or any of its respective assets or
property. There are no outstanding tax sharing agreements or other such
arrangements between the Company and any other corporation or entity.

 

Title to Properties and Securities. Except as disclosed in the SEC Filings, the
Company has good and marketable title to all real properties and all other
properties and assets owned by it, in each case free from liens, encumbrances
and defects that would

 

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materially affect the value thereof or materially interfere with the use made or
currently planned to be made thereof by them; and except as disclosed in the SEC
Filings, the Company holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.

 

Certificates, Authorities and Permits. The Company possesses adequate
certificates, authorities or permits issued by appropriate governmental agencies
or bodies necessary to conduct the business now operated by it and has not
received any notice of proceedings relating to the revocation or modification of
any such certificate, authority or permit that, if determined adversely to the
Company, would individually or in the aggregate have a Material Adverse Effect.

 

No Labor Disputes. No material labor dispute with the employees of the Company
exists or, to the knowledge of the Company, is imminent.

 

Intellectual Property. The Company owns or possesses adequate rights or licenses
to the inventions, know-how, patents, patent rights, copyrights, trademarks,
trade names, licenses, approvals, governmental authorizations, trade secrets
confidential information and other intellectual property rights (collectively,
“Intellectual Property Rights”), free and clear of all liens, security
interests, charges, encumbrances, equities and other adverse claims, necessary
to conduct the business now operated by it, or presently employed by it, and
presently contemplated to be operated by it, and the Company has not received
any notice of infringement of or conflict with asserted rights of others with
respect to any Intellectual Property Rights except as disclosed in the SEC
Filings. None of the Company’s Intellectual Property Rights have expired or
terminated, or are expected to expire or terminate within three years from the
date of this Agreement, except those the expiration or termination of which
would not cause a Material Adverse Effect. To the Company’s knowledge, the
Company’s patents and other Intellectual Property Rights and the present
activities of the Company do not infringe any patent, copyright, trademark,
trade name or other proprietary rights of any third party where such
infringement may cause a Material Adverse Effect on the Company. There is no
claim, action or proceeding being made or brought against, or to the Company’s
knowledge, being threatened against, the Company regarding its Intellectual
Property Rights, and the Company is unaware of any facts or circumstances which
might give rise to any of the foregoing. The Company has no knowledge of the
material infringement of its Intellectual Property Rights by third parties and
has no reason to believe that any of its Intellectual Property Rights is
unenforceable, and the Company is unaware of any facts or circumstances which
might give rise to any of the foregoing. The Company has taken commercially
reasonable security measures to protect the secrecy, confidentiality and value
of all of its intellectual properties.

 

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1.16. Environmental Matters. The Company is not in violation of any statute,
rule, regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration of
the environment or human exposure to hazardous or toxic substances
(collectively, “Environmental Laws”), does not own or operate any real property
contaminated with any substance that is subject to any Environmental Laws, is
not liable for any off-site disposal or contamination pursuant to any
Environmental Laws, and is not subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim would
individually or in the aggregate have a Material Adverse Effect; and the Company
is not aware of any pending investigation that might lead to such a claim.

 

Litigation. Except as disclosed in the SEC Filings, there are no pending
actions, suits or proceedings against or affecting the Company or any of its
properties that, if determined adversely to the Company, would individually or
in the aggregate have a Material Adverse Effect, or which are otherwise material
in the context of the sale of the Securities; and to the Company’s knowledge, no
such actions, suits or proceedings are threatened or contemplated.

 

Financial Statements. The financial statements included in each SEC Filing
present fairly and accurately in all material respects the consolidated
financial position of the Company as of the dates shown and its consolidated
results of operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis. Except as set forth in the financial
statements of the Company included in the SEC Filings filed prior to the date
hereof, the Company has no liabilities, contingent or otherwise, except those
which individually or in the aggregate are not material to the financial
condition or operating results of the Company.

 

Insurance Coverage. The Company maintains in full force and effect insurance
coverage that the Company reasonably believes to be adequate against all
liabilities, claims and risks against which it is customary for comparably
situated companies to insure.

