<PAGE>   1
                                                                 EXHIBIT 10.16




                        DEVELOPMENT  FINANCE  AGREEMENT




              ____________________________________________________





                          Harken  Energy  Corporation

                                      and

                           Harken Capital Corporation




              ____________________________________________________





                               December 24, 1997
<PAGE>   2
                              TABLE OF CONTENTS
                                                                            Page

<TABLE>
<S>                                                                                                          <C>
ARTICLE I -- Definitions and References . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
         Section 1.1.     Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
         Section 1.2.     References and Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5

ARTICLE II -- Advancement of Capital  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  6
         Section 2.1.     Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  6
         Section 2.2.     Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  6

ARTICLE III -- Net Profits Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
         Section 3.1.     Net Profits Interest  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
         Section 3.2.     Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
         Section 3.3.     Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
         Section 3.4.     Debits  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9
         Section 3.5.     Additional Account Matters  . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
         Section 3.6.     Accounting  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
         Section 3.7.     Payments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
         Section 3.8.     Overpayments and Underpayments  . . . . . . . . . . . . . . . . . . . . . . . . .  13
         Section 3.9.     Prudent Operator Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
         Section 3.10.    Sales of Subject Hydrocarbons . . . . . . . . . . . . . . . . . . . . . . . . . .  13
         Section 3.11.    Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
         Section 3.12.    Contracts with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
         Section 3.13.    Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
         Section 3.14.    Abandonments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
         Section 3.15.    Pooling and Unitization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
         Section 3.16.    Non-consent Operations  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
         Section 3.17.    No Personal Liability; Indemnification  . . . . . . . . . . . . . . . . . . . . .  16
         Section 3.18.    Access to Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

ARTICLE IV -- Owner Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . .  17
         Section 4.1.     Organization and Corporate Authority  . . . . . . . . . . . . . . . . . . . . . .  17
         Section 4.2.     Qualification to do Business  . . . . . . . . . . . . . . . . . . . . . . . . . .  17
         Section 4.3.     Finders= Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
         Section 4.4.     Authority of Owner  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
         Section 4.5.     Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
         Section 4.6.     Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
         Section 4.7.     Reports and Financial Statements of Owner . . . . . . . . . . . . . . . . . . . .  18
         Section 4.8.     Disclosure  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
         Section 4.9.     Owner=s Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
         Section 4.10.    Association Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
         Section 4.11.    Ownership of Harken Colombia  . . . . . . . . . . . . . . . . . . . . . . . . . .  19
</TABLE>





                                      -ii-
<PAGE>   3
<TABLE>
<S>                                                                                                          <C>
         Section 4.12.    Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
         Section 4.13.    No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
         Section 4.14.    Litigation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
         Section 4.15.    Compliance with Laws  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
         Section 4.16.    Harken Colombia Organization and Corporate Authority  . . . . . . . . . . . . . .  20
         Section 4.17.    Harken Colombia Qualification to do Business  . . . . . . . . . . . . . . . . . .  20
         Section 4.18.    Harken Colombia Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . .  21
         Section 4.19.    Harken Colombia Governmental Consents . . . . . . . . . . . . . . . . . . . . . .  21
         Section 4.20.    Harken Colombia Disclosure  . . . . . . . . . . . . . . . . . . . . . . . . . . .  21

ARTICLE V -- Investor Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . .  22
         Section 5.1.     Organization and Corporate Authority  . . . . . . . . . . . . . . . . . . . . . .  22
         Section 5.2.     Finders= Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
         Section 5.3.     Authority of Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
         Section 5.4.     Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
         Section 5.5.     Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
         Section 5.6.     Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
         Section 5.7.     Disclosure of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
         Section 5.8.     Accredited Investor and Experience  . . . . . . . . . . . . . . . . . . . . . . .  23
         Section 5.9.     Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
         Section 5.10.    Legend  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23

ARTICLE VI -- Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
         Section 6.1.     Assignment by Harken Colombia . . . . . . . . . . . . . . . . . . . . . . . . . .  24
         Section 6.2.     Assignment by Investor  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
         Section 6.3.     Commitment Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
         Section 6.4.     Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
         Section 6.5.     Public Announcements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
         Section 6.6.     Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
         Section 6.7.     Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
         Section 6.8.     Waivers and Amendments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  26
         Section 6.9.     Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
         Section 6.10.    Binding Effect; No Assignment; No Third Party Benefit . . . . . . . . . . . . . .  27
         Section 6.11.    Entire Agreement  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
         Section 6.12.    Severability  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
         Section 6.13.    United States Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
         Section 6.14.    Survival of Representations and Warranties  . . . . . . . . . . . . . . . . . . .  27
         Section 6.15.    Counterparts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
         Section 6.16.    Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
         Section 6.17.    Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
         Section 6.18.    Guaranty of Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
         Section 6.19.    No Partnership  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
         Section 6.20.    Expenses  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
</TABLE>





                                      -iii-
<PAGE>   4

EXHIBITS

<TABLE>
         <S>              <C>
         Exhibit A-1      Bocachico Block
         Exhibit A-2      Cambulos Block
</TABLE>





                                      -iv-
<PAGE>   5

                         DEVELOPMENT FINANCE AGREEMENT


         THIS DEVELOPMENT FINANCE AGREEMENT (this "Agreement") is made as of
the 24th day of December, 1997, by and between HARKEN ENERGY CORPORATION, a
Delaware corporation (herein called "Owner"), and HARKEN CAPITAL CORPORATION, a
Delaware corporation (herein called "Investor").  In consideration of the
mutual covenants and agreements contained herein, the parties hereto hereby
agree as follows:


                                   ARTICLE I

                           Definitions and References

         Section 1.1.       Defined Terms.  As used in this Agreement, each of
the following terms has the meaning given it in this Section 1.1 or in the
sections or subsections referred to below:

         "Account" shall have the meaning assigned to it in Section 3.2.

         "Advance" shall have the meaning assigned to it in Section 2.1.

         "Affiliate" shall mean any person directly or indirectly controlling,
controlled by or under common control with Owner and/or Harken Colombia, with
the concept of control in such context meaning the possession of the power to
direct or cause the direction of the management and policies of another,
through the ownership of voting securities, by contract or otherwise, it being
understood and agreed for the purposes of this Agreement that Owner and Harken
Colombia are Affiliates of one another.

         "Agreed Rate" shall mean a rate of interest per annum which is equal
to the lesser of (a) a rate which is two percent (2%) above the prime rate of
interest of Wells Fargo and Company, as announced or published by such bank
from time to time or a similar rate if a prime rate is not announced or
published by such bank (adjusted from time to time to reflect any changes in
such rate determined hereunder), or (b) the maximum rate from time to time
permitted by applicable law.

         "Association Contract" shall mean (a) with respect to the Bocachico
Prospect, the Bocachico Association Contract, and (b) with respect to the
Cambulos A Prospect and the Cambulos B Prospect, the Cambulos Association
Contract.

         "Bocachico Association Contract" shall mean that certain Bocachico
Association Contract executed January 6, 1994, between Ecopetrol and Harken
Colombia, together with the operating agreement attached thereto and all
modifications, amendments and/or





<PAGE>   6
supplements heretofore or hereafter made with respect to such Association
Contract or operating agreement.

         "Bocachico Prospect" shall mean the Initial Bocachico Prospect Area;
provided, however, that, upon establishment of a Commercial Field, as described
below, resulting from a productive Initial Well drilled on the Bocachico
Prospect under the terms of this Agreement, the term "Bocachico Prospect" shall
mean and include, effective as of the Effective Date on a retroactive basis,
that portion of the lands covered by the Bocachico Association Contract which
are included within the Commercial Field surrounding the Initial Bocachico Well
or any other wells drilled by Owner or its Affiliates to explore for or develop
hydrocarbons that are part of a common source of supply.

         "Business Day" shall mean any day other than a Saturday, a Sunday or a
day in which banks in the State of Texas are closed.

         "Cambulos A Prospect" shall mean the Initial Cambulos A Prospect Area;
provided, however, that, upon establishment of a Commercial Field, as described
below, resulting from a productive Initial Well drilled on the Cambulos A
Prospect under the terms of this Agreement, the term "Cambulos A Prospect"
shall mean and include, effective as of the Effective Date on a retroactive
basis, that portion of the lands covered by the Cambulos Association Contract
which are included within the Commercial Field surrounding the Initial Cambulos
A Well or any other wells drilled by Owner or its Affiliates to explore for or
develop hydrocarbons that are part of a common source of supply.

         "Cambulos Association Contract" shall mean that certain Cambulos
Association Contract effective November 17, 1995, between Ecopetrol and Harken
Colombia, together with the operating agreement attached thereto and all
modifications, amendments and/or supplements heretofore or hereafter made with
respect to such Association Contract or operating agreement.

         "Cambulos B Prospect" shall mean the Initial Cambulos B Prospect Area;
provided, however, that, upon establishment of a Commercial Field, as described
below, resulting from a productive Initial Well drilled on the Cambulos B
Prospect under the terms of this Agreement, the term "Cambulos B Prospect"
shall mean and include, effective as of the Effective Date on a retroactive
basis, that portion of the lands covered by the Cambulos Association Contract
which are included within the Commercial Field surrounding the Initial Cambulos
B Well or any other wells drilled by Owner or its Affiliates to explore for or
develop hydrocarbons that are part of a common source of supply.

         "Commercial Field" shall mean a commercial field designated or
accepted by Ecopetrol, or, in the absence of such a designation or acceptance
by Ecopetrol, by Harken Colombia or its Affiliates, pursuant to an Association
Contract.  A Commercial Field shall be deemed established for purposes of this
Agreement upon such designation or acceptance.





                                      -2-
<PAGE>   7
         "Commitment" shall have the meaning assigned to it in Section 2.1.

         "Common Shares" shall mean shares of the Common Stock, par value $.01
per share, of Owner.

         "Designated Percentage" shall mean 1.4%.

         "Ecopetrol" shall mean Empresa Colombiana de Petroleos, an industrial
and commercial company owned by the Republic of Colombia.

         "Effective Date" shall mean the date of this Agreement.

         "Governmental Authority" shall mean (a) the United States of America
or any state within the United States of America, (b) Colombia or any political
subdivision of Colombia, (c) any court or any governmental department,
commission, board, bureau, agency or other instrumentality of the United States
of America or of any state within the United States of America, and (d) any
court or any governmental department, commission, board, bureau, agency or
other instrumentality of Colombia or of any political subdivision of Colombia.

         "Gross Proceeds" shall have the meaning assigned to it in Section 3.3.

         "Harken Colombia" shall mean Harken de Colombia, Ltd., a Cayman
Islands corporation and wholly owned subsidiary of Owner, and/or, when
appropriate, its branch established in Santa Fe de Bogota, D.C., Colombia, and
its successors and permitted assigns.

         "Initial Bocachico Prospect Area" shall have the meaning assigned to
it in Section 2.2.

         "Initial Bocachico Well" shall mean the first well drilled by Owner or
its Affiliates on the Bocachico Prospect.

         "Initial Cambulos A Prospect Area" shall have the meaning assigned to
it in Section 2.2.

         "Initial Cambulos A Well" shall mean the first well drilled by Owner
or its Affiliates on the Cambulos A Prospect.

         "Initial Cambulos B Prospect Area" shall have the meaning assigned to
it in Section 2.2.

         "Initial Cambulos B Well" shall mean the first well drilled by Owner
or its Affiliates on the Cambulos B Prospect.

         "Initial Wells" shall mean the Initial Bocachico Well, the Initial
Cambulos A Well and the Initial Cambulos B Well.





                                      -3-
<PAGE>   8
         "Investor" shall mean Harken Capital Corporation, a Delaware
corporation, and its successors and permitted assigns.

         "Law" shall mean any applicable statute, law, ordinance, regulation,
rule, ruling, order, restriction, requirement, writ, injunction, decree or
other official act of or by any Governmental Authority.

         "Non-Affiliate" shall mean, with respect to Owner and Harken Colombia,
any person who is not an Affiliate of Owner or Harken Colombia.