 

Compliance with AMEX Continued Listing Requirements. The Company is in
compliance with all applicable American Stock Exchange continued listing
requirements. There are no proceedings pending or to the Company’s knowledge
threatened against the Company relating to the continued listing of the
Company’s Common Stock on the American Stock Exchange and the Company has not
received any notice of, nor to the knowledge of the Company is there any basis
for, the delisting of the Common Stock from the American Stock Exchange.

 

Brokers and Finders. The Purchasers shall have no liability or responsibility
for the payment of any commission or finder’s fee to any third party in
connection with or resulting from this agreement or the transactions
contemplated by this Agreement by reason of any agreement of or action taken by
the Company. Upon

 

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Closing, the Company shall pay to any finder in connection with the transactions
contemplated hereby any finder’s fee(s) owing to such finder pursuant to a
separate agreement or arrangement.

 

No General Solicitation. Neither the Company nor any Person acting on its behalf
has conducted any general solicitation or general advertising (as those terms
are used in Regulation D) in connection with the offer or sale of any of the
Securities.

 

No Integrated Offering. Neither the Company nor any of its Affiliates, nor any
Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would adversely affect reliance by the Company on
Section 4(2) of the 1933 Act for the exemption from registration for the
transactions contemplated hereby or would require registration of the Securities
under the 1933 Act, or would require the integration of this offering with any
other offering of securities for purposes of determining the need to obtain
stockholder approval of the transactions contemplated hereby under the rules of
the American Stock Exchange.

 

Disclosures. No representation or warranty made by the Company under any section
hereof and no written information furnished by the Company to the Purchasers or
any authorized representative of the Purchasers, pursuant to the Agreements or
in connection therewith, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under which the
statements were made, not misleading.

 

Representations and Warranties of the Purchaser. Each of the Purchasers hereby
severally, and not jointly, represents and warrants to the Company as to itself
only that:

 

Organization and Existence. The Purchaser is a validly existing corporation,
partnership or limited liability company and has all requisite corporate,
partnership or limited liability company power and authority to invest in the
Securities pursuant to this Agreement.

 

Authorization. The execution, delivery and performance by the Purchaser of this
Agreement and the Registration Rights Agreement have been duly authorized and
this Agreement and the Registration Rights Agreement will each constitute the
valid and legally binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors’ rights generally.

 

Purchase Entirely for Own Account. The Securities to be received by the
Purchaser hereunder will be acquired for the Purchaser’s own account, not as
nominee or agent, and not with a view to the resale or distribution of any part
thereof in violation of

 

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securities laws, and the Purchaser has no present intention of selling, granting
any participation in or otherwise distributing the same, in violation of
securities laws. The Purchaser is not a registered broker dealer or an entity
engaged in the business of being a broker dealer.

 

Investment Experience. The Purchaser acknowledges that it can bear the economic
risk and complete loss of its investment in the Securities and has such
knowledge and experience in financial or business matters and in private
placement transactions of companies similar to the Company so that it is capable
of evaluating the merits and risks of the purchase contemplated hereby.

 

Disclosure of Information. The Purchaser has had an opportunity to receive
documents related to the Company and to ask questions of and receive answers
from the Company regarding the Company, its business and the terms and
conditions of the offering of the Securities and has received and read the SEC
Filings filed via EDGAR at least five days prior to the date hereof. Neither
such inquiries nor any other due diligence investigation conducted by the
Purchaser shall modify, amend or affect the Purchaser’s right to rely on the
Company’s representations and warranties contained in this Agreement or made
pursuant to this Agreement.

 

Restricted Securities. The Purchaser understands that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws, applicable state laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.

 

Legends. It is understood that, until registration for resale pursuant to the
Registration Rights Agreement or until sales under Rule 144 are permitted,
certificates evidencing the Securities may bear one or all of the following
legends or legends substantially similar thereto:

 

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR UNDER ANY STATE SECURITIES LAWS, IN RELIANCE UPON
EXEMPTIONS FROM REGISTRATION FOR NON-PUBLIC OFFERINGS. THIS SECURITY MAY NOT BE
SOLD OR TRANSFERRED UNLESS IT IS REGISTERED UNDER THE ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR UNLESS THERE IS AN AVAILABLE EXEMPTION FROM, OR SUCH
SALE OR TRANSFER IS IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS, AS EVIDENCED BY AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE ISSUER.”