         "Net Profits Interest" shall have the meaning assigned to it in
Section 3.1.

         "Owner" shall mean Harken Energy Corporation, a Delaware corporation,
and its successors and permitted assigns.

         "Owner's SEC Filings" shall have the meaning assigned to it in Section
4.7.

         A "person" shall mean an individual, an estate, a corporation, a
partnership, a joint venture, a limited liability company, an association, a
joint stock company, a government or any department or agency of a government,
a trust and/or any other entity.

         "Processing" shall mean the manufacture, fractionation, refining or
other treating or transportation of Subject Hydrocarbons prior to their sale or
disposition, and "Processed" shall have the meaning correlative to the
foregoing.

         "Production Sales Contracts" shall mean all contracts, agreements and
arrangements for the sale or disposition of Subject Hydrocarbons that may be
produced from or attributable to Subject Interests, whether presently existing
or hereafter created.

         The Bocachico Prospect, the Cambulos A Prospect and the Cambulos B
Prospect are herein collectively called the "Prospects" and sometimes
individually called a "Prospect".

         "SEC" shall mean the Securities and Exchange Commission.

         "Securities Act" shall mean the Securities Act of 1933, as amended.

         "Subject Hydrocarbons" shall mean (except to the extent otherwise
expressly provided in this Agreement), with respect to each Prospect, all oil,
gas and other minerals in and under and that may be produced, from and after
the Effective Date, from the lands and depths covered by and/or included in the
Subject Interests relating to such Prospect.  There shall not be included in
the Subject Hydrocarbons any oil, gas or other minerals (a) attributable to
royalties or other similar obligations deducted or paid in kind to or for the
benefit of third parties pursuant to the related Association Contract or
pursuant to any applicable Law, (b)





                                      -4-
<PAGE>   9
deducted, paid in kind or otherwise taken out of Harken Colombia's share of
such oil, gas or other minerals and delivered to another person as
reimbursement to such person for oil, gas or other minerals of such other
person (i) which were previously taken by Harken Colombia relating to the
Prospect and (ii) the Gross Proceeds of which were credited to the related
Account or otherwise accrued to the benefit of Investor in accordance with the
provisions of Section 3.3, or (c) attributable to the interest of Ecopetrol as
provided for under the terms of the related Association Contract.

         "Subject Interests" shall mean (a) with respect to the Bocachico
Prospect, the interest of Harken Colombia and its successors and assigns in the
Bocachico Association Contract to the extent such interest covers and is
attributable to the Bocachico Prospect, (b) with respect to the Cambulos A
Prospect, the interest of Harken Colombia and its successors and assigns in the
Cambulos Association Contract to the extent such interest covers and is
attributable to the Cambulos A Prospect, and (c) with respect to the Cambulos B
Prospect, the interest of Harken Colombia and its successors and assigns in the
Cambulos Association Contract to the extent such interest covers and is
attributable to the Cambulos B Prospect.  As provided in an Association
Contract, the areal extent of the related Prospect under the Association
Contract may be reduced and/or the percentage interest of Harken Colombia and
its successors and assigns in the oil, gas and mineral production thereunder
may be reduced, and in each such case the "Subject Interests" relating to such
Prospect shall be reduced to the same extent as the areal extent of such
Prospect under the Association Contract and/or the interest of Harken Colombia
and its successors and assigns thereunder is so reduced.  No reduction shall
occur, however, in the Subject Interests as a result of any sale, exchange,
transfer or other disposition of all or any portion of the Subject Interests or
the related Association Contract by Harken Colombia, and in such event all
credits and debits to the Prospect's Account under Article III shall be made as
if no such sale, exchange, transfer or other disposition had occurred and
Harken Colombia was still the owner of all of the Association Contract and the
Subject Interests.

         Section 1.2.       References and Titles.  All references in this
Agreement to articles, sections, subsections and other subdivisions refer to
the articles, sections, subsections and other subdivisions of this Agreement
unless expressly provided otherwise.  Titles appearing at the beginning of any
subdivisions are for convenience only and do not constitute any part of such
subdivisions and shall be disregarded in construing the language contained in
such subdivisions.  The words "this Agreement", "this instrument", "herein",
"hereof", "hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited.  The phrases "this Section" and "this subsection" and similar phrases
refer only to the sections or subsections hereof in which such phrases occur.
Pronouns in masculine, feminine and neuter genders shall be construed to
include any other gender, and words in the singular form shall be construed to
include the plural and vice versa, unless the context otherwise requires.





                                      -5-
<PAGE>   10
                                   ARTICLE II

                             Advancement of Capital

         Section 2.1.       Advance.  Investor unconditionally and irrevocably
agrees and commits (herein collectively called the "Commitment") to advance to
Owner, on the Business Day next following the Effective Date, the amount of
Seven Million Dollars ($7,000,000) (herein called the "Advance").  The Advance
shall be made to Owner by wire transfer of the full amount of the Advance in
immediately available funds to a bank account designated by Owner.  The
Commitment is not in the nature of a loan to any party or a direct ownership
interest in Harken Colombia, an Association Contract or any Subject Interests.
Instead, the Commitment and the Advance thereof shall constitute consideration
for the right to receive payments measured by the Accounts provided for in
Article III and the other rights and benefits provided by this Agreement.