 

If required by the authorities of any state in connection with the issuance of
sale of the Securities, the legend required by such state authority.

 

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Upon registration for resale pursuant to the Registration Rights Agreement, and
for so long as (and at all times as) such Registration Statement remains
effective, or upon Rule 144(k) under the 1933 Act becoming available, the
Company shall promptly cause certificates evidencing the Underlying Shares and
Warrant Shares previously issued to be replaced with certificates which do not
bear such restrictive legends, and all Underlying Shares and Warrant Shares
subsequently issued shall not bear such restrictive legends. The Company shall
not place any restrictive legend on certificates evidencing the Underlying
Shares and Warrant Shares subsequently issued or impose any stop transfer
restriction thereon, unless prior to such Rule 144(k) becoming available the
relevant Registration Statement subsequently becomes withdrawn or otherwise
ceases to be effective, provided that any such restrictive legends or stop
transfer restrictions shall be removed upon the earlier of such Registration
Statement subsequently becoming effective or such Rule 144(k) becoming
available.

 

Accredited Investor. The Purchaser is an “accredited investor” as defined in
Rule 501(a) of Regulation D, as amended, under the 1933 Act.

 

No General Solicitation. The Purchaser did not learn of the investment in the
Securities as a result of any public advertising or general solicitation.

 

Closing Documents. The parties acknowledge and agree that part of the inducement
for the Purchasers to enter into this Agreement is the Company’s execution and
delivery of the Registration Rights Agreement. The parties acknowledge and agree
that on or prior to the Closing, the Registration Rights Agreement will be duly
executed and delivered by the parties thereto.

 

Covenants and Agreements of the Company.

 

19.9% Cap; Rule 144.

 

19.9% Cap. In the event that at any time the Company would be obligated to issue
an amount of shares upon conversion of, as payment for dividends on, for
redemption of, and otherwise pursuant to, the Preferred Shares, or upon exercise
of the Warrants, which, when aggregated with all shares of Common Stock issued
to the Purchasers hereunder (including under the Certificate and Warrants and
including to other purchasers of Preferred Shares), would constitute a breach of
the Company’s obligations under the rules or regulations of the American Stock
Exchange as they apply to the Company, or any other principal securities
exchange or market (“Principal Market”) upon which the Common Stock is or
becomes traded (the “Cap Regulations”), the Company shall not be obligated to
issue any such shares of Common Stock to the extent such shares are in excess of
the maximum permissible amount (“Maximum Common Stock Issuance”) under such Cap
Regulations (“Excess Shares”). Each holder of Preferred Shares shall be entitled
to receive the number of Underlying Shares, together with its Warrant Shares
under the Warrant held by it, equal to such holder’s pro rata share of the
Maximum Common Stock Issuance (based upon its aggregate Purchase Price under the
Purchase Agreement). Once a holder has received its total pro rata share upon
conversion

 

13

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of its Preferred Shares and exercise of its Warrants, and if the Company shall
not have complied with its obligations to obtain the stockholder approval
described below by the date set forth below, it shall have the right to compel
the Company to redeem its remaining Preferred Shares and Warrants as set forth
below. If a holder has converted and exercised all of its Preferred Shares and
Warrants, but has not depleted the total number of pro rata shares of the
Maximum Common Stock Issuance allocated to it hereunder, its remaining pro rata
shares shall be reallocated amongst the other holders still holding Preferred
Shares and Warrants on a pro rata basis. If at any point in time and from time
to time (each a “Trigger Date”) the number of shares of Common Stock issued
pursuant to conversion of the Preferred Shares and exercise of the Warrants,
together with the number of shares of Common Stock that would then be issuable
by the Company upon conversion of all the Preferred Shares and exercise of all
the Warrants then outstanding, would exceed the Maximum Common Stock Issuance
but for this Section, then the Company shall, at the Company’s election, either
(A) promptly call a shareholders meeting to obtain shareholder approval for the
issuance of shares of Common Stock hereunder in excess of the Maximum Common
Stock Issuance, which such shareholder approval shall be obtained within 60 days
following the Trigger Date, or (B) purchase from the holders of Preferred Shares
and Warrants on a pro rata basis such number of Preferred Shares and number of
Warrants which cannot be converted or exercised due to such Maximum Common Stock
Issuance limitation at a redemption price equal to (x) for the Preferred Shares,
100% of such Liquidation Value (as defined in the Certificate), and (y) for the
Warrants, the number of Excess Shares underlying the Warrant multiplied by the
positive difference, if any, of the closing sale price on the American Stock
Exchange as of the Trigger Date minus the Warrant Price (as defined in the
Warrants). Such redemption price shall be paid within five (5) trading days
after a Trigger Date if this clause (B) is elected. The Company shall make such
election with three (3) days following the Trigger Date by giving written notice
to all holders of Preferred Shares and Warrants. If the Company fails to timely
make such election, or elects clause (A) but then fails to obtain such
shareholder approval within 60 days following the Trigger Date, then the Company
shall purchase such Preferred Shares and Warrants which cannot be converted or
exercised within five (5) trading days following any such failure. Only shares
of Common Stock acquired pursuant to this Agreement (including Underlying Shares
and Warrant Shares) will be included in determining whether the limitation
contained herein would be exceeded for purposes of this Section 7.1(a).

 

Rule 144. The Company agrees that, for purposes of determining the holding
period under Rule 144 of the 1933 Act for Underlying Shares issued upon
conversion of the Preferred Shares, the holding period of such Underlying Shares
shall be tacked to the holding period of the Preferred Shares. The Company
agrees to make publicly available on a timely basis the information necessary to
enable Rule 144 under the 1933 Act to be available for resale.

 

[Intentionally omitted]

 

14

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Right of the Purchasers to Participate in Future Transactions. For the two-year
period commencing on the Closing Date, The Tail Wind Fund Ltd. and Solomon
Strategic Holdings, Inc. will have a right to participate in any sales of any of
the Company’s securities in a capital raising transaction on the terms and
conditions set forth in this Section 7.3. During such period, the Company shall
give 36 hours advance written notice to such Purchasers prior to any non-public
offer or sale of any of the Company’s equity securities or any securities
convertible into or exchangeable or exercisable for such securities in a capital
raising transaction by providing to such Purchasers a comprehensive term sheet
containing all significant business terms of such a proposed transaction. Such
Purchasers shall have the right (pro rata in accordance with such Purchasers’
purchase price for the Preferred Shares) to participate in such transaction by
purchasing in such transaction an amount of the identical securities issued in
such transaction equal to up to 15% of the aggregate amount of such securities
issued to such Purchasers and such other investors together for the same
consideration and on the same terms and conditions as such third-party sale. If,
subsequent to the Company giving notice to such Purchasers hereunder but prior
to each of such Purchasers exercising its rights hereunder, the terms and
conditions of the third-party sale are changed from that disclosed in the
comprehensive term sheet provided to such Purchaser, the Company shall be
required to provide a new notice to such Purchaser hereunder and such Purchasers
shall have the right to exercise their rights to purchase the identical
securities in such transaction on such changed terms and conditions as provided
hereunder. The rights and obligations of this Section 7.3 shall in no way
diminish the other rights of the Purchasers pursuant to this Section 7.
Notwithstanding anything to the contrary contained herein, the number of shares
of Common Stock that may be acquired by any Purchaser pursuant to any capital
raising transaction as described in this Section 7.3 shall not exceed a number
that, when added to the total number of shares of Common Stock deemed
beneficially owned by such Purchaser (other than by virtue of the ownership of
securities or rights to acquire securities that have limitations on the
Purchaser’s right to convert, exercise or purchase similar to the limitation set
forth herein), together with all shares of Common Stock deemed beneficially
owned by the Purchaser’s “affiliates” (as defined in Rule 144 of the 1933 Act)
that would be aggregated for purposes of determining whether a group under
Section 13(d) of the 1934 Act, exists, would exceed 9.9% of the total issued and
outstanding shares of the Common Stock.

 

Opinion of Counsel. On or prior to the Closing Date, the Company will deliver to
the Purchasers the opinions of legal counsel to the Company substantially in the
form and substance attached hereto as Exhibit D.