         Section 2.2.       Use of Proceeds.  Owner shall use all funds from
the Advance to finance (a) geological, geophysical and engineering operations
and studies of each Prospect, (b) the drilling, completing and equipping or
abandonment of one well and related facilities on each Prospect and (c) other
related exploitation of the Prospects, in each case solely in respect of the
Subject Interests.  Prior to drilling any wells pursuant to this Agreement,
Owner shall fix and determine, and promptly after such determination shall
advise Investor in writing of, (a) the initial areal extent of the lands
covered by the Bocachico Prospect, which lands shall be located within the
boundaries of the lands covered by the Bocachico Association Contract (the
"Initial Bocachico Prospect Area"), (b) the initial areal extent of the lands
covered by the Cambulos A Prospect, which lands shall be located within the
boundaries of the lands covered by the Cambulos Association Contract (the
"Initial Cambulos A Prospect Area"), and (c) the initial areal extent of the
lands covered by the Cambulos B Prospect, which lands shall be located within
the boundaries of the lands covered by the Cambulos Association Contract (the
"Initial Cambulos B Prospect Area"); provided, however, that the Cambulos A
Prospect and the Cambulos B Prospect shall be separate exploratory prospects
and shall not overlap.  Owner hereby represents, warrants and covenants to
Investor that Owner will drill one well on each Prospect within three years of
the Effective Date.  Each Initial Well shall be drilled on a turnkey basis.
Prior to drilling any Initial Well, Owner shall deliver to Investor for its
information a copy of Owner's internal authority for expenditure (a.f.e.) for
such Initial Well.  Owner shall give prompt written notice to Investor of the
commencement of drilling and the completing and equipping or abandonment, as
the case may be, of each Initial Well.  Owner shall also furnish to Investor
such other public information regarding each Initial Well and the progress of
drilling thereof as Investor may from time to time reasonably request in
accordance with the notice provisions of Section 6.7.





                                      -6-
<PAGE>   11
                                  ARTICLE III

                              Net Profits Interest

         Section 3.1.       Net Profits Interest.  In consideration for the
payment by Investor to Owner of the Advance, Investor shall have the rights
provided for in this Article III and elsewhere in this Agreement with respect
to the Accounts, including without limitation the rights to receive payments
from Owner measured by each Account pursuant to Section 3.7 (all of such rights
are herein collectively called the "Net Profits Interest").  The Net Profits
Interest is intended to provide to Investor substantially the same economic
benefit as if Investor was the owner of a direct net profits interest in each
Association Contract to the extent it relates to the Designated Percentage of
the related Subject Interests and on the terms otherwise provided for herein;
provided, however, that no rights or interest of any nature whatsoever in an
Association Contract, any Subject Interests or Harken Colombia are intended to
be, or are hereby, assigned or conveyed to Investor, it being understood and
agreed that the Net Profits Interest is solely a contractual obligation of
Owner as expressed in this Agreement.

         Section 3.2.       Establishment.  Owner shall establish and maintain
a separate bookkeeping account for each Prospect (herein called an "Account")
in accordance with sound, accurate and comprehensive accounting practices and
consistent with the various provisions of this Agreement and at all times shall
keep true and correct books and records with respect thereto.

         Section 3.3.       Credits.  Except as otherwise provided herein, with
respect to each sale or other disposition of Subject Hydrocarbons attributable
to a Prospect, the Account for such Prospect shall be credited with the gross
proceeds from the sale of such Subject Hydrocarbons.  The amount of gross
proceeds (herein called "Gross Proceeds") to be credited to an Account with
respect to any sale or disposition of Subject Hydrocarbons shall be subject to
the following:

                   (a)      Gross Proceeds shall include all consideration
         received, directly or indirectly, by Harken Colombia or any Affiliate
         for sales or other dispositions of (i) Subject Hydrocarbons, or (ii)
         if any Subject Hydrocarbons are Processed by or for the benefit of
         Harken Colombia or any Affiliate before sale or disposition, the
         products of such Subject Hydrocarbons after such Processing;

                   (b)      If any proceeds are withheld from Harken Colombia
         or an Affiliate by a Non-Affiliate for any reason (other than at the
         request of Harken Colombia or any Affiliate or due to Harken
         Colombia's or an Affiliate's negligence or willful misconduct), such
         proceeds shall not be considered to be Gross Proceeds until such
         proceeds are actually received by Harken Colombia or an Affiliate;
         provided, however, that Gross Proceeds shall include any interest,
         penalty or other amount that is derived from the sale of Subject
         Hydrocarbons or the proceeds thereof when and if received;





                                      -7-
<PAGE>   12
                   (c)      Gross Proceeds shall not include any amounts for
         Subject Hydrocarbons unavoidably lost in production or used by Harken
         Colombia or any Affiliate in conformity with good oil field practices
         for drilling and production operations (including without limitation
         gas injection, fuel, secondary or tertiary recovery, pressure
         maintenance, repressuring or recycling, Processing and transportation)
         conducted solely for the purpose of producing Subject Hydrocarbons
         from the related Subject Interests, but only so long as such Subject
         Hydrocarbons are so used;

                   (d)      In the event Subject Hydrocarbons are used by
         Harken Colombia or any Affiliate outside of the related Subject
         Interests and for purposes not primarily associated with, or primarily
         for the benefit of, the related Subject Interests or the production,
         Processing or marketing of Subject Hydrocarbons, Gross Proceeds shall
         include the then current market value at the wellhead of such Subject
         Hydrocarbons;

                   (e)      Gross Proceeds shall include all proceeds (or, if
         the consideration received is other than cash, the then current market
         value of such non-cash consideration) attributable to Subject
         Interests which are received by Harken Colombia or any Affiliate from
         the sale, after the Effective Date, of any materials, supplies,
         equipment and other personal property or fixtures, or any part thereof
         or interest therein, located on or used in connection with the Subject
         Interests or any Subject Hydrocarbons;

                   (f)      Gross Proceeds shall include all proceeds
         attributable to Subject Interests of all insurance received by Harken
         Colombia or any Affiliate the cost of which is charged to the Account,
         directly or indirectly;

                   (g)      Gross Proceeds shall include all proceeds
         attributable to Subject Interests of all judgments and claims received
         by Harken Colombia or any Affiliate for any loss or damage which
         occurs after the Effective Date with respect to Harken Colombia's or
         any Affiliate's interest in the Subject Interests, any materials,
         supplies, equipment or other personal property or fixtures located on
         or used in connection with any of the Subject Interests, or any
         Subject Hydrocarbons;

                   (h)      Gross Proceeds shall include all payments,
         including advance payments, under take-or-pay and similar provisions
         of Production Sales Contracts;

                   (i)      Gross Proceeds shall include any amounts received
         by Harken Colombia or any Affiliate from production of Subject
         Hydrocarbons at levels greater than Harken Colombia's interest in the
         Subject Interests and shall include any payments received by Harken
         Colombia from joint interest owners as settlement for production of
         Subject Hydrocarbons at levels less than Harken Colombia's interest in
         the Subject Interests or any Subject Hydrocarbons; and