 

Reservation of Common Stock issuable upon Conversion of Preferred Shares and
Exercise of Warrants. The Company hereby agrees at all times to reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of providing for the full conversion of Preferred Shares (including
payment of accrued dividends thereon and redemption thereof) and the exercise of
the Warrants, such number of shares of Common Stock as shall from time to time
equal the number of shares sufficient to permit the full conversion of Preferred
Shares (including payment of accrued dividends thereon and redemption thereof)
in accordance with the terms of the Certificate

 

15

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and to permit the full exercise of the Warrants in accordance with the terms of
the Warrants. All calculations pursuant to this paragraph shall be made without
regard to restrictions on beneficial ownership.

 

Reports. For so long as the Purchasers beneficially own the Preferred Shares or
Warrants, the Company will furnish to the Purchasers the following reports, each
of which shall be provided to the Purchasers by air mail or reputable
international courier (within one week of filing with the SEC, in the case of
SEC filings), to the extent not filed on and available at that time via EDGAR:

 

Quarterly Reports. As soon as available and in any event within 45 days after
the end of each fiscal quarter of the Company, the Company’s quarterly report on
Form 10-Q or, in the absence of such report, consolidated balance sheets of the
Company as at the end of such period and the related consolidated statements of
operations, stockholders’ equity and cash flows for such period and for the
portion of the Company’s fiscal year ended on the last day of such quarter, all
in reasonable detail and certified by the Company to have been prepared in
accordance with generally accepted accounting principles, subject to year-end
and audit adjustments.

 

Annual Reports. As soon as available and in any event within 90 days after the
end of each fiscal year of the Company, the Company’s Form 10-K or, in the
absence of a Form 10-K, consolidated balance sheets of the Company as at the end
of such fiscal year and the related consolidated statements of earnings,
stockholders’ equity and cash flows for such year, all in reasonable detail and
accompanied by the report on such consolidated financial statements of an
independent certified public accountant selected by the Company and reasonably
satisfactory to the Purchaser.

 

Securities Filings. As promptly as practicable and in any event within five days
after the same are issued or filed, copies of (i) all notices, proxy statements,
financial statements, reports and documents as the Company shall send or make
available generally to its stockholders or to financial analysts, and (ii) all
periodic and special reports, documents and registration statements (other than
on Form S-8) which the Company furnishes or files, or, to the extent also
delivered to the Company, any officer or director of the Company (in such
person’s capacity as such) furnishes or files with the SEC.

 

Other Information. Such other information relating to the Company as from time
to time may reasonably be requested by any Purchaser provided the Company
produces such information in its ordinary course of business, and further
provided that the Company, solely in its own discretion, determines that such
information is not confidential

 

16

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in nature and disclosure to the Purchaser would not be harmful to the Company or
violate any rules or regulations of the SEC or the American Stock Exchange.

 

Press Releases. Any press release or other publicity concerning this Agreement
or the transactions contemplated by this Agreement shall be submitted to the
Purchasers for comment at least two (2) business days prior to issuance, unless
the release is required to be issued within a shorter period of time by law or
pursuant to the rules of the American Stock Exchange or another national
securities exchange or market. The Company shall issue a press release
concerning the fact and material terms of this Agreement within three business
days of the Closing, provided that in lieu thereof the Company may file a Form
8-K concerning the fact and material terms of this Agreement within five
business days of the Closing (attaching such Agreements as applicable).

 

No Conflicting Agreements. The Company will not take any action, enter into any
agreement or make any commitment that would conflict or interfere in any
material respect with the obligations to the Purchasers under the Agreements.

 

Insurance. For so long as any Purchaser beneficially owns any of the Securities,
the Company shall have in full force and effect (a) insurance reasonably
believed by the Company to be adequate on all assets and activities, covering
property damage and loss of income by fire or other casualty, and (b) insurance
reasonably believed to be adequate protection against all liabilities, claims
and risks against which it is customary for companies similarly situated as the
Company to insure.

 

Compliance with Laws. So long as the Purchasers beneficially own any Securities,
the Company will use reasonable efforts to comply with all applicable laws,
rules, regulations, orders and decrees of all governmental authorities, except
to the extent non-compliance (in one instance or in the aggregate) would not
have a Material Adverse Effect.

 

Listing of Underlying Shares and Related Matters. The Company hereby agrees,
promptly following the Closing of the transactions contemplated by this
Agreement, to take such action to cause the Underlying Shares and the Warrant
Shares to be listed on the American Stock Exchange as promptly as possible but
no later than the effective date of the registration contemplated by the
Registration Rights Agreement. The Company further agrees that if the Company
applies to have its Common Stock or other securities traded on any other
principal stock exchange or market, it will include in such application the
Underlying Shares and Warrant Shares and will take such other action as is
necessary to cause such Common Stock to be so listed. For so long as any
Preferred Shares remain outstanding, the Company will take all action necessary
to continue the listing and trading of its Common Stock on the AMEX or another
Approved Market, and will comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of such exchange or
market, as applicable, to ensure the continued eligibility for trading of the
Underlying Shares and the Warrant Shares thereon.

 

17

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Corporate Existence. So long as any Preferred Shares or Warrants remain
outstanding, the Company shall maintain its corporate existence, except in the
event of a merger, consolidation or sale of all or substantially all of the
Company’s assets so long as the surviving or successor entity in such
transaction (a) assumes the Company’s obligations hereunder and under the
agreements and instruments entered into in connection herewith, regardless of
whether or not the Company would have had a sufficient number of shares of
Common Stock authorized and available for issuance in order to fulfill its
obligations hereunder and effect the conversion (including payment on) and
exercise in full of all Preferred Shares and Warrants outstanding as of the date
of such transaction; (b) has no legal, contractual or other restrictions on its
ability to perform the obligations of the Company hereunder and under the
agreements and instruments entered into in connection herewith; and (c)(i) is a
publicly traded corporation whose common stock and the shares of capital stock
issuable upon conversion and exercise of the Preferred Shares and Warrants are
(or would be upon issuance thereof) listed for trading on an Approved Market or
(ii) if not such a publicly traded corporation, then the buyer agrees that it
will, at the election of the Purchasers, purchase such Purchasers’ Securities at
a price equal to the greater of (a) 120% of the Purchase Price of such
Securities or (b) the fair market value of such Securities on an as-converted
and as-exercised basis based on the closing price immediately preceding such
transaction or the redemption date, whichever is greater.

 

Survival. All representations, warranties, covenants and agreements contained in
this Agreement shall be deemed to be representations, warranties, covenants and
agreements as of the date hereof and shall survive the execution and delivery of
this Agreement and terminate upon expiration of the applicable statute of
limitations.

 

Miscellaneous.

 

Successors and Assigns. This Agreement may not be assigned by the Company
without the prior written consent of the holders of at least 75% of the
outstanding Preferred Shares, which consent may not be unreasonably withheld or
delayed. This Agreement may not be assigned by any Purchaser without the prior
written consent of the Company, which consent may not be unreasonably withheld
or delayed, except that without the prior written consent of the Company, but
after notice duly given, a Purchaser may assign its rights and delegate its
duties hereunder in whole or in part to an Affiliate or to any Person to which
such Purchaser has transferred or assigned all or part of its Preferred Shares
or Warrants in accordance with the terms of the Certificate and Warrants,
provided in each case that such Affiliate, transferee or assignee acknowledges
in writing to the Company that the representations and warranties contained in
Section 5 hereof shall apply to such Affiliate, transferee or assignee. The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective permitted successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.

 

18

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Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

 

Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement.

 

Notices. Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given only
upon delivery to each party to be notified by (i) personal delivery, (ii) telex
or telecopier, upon receipt of confirmation of complete transmittal, or (iii) an
internationally recognized overnight air courier, addressed to the party to be
notified at the address as follows, or at such other address as such party may
designate by ten days’ advance written notice to the other party:

 

If to the Company:

 

HARKEN ENERGY CORPORATION

180 State Street

Suite 200

Southlake, TX 76092

Attention: Elmer A. Johnston, General Counsel

Fax: (281) 504-4110

 

If to the Purchasers, to the addresses set forth on the signature pages hereto.