                                      -8-
<PAGE>   13
                   (j)      Gross Proceeds shall include all other monies and
         things of value which are received by Harken Colombia or any Affiliate
         by virtue of the ownership after the Effective Date of the Subject
         Interests and/or any materials, supplies, equipment and other personal
         property and fixtures located on or used in connection with the
         Subject Interests or any Subject Hydrocarbons the cost of which was
         charged against the Account;

provided that this Section 3.3 shall not operate to provide any credits on
account of (i) any amounts paid by third parties (including Ecopetrol) to
Harken Colombia as operator under the applicable Association Contract or
operating agreement now or hereafter in force covering any of the Subject
Interests to reimburse or compensate Harken Colombia as operator for costs
incurred or services performed for the account or benefit of such third
parties, (ii) any amounts received by Harken Colombia upon any sale or other
disposition in accordance with Section 6.1 of any portion of the applicable
Association Contract or Subject Interests, or (iii) any amounts received by
Harken Colombia as reimbursement by Ecopetrol of Direct Exploration Costs
provided for under the applicable Association Contract.

         Section 3.4.       Debits.  Except as otherwise provided herein, each
Account shall be debited with the following:

                   (a)      All direct costs (and those indirect costs
         expressly permitted in subsection (x) below) which are attributable
         solely to the related Subject Interests (i.e., the Subject Interests
         relating to the Prospect for which the Account was established) after
         the Effective Date for exploring, developing, operating, producing,
         reworking, maintaining and restoring the related Subject Interests,
         including without limitation any direct costs (and those indirect
         costs expressly permitted in subsection (x) below) after the Effective
         Date for (i) geological and geophysical operations and studies (and
         related computer processing and modeling) with respect to the related
         Subject Interests and drilling, completing, testing, equipping,
         plugging back, reworking, recompleting and plugging and abandoning any
         wells on the related Subject Interests, (ii) constructing, maintaining
         and operating any gathering facilities, tanks and other production,
         delivery and transportation facilities on or for use in connection
         with the related Subject Interests, (iii) Processing any Subject
         Hydrocarbons attributable to the Prospect for which the Account was
         established and acquiring, constructing, operating and maintaining any
         facility, plant, equipment or pipeline for Processing any such Subject
         Hydrocarbons, (iv) secondary recovery, pressure maintenance,
         repressuring, recycling and other operations conducted for the purpose
         of enhancing production of such Subject Hydrocarbons, (v) wages,
         salaries, fringe benefits and expenses of officers, employees and
         contract personnel, consultants and professionals necessary or
         appropriate for operating, producing and maintaining the related
         Subject Interests, (vi) local offices, camps, warehouses, housing and
         other facilities paid for by Harken Colombia, relocation of employees
         and their families, travel, telephone, training of Colombian
         personnel, rental and use or damage to the real and personal property
         of others,





                                      -9-
<PAGE>   14
         community relations, protection, peaceful operations and similar
         matters, and otherwise doing business in Colombia, (vii) insurance,
         (viii) payments made in cash as compensation for or in settlement of
         any Subject Hydrocarbons taken by Harken Colombia at levels greater
         than Harken Colombia's interest in the related Subject Interests, (ix)
         royalties required to be paid pursuant to the applicable Association
         Contract or any applicable Law and other charges and payments required
         under the applicable Association Contract and (x) general,
         administrative and overhead expenses incurred by Harken Colombia which
         are necessary or appropriate to support the activities described in
         this subsection and fairly allocated to the related Subject Interests;
         provided, however, that the debits made to the Account pursuant to
         this subsection with respect to any Subject Interest shall be made in
         accordance with customary industry practices and applicable accounting
         standards;

                   (b)      All Colombian taxes and similar charges incurred by
         Harken Colombia with respect to the ownership of the related Subject
         Interests for periods after the Effective Date, including without
         limitation (i) Colombian income, transfer, franchise, occupation,
         sales and use, value-added and like taxes based on or relating to the
         related Subject Interests, the sale or production of the Subject
         Hydrocarbons attributable to the Prospect for which the Account was
         established, or the proceeds, value or income therefrom, (ii)
         Colombian production, severance, excise and other taxes assessed
         against, and/or measured by, the production of (or the proceeds or
         value of production of) such Subject Hydrocarbons, and (iii) Colombian
         ad valorem and other taxes assessed against or attributable to the
         related Subject Interests or any Processing or other equipment or
         property located on or related to the related Subject Interests;
         provided, however, that if any such taxes relate to the related
         Subject Interests and to other property owned by Harken Colombia or to
         such Subject Hydrocarbons and to other production of Harken Colombia,
         such taxes shall be allocated to the related Subject Interests or such
         Subject Hydrocarbons and debited hereunder on a proportionate or other
         equitable basis in accordance with applicable accounting, tax and
         industry standards;

                   (c)      Amounts attributable to currency conversions,
         exchange control obligations and similar costs and losses with respect
         to currencies used to pay expenses charged to the Account, currencies
         credited to the Account or currencies paid by Harken Colombia to Owner
         for the purpose (directly, indirectly or accrued) of making payments
         to Investor pursuant to Section 3.7 (excluding in each case any costs
         for currency hedges, swaps and similar instruments); and any such
         amounts shall be calculated or determined in a manner consistent with
         the treatment of such amounts on the books of Owner for financial
         reporting to governmental entities;

                   (d)      All interest payments on any indebtedness of Harken
         Colombia or any Affiliate incurred after the Effective Date for the
         benefit of the Subject Interests (provided that if any such
         indebtedness shall be incurred for the benefit of other





                                      -10-
<PAGE>   15
         properties owned by Harken Colombia besides the Subject Interests,
         then an allocation of such interest  shall be made to the Subject
         Interests based upon the portion of the indebtedness that was utilized
         for the benefit of the Subject Interests); and

                   (e)      Except as otherwise provided elsewhere in this
         Agreement, all other reasonable, direct expenditures attributable to
         the related Subject Interests paid or incurred by Harken Colombia
         after the Effective Date with respect to the related Subject
         Interests;

provided that this Section 3.4 shall not operate to permit any debits (i) by
duplication or on account of any amount which has also been used to reduce the
amount of the Subject Hydrocarbons, Gross Proceeds and/or payments to Investor
pursuant to Section 3.7 or has otherwise not been included therein (including,
by way of example and without limitation, royalties, production, severance,
excise and other taxes and any other amounts deducted, withheld or paid by any
other person), (ii) on account of any expenses and any penalties, interest or
other similar charges which result from the failure of Harken Colombia to
properly discharge all costs and expenses (including taxes) of developing,
operating and maintaining the related Subject Interests and (iii) excluded
pursuant to Section 3.5.

         Section 3.5.       Additional Account Matters.

         (a)       Notwithstanding the provisions of Section 3.4 (or any other
provision of this Agreement) which may appear to the contrary, with respect to
the  Accounts taken as a whole:

                   (i)      costs and expenses equaling  the aggregate amount
         of the Advance paid to Owner which would otherwise be charged or
         debited to the Accounts under Section 3.4 shall not be charged or
         debited to the Accounts and shall be borne solely by Owner and Harken
         Colombia (i.e., the first $7,000,000 of costs and expenses that would
         otherwise be charged or debited to the Accounts under Section 3.4
         shall not be so charged or debited and shall be borne solely by Owner
         and Harken Colombia); and

                   (ii)     in no event shall any costs and expenses of
         drilling and completing the Initial Wells, constructing and completing
         associated facilities and hooking the Initial Wells up to a pipeline
         or pipelines, so as to make the Initial Wells capable of production,
         in excess of an aggregate of $7,000,000 be charged or debited to the
         Accounts, it being agreed and understood by Owner that any such costs
         and expenses in excess of an aggregate of $7,000,000 shall be borne
         solely by Owner and Harken Colombia.

         (b)       Upon the reconfiguration of the areal extent of a Prospect
to correspond to a Commercial Field established under the related Association
Contract, as provided in the respective definitions of the Prospects in Section
1.1, the net profits realized from the related Subject Interests shall be
recomputed, retroactive to the Effective Date, to take into account





                                      -11-
<PAGE>   16
and fully reflect the reconfiguration of the Prospect as if such Prospect had
always included the Commercial Field, and an appropriate accounting and payment
shall be made to Investor with respect to the recomputed net profits in the
Prospect's Account.

         Section 3.6.       Accounting.  All debits to an Account which are
attributable to costs and expenses paid by Harken Colombia during a calendar
quarter up to and including the last day of such calendar quarter shall be
debited against the Account as of the last day of such calendar quarter;
provided that any such debits which do not (and will not) result from payments
to third parties or to Harken Colombia shall be debited against the Account as
of the last day of the calendar quarter in which they arise.  After such debits
have been so made for a given calendar quarter, all credits to the Account
which are actually received by Harken Colombia during a calendar quarter up to
and including the last day of such calendar quarter shall be credited to the
Account as of the last day of such calendar quarter; provided that any such
credits which do not (and will not) result from credits given by or payments
from third parties shall be credited to the Account as of the last day of the
calendar quarter in which they arise.  For each Account, the total net profits
realized from the Subject Interests relating to the Account (or the total net
losses, as the case may be) shall be determined after the applications and
calculations provided for above have been made by Owner.  Subject to the
provisions of Section 3.7, Investor shall participate in the Designated
Percentage of the net profits derived from the Subject Interests relating to
the Account, as provided in this Agreement, only after and while all debits
properly debited against the Account shall have been offset by credits to the
Account and a credit balance shall exist in the Account.

         Section 3.7.       Payments.  On or before 60 days after the end of
each calendar quarter, Owner shall furnish to Investor detailed statement(s)
covering each Account clearly reflecting the condition of each Account as of
the close of business on the last day of such calendar quarter, and clearly
reflecting those items which gave rise to debits and credits to each Account
during such quarter and clearly reflecting the quantities of Subject
Hydrocarbons produced from the Subject Interests relating to such Account
during the quarter covered by such statement.  Any deficit reflected by any
such statement shall be carried forward for the next and succeeding months
until such deficit has been wiped out and liquidated.  In case a net profit is
reflected by any such statement, payment to Investor in U.S. dollars of the
Designated Percentage of the amount of such net profit shall be enclosed with
the statement rendered to Investor (or, if requested at any time by Investor,
paid by bank wire transfer to such bank and account designated in writing by
Investor); provided, however, that (a) Owner may elect to cause Harken Colombia
(instead of Owner) to make any payment required under this Section to Investor
in U.S. dollars, (b) any payment to Investor under this Section shall be
reduced by any costs or losses from currency conversions, compliance with
exchange control obligations, withholding obligations and remittance and other
taxes which are properly chargeable to the Account pursuant to Section 3.4(b)
or (c) and (i) are incurred by Harken Colombia in connection with such payment
to Investor or any payment of an amount equivalent to such payment by Harken
Colombia to Owner (provided that this clause (a) (i) shall not operate to
permit any double charge to the Account with respect to such costs or losses)
or (ii) in the





                                      -12-
<PAGE>   17
event such payment is made by Owner from its U.S. funds without any equivalent
payment by Harken Colombia to Owner, would have been so incurred at such time
if Harken Colombia had paid to Owner an amount equivalent to such payment, and
(c) Owner may retain up to one-third of Investor's share of any such net profit
in the event and to the extent that the debits that Owner reasonably projects
will be charged to the Account during the next three months will exceed the
credits that Owner reasonably projects will be made to the Account during such
three-month period and apply such retained amount to the payment of Investor's
share of such debits.  Any such retained amount that is subsequently determined
to be unnecessary for the payment of Investor's share of such debits shall be
paid promptly to Investor.  In the event any amount is deducted from any
payment pursuant to subsection (a), (b) or (c) above, such amount shall not
thereafter be charged to the Account to the extent it would cause any direct or
indirect double charge to the Account or Investor for such amount.

         Section 3.8.       Overpayments and Underpayments.  If at any time
Owner inadvertently pays Investor more or less than the amount then due with
respect to an Account, the amount or amounts otherwise payable with respect to
such Account for any subsequent period or periods shall be reduced or increased
by such overpayment or underpayment, plus an amount equal to interest (computed
at the Agreed Rate) on the unrecovered balance of such overpayment or
underpayment during the period of such overpayment or underpayment; provided,
however, that if the amount of any such overpayment or underpayment exceeds
$5,000, the party owing such amount shall promptly pay such amount (together
with interest on such amount as calculated above) to the other party.

         Section 3.9.       Prudent Operator Standard.  Harken Colombia
(subject to the terms and provisions of the applicable Association Contract and
any applicable operating agreements) shall have exclusive charge, management
and control of all operations to be conducted on the Subject Interests and may
take any and all actions which a reasonably prudent operator would deem
necessary or advisable in the management, operation and control thereof.
Harken Colombia shall operate and maintain the Subject Interests as would a
prudent operator under similar circumstances in accordance with good oil field
practices. Harken Colombia shall promptly (and, unless the same are being
contested in good faith and by appropriate proceedings, before the same are
delinquent) pay or cause to be paid all costs and expenses (including without
limitation all taxes and all costs, expenses and liabilities for labor,
materials and equipment incurred in connection with the Subject Interests and
all obligations to the holders of interests affecting the Subject Interests)
incurred from and after the Effective Date in developing, operating and
maintaining the Subject Interests.  As to those of the Subject Interests, if
any, as to which Harken Colombia hereafter may not be the operator, Harken
Colombia shall take all such action and exercise all such rights and remedies
as are reasonably available to Harken Colombia to cause the operator to so
maintain and operate such Subject Interests (provided that Harken Colombia
shall never be obligated to pay any costs or expenses attributable to any
interest other than the Subject Interests and all royalties related thereto).





                                      -13-
<PAGE>   18
         Section 3.10.      Sales of Subject Hydrocarbons.  Harken Colombia
shall market or cause to be marketed, subject to the terms of the applicable
Association Contract, the Subject Hydrocarbons in accordance with reasonable
and prudent business judgment and sound oil field practices and on such terms
and conditions as Harken Colombia shall determine to be in the best interests
of Investor; provided, however, that all such sales of Subject Hydrocarbons (a)
shall be upon terms and conditions which are the best terms and conditions
available as determined in good faith by Harken Colombia taking into account
all relevant circumstances, including without limitation, price, quality of
production, access to markets or lack thereof, minimum purchase guarantees,
identity of purchaser and length of commitment, and (b) shall be made to
Non-Affiliates of Owner or Harken Colombia, except that sales of Subject
Hydrocarbons may be made to an Affiliate of Owner or Harken Colombia that is
owned in part by a Governmental Authority and that owns or operates a pipeline
or other Processing facility if the price paid by such Affiliate is no less
favorable to Harken Colombia than the prices then being paid by a Non-Affiliate
for oil, gas and/or minerals which are of comparable type and quality and in
the same or similar locations.

         Section 3.11.      Insurance.  Harken Colombia shall obtain or cause
to be obtained (and maintain or cause to be maintained during the economic life
of the Subject Interests) insurance coverage relating to the ownership,
operation and maintenance of the Subject Interests, the cost of which shall be
charged against the related Account, in such amounts, with provisions for such
deductible amounts and for such purposes as Harken Colombia shall determine to
be appropriate (and, because of cost, availability and other factors, Harken
Colombia may determine not to acquire any such insurance).

         Section 3.12.      Contracts with Affiliates.  Harken Colombia and/or
its Affiliates may perform services and furnish supplies and equipment with
respect to the Subject Interests, provided that the amount of compensation,
price or rental that can be charged to the related Account therefor must be no
less favorable to the Account than would be the compensation, price or rental
payable to Non-Affiliates in the area engaged in the business of rendering
comparable services or selling or leasing comparable equipment and supplies
which could reasonably be made available to the Subject Interests.

         Section 3.13.      Government Regulation.  All obligations of Owner
and Harken Colombia under this Article III shall be subject to and limited by
(a) all applicable Laws and (b) the applicable Association Contract as it may
be modified, amended and/or supplemented from time to time; provided, that
Owner and Harken Colombia shall act in good faith with respect to the interests
of Investor and in accordance with the best interests of Investor under this
Agreement as reasonably determined by Owner and Harken Colombia.  Where the
price at which Subject Hydrocarbons are sold is limited by applicable Laws, the
price so permitted to be paid for Subject Hydrocarbons shall be controlling if
lower than prices established in Production Sales Contracts or required
hereunder.





                                      -14-
<PAGE>   19
         Section 3.14.      Abandonments.  After the Effective Date, Harken
Colombia shall have the right without the consent of Investor to release,
surrender and/or abandon its interest in the Subject Interests and/or any
Association Contract, or any part thereof, or interest therein, in order to
comply with the relinquishment provisions of the applicable Association
Contract, even though the effect of such release, surrender or abandonment may
be to affect adversely the Net Profits Interest.  In the event of any
relinquishment of acreage under an Association Contract, Harken Colombia shall
have the exclusive authority to determine the acreage to be relinquished, which
may be acreage within the Subject Interests or acreage outside the Subject
Interests or both; provided, that, in taking any of the actions described in
this Section 3.14, Harken Colombia shall act in good faith with respect to the
interests of Investor and in accordance with the best interests of Investor
under this Agreement as reasonably determined by Harken Colombia.

         Section 3.15.      Pooling and Unitization.  Without the prior written
consent of Investor, Harken Colombia shall have the right and power to unitize,
pool or combine the lands covered by the Subject Interests, or any portion or
portions thereof, as to oil, gas and/or other minerals, with any other land or
contract or contracts so as to create one or more unitized areas (or, with
respect to unitized or pooled areas theretofore created, to dissolve the same
or to amend and/or reconfigure the same to include additional acreage or
substances or to exclude acreage or substances).  If any of the Subject
Interests are pooled or unitized in any manner, the Net Profits Interest
insofar as it affects such Subject Interests shall be considered to be pooled
and unitized, and in any such event the Net Profits Interest shall apply to
(and the term "Subject Hydrocarbons" shall include) the production which
accrues to such Subject Interests under and by virtue of such pooling and
unitization arrangements and the applicable Account shall be computed giving
consideration to such production and costs, expenses, charges and credits
attributable to such Subject Interests.

         Section 3.16.      Non-consent Operations.

                   (a)      If Harken Colombia elects to be a non-participating
         party (whether pursuant to an Association Contract or operating
         agreement or other agreement or requirement) with respect to any
         drilling, deepening, plugging back, reworking, sidetracking or
         completion (or other) operation on any Subject Interest or elects to
         be an abandoning party with respect to a well located on any Subject
         Interest, the consequence of which election is that Harken Colombia's
         interest in such Subject Interest or part thereof is temporarily
         (i.e., during a recoupment period) or permanently forfeited to the
         parties participating in such operations, or electing not to abandon
         such well, then the costs and proceeds attributable to such forfeited
         interest shall not, for the period of such forfeiture (which may be a
         continuous and permanent period), be debited or credited to the
         applicable Account and such forfeited interest shall not, for the
         period of such forfeiture, be subject to the Net Profits Interest.





                                      -15-
<PAGE>   20
                   (b)      If Harken Colombia elects to be a participating
         party to such a drilling, deepening, plugging back, reworking,
         sidetracking or completing (or other) operation, or elects to be a
         non-abandoning party with respect to such a well, and any other party
         or parties have elected not to participate in such operation (or have
         elected to abandon such well) with the result that (pursuant to an
         Association Contract or operating agreement or other agreement or
         requirement) Harken Colombia becomes entitled to receive, either
         temporarily (i.e., through a period of recoupment) or permanently,
         interests belonging to such other party or parties, the costs and
         proceeds attributable to such non-participating parties' interests to
         which Harken Colombia becomes so entitled shall not be debited and
         credited to the applicable Account and instead shall be for the
         account of Harken Colombia.

         Section 3.17.      No Personal Liability; Indemnification.
Notwithstanding anything to the contrary contained in this Agreement, Investor
shall never personally be responsible for payment of any part of the costs,
expenses or liabilities incurred in connection with the exploring, developing,
operating, owning and/or maintaining of the Subject Interests or an Association
Contract (including without limitation, any costs, expenses or liabilities
related to damage to or remediation of the environment, including any of the
same arising out of ownership of an interest in property), and Owner agrees to
indemnify and hold Investor harmless from and against all such costs, expenses
and liabilities (with such indemnity to also cover all costs and expenses of
Investor, including reasonable legal fees and expenses, which are incurred
incident to the matters indemnified against); provided, however, all such
costs, expenses and liabilities shall, to the extent the same relate to periods
after the Effective Date, nevertheless be charged against the applicable
Account if such costs, expenses and liabilities are expressly permitted
elsewhere in this Agreement to be charged to such Account.  The foregoing
indemnifications shall extend to Investor and its successors and permitted
assigns, all their respective affiliates and all their respective officers,
directors, agents, attorneys, representatives and employees.  THE FOREGOING
INDEMNITIES SHALL APPLY WHETHER OR NOT ARISING OUT OF THE SOLE, JOINT OR
CONCURRENT NEGLIGENCE, FAULT OR STRICT LIABILITY OF INVESTOR OR ANY OTHER
PERSON OR ENTITY INDEMNIFIED HEREUNDER AND SHALL APPLY, WITHOUT LIMITATION, TO
ANY LIABILITY IMPOSED UPON ANY PERSON INDEMNIFIED HEREUNDER AS A RESULT OF ANY
STATUTE, RULE, REGULATION, THEORY OF STRICT LIABILITY OR OTHERWISE.  THE
PROVISIONS OF THIS SECTION 3.17 SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT
AND SHALL CONTINUE IN EFFECT FOR A PERIOD OF THREE YEARS THEREAFTER, AT WHICH
TIME SUCH PROVISIONS SHALL TERMINATE.

         Section 3.18.      Access to Books and Records.  In addition to any
reports and information specifically required by the terms of this Agreement,
Owner agrees to furnish to Investor full information pertaining to the
Prospects (or potential Prospects) or the ownership, operation and maintenance
of the Subject Interests, at all reasonable times, and in such form, as
Investor may reasonably request.  Owner and Harken Colombia will permit
representatives designated by Investor, including independent accountants,
agents, attorneys, and other persons, to inspect Owner's and Harken Colombia's
respective books and records pertaining to





                                      -16-
<PAGE>   21
the Subject Interests and each Account (and to make copies and photocopies from
such records and to write down and record such information as such
representatives may request), and each of Owner and Harken Colombia shall
permit Investor and its designated representatives reasonably to investigate
and verify the accuracy of information furnished by it to Investor hereunder or
in connection herewith and to discuss all such matters with their officers,
employees and representatives.  If for any reason Harken Colombia is unable to
provide to Investor the information, access to information and inspection
rights referred to in the immediately preceding sentences of this Section 3.18,
Owner shall cause such information, access to information and inspection rights
to be provided to Investor.


                                   ARTICLE IV

                Owner Representations, Warranties and Covenants

         Owner hereby represents and warrants to and covenants with Investor as
follows:

         Section 4.1.       Organization and Corporate Authority.  Owner is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with corporate power and
authority to carry on its business as now conducted and to own, lease and
operate all properties and assets now owned, leased or operated by it.

         Section 4.2.       Qualification to do Business.  Owner is duly
qualified to do business as a foreign corporation and in good standing in each
jurisdiction in which its ownership of property or the conduct of its business
requires such qualification, except jurisdictions in which the failure so to
qualify would not have a material adverse effect on Owner's business,
properties, financial condition or results of operations.

         Section 4.3.       Finders' Fees.  No broker or finder has acted on
behalf of Owner or Harken Colombia in connection with this Agreement or the
transactions contemplated herein.

         Section 4.4.       Authority of Owner.  Owner has the corporate power
to enter into, and be bound by the terms and conditions of, this Agreement and
to carry