 

Expenses. The parties hereto shall pay their own costs and expenses in
connection herewith, except that the Company shall pay to Tail Wind Advisory and
Management Ltd. a non-refundable sum equal to $40,000 as and for legal and due
diligence expenses incurred in connection herewith, half of which amount has
been previously paid. The Company shall pay all fees and expenses of any
placement agents or finders in connection with the transactions contemplated by
this Agreement pursuant to a separate agreement between such parties.

 

Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and holders of 75% of the Preferred Shares,
provided, however, that any such amendment or waiver effected in accordance with
this paragraph shall be binding upon each holder of any Securities purchased
under this Agreement at the time outstanding, each future holder of all such
securities, and the Company.

 

Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this

 

19

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Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.

 

Entire Agreement. This Agreement, including the Exhibits and Schedules hereto,
and the Registration Rights Agreement, the Certificate and Warrants and other
documents contemplated hereby constitute the entire agreement among the parties
hereof with respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, both oral and written, between the parties
with respect to the subject matter hereof and thereof.

 

Further Assurances. The parties shall execute and deliver all such further
instruments and documents and take all such other actions as may reasonably be
required to carry out the transactions contemplated hereby and to evidence the
fulfillment of the agreements herein contained.

 

Applicable Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York without regard to principles of
conflicts of laws.

 

Remedies.

 

The Purchasers shall be entitled to specific performance of the Company’s
obligations under the Agreements.

 

The Company on the one hand, and each Purchaser severally and not jointly on the
other hand, shall indemnify the other and hold it harmless from any loss, cost,
expense or fees (including attorneys’ fees and expenses) arising out of any
breach of any representation, warranty, covenant or agreement in any of the
Agreements, or arising out of the enforcement of this Section 9.11.

 

Jurisdiction. The parties hereby agree that all actions or proceedings arising
directly or indirectly from or in connection with this Agreement or the other
Agreements shall be litigated only in the Supreme Court of the State of New York
or the United States District Court for the Southern District of New York
located in New York County, New York. The parties consent to the jurisdiction
and venue of the foregoing courts and consent that any process or notice of
motion or other application to either of said courts or a judge thereof may be
served inside or outside the State of New York or the Southern District of New
York by registered mail, return receipt requested, directed to the party being
served at its address set forth in this Agreement (and service so made shall be
deemed complete three (3) days after the same has been posted as aforesaid) or
by personal service or in such other manner as may be permissible under the
rules of said courts. The Company and the Purchasers hereby waive any right to a
jury trial in connection with any litigation pursuant to this Agreement or the
other Agreements.

 

1.17. Like Treatment of Purchasers and Holders. Neither the Company nor any of
its affiliates shall, directly or indirectly, pay or cause to be paid any

 

20

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consideration (immediate or contingent), whether by way of interest, fee,
payment for the redemption, conversion or exercise of the Securities, or
otherwise, to any Purchaser or holder of Securities, for or as an inducement to,
or in connection with the solicitation of, any consent, waiver or amendment of
any terms or provisions of the Agreements, unless such consideration is required
to be paid to all Purchasers or holders of Securities bound by such consent,
waiver or amendment. The Company shall not, directly or indirectly, redeem any
Securities unless such offer of redemption is made pro rata to all Purchasers
and holders of Securities on identical terms. For clarification purposes, this
provision constitutes a separate right granted to each Purchaser by the Company
and negotiated separately by each Purchaser, and shall not in any way be
construed as the Purchasers acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or otherwise.

 

1.18. Actions of Purchasers. The obligations of each Purchaser hereunder and
under the documents contemplated hereby are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall in any way be
responsible for the performance of the obligations of any other Purchaser under
any such document. Nothing contained herein or in any other document
contemplated hereby, and no action taken by any Purchaser pursuant hereto or
thereto, shall be deemed to constitute any of the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated hereby or
thereby. Each Purchaser confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. Each Purchaser shall be entitled to independently protect
and enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other document contemplated hereby, and it shall
not be necessary for any other Purchaser to be joined as an additional party in
any proceeding for such purpose. Notwithstanding anything herein to the
contrary, the actions and obligations of the Purchasers hereunder shall at all
times be considered several and not joint, and the Purchasers are not, under any
circumstances, agreeing to act jointly with respect to the Securities or any of
their actions or obligations under the Agreements, and shall not constitute a
“group” under the 1934 Act. Each Purchaser acknowledges that no other Purchaser
has acted as agent for such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
Agreements, and it shall not be necessary for any other Purchaser to be joined
as an additional party in any proceeding for such purpose. The Company has
elected to provide all Purchasers with the same terms and Agreements for the
convenience of the Company and not because it was required or requested to do so
by the Purchasers.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK]

 

21

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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.

 

The Company:    HARKEN ENERGY CORPORATION      By:   /s/ Elmer A. Johnston     

Name:

Title:

 

Elmer Johnston

Vice President

 

22

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The Purchasers:

 

THE TAIL WIND FUND LTD.

  By: TAIL WIND ADVISORY AND MANAGEMENT LTD., as investment manager

 

By:   /s/ David Crook

Name:

Title:

 

David Crook

CEO

 

Purchase Price:

   $ 4,600,000

Number of Preferred Shares:

     46,000

Number of Warrants:

     4,035,088

Conversion Price of Preferred Shares:

   $ 0.60

 

Resident:

   BVI

Address for Notices:

   The Tail Wind Fund Ltd.      c/o Tail Wind Advisory and Management Ltd.     
Attn: David Crook      1st Floor, No. 1 Regent Street      London, SW1Y 4NS UK  
   Telephone: 44-207-468-7660      Facsimile: 44-207-468-7657      with a copy
to:      Peter J. Weisman, P.C.      335 Madison Avenue, Suite 1702      New
York, NY 10017      Telephone: 212-418-4972      Facsimile: 212-317-8855

 

23

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SOLOMON STRATEGIC HOLDINGS, INC. By:   /s/ Andrew P. MacKellar

Name:

Title:

 

Andrew P. MacKellar

Director

 

Purchase Price:

   $ 400,000

Number of Preferred Shares:

     4,000

Number of Warrants:

     350,877

Conversion Price of Preferred Shares:

   $ 0.60

 

Resident:

   BVI

Address for Notices:

   Solomon Strategic Holdings, Inc.      c/o Andrew P. MacKellar (Director)     
Greenlands      The Red Gap      Castletown      IM9 1HB      British Isles     
Telephone: +011 (44) 1624 824171      Facsimile: +011 (44) 1624 824191      with
a copy to:      Peter J. Weisman, P.C.      335 Madison Avenue, Suite 1702     
New York, NY 10017      Telephone: 212-418-4972      Facsimile: 212-317-8855

 

24

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Schedule 4.3

 

Capitalization of Harken Energy Corporation

 

Total Authorized Shares of Common Stock

        325,000,000

TOTAL SHARES ISSUED

        206,368,806          

--------------------------------------------------------------------------------

Authorized but Unissued Shares

        118,631,194

Treasury Stock

        605,700          

--------------------------------------------------------------------------------

Unissued Shares plus Treasury Stock

        119,236,894

Shares Reserved for Future Issuance:

         

5.0% Euronotes Due 2009 Conversion ($5,245,000 /$0.52)

   10,086,538     

4.25 % Euronote Conversion ($4,166,666/$1.25 per share)

   3,333,333     

Preferred Series G1 (295,372 x $100/$12.50 per share)

   2,362,976     

Preferred Series G2 (27,150 x $100/$3.00 per share)

   905,000     

Preferred Series G4 (77,517 x $100/$2.00 per share)

   3,875,850     

Elliott Warrants

   1,750,000     

Preferred Series J (50,000 x $100/$0.87 per share)

   5,910,050     

Preferred Series L (50,000x$100.00/$0.72 per share)

   6,944,444     

Preferred Series L Warrants

   3,676,471     

Preferred Series J Warrants

   2,873,563     

Total Shares Reserved for Future Issuance

        41,718,225          

--------------------------------------------------------------------------------

Shares Available for Issuance

        77,518,669          

--------------------------------------------------------------------------------

Total Shares Issued

        206,368,806

Treasury Stock

        605,700          

--------------------------------------------------------------------------------

Total Shares Outstanding

        205,763,106

Shares Reserved for Future Issuance

        41,718,225          

--------------------------------------------------------------------------------

Fully Diluted Shares

        247,481,331          

--------------------------------------------------------------------------------

 

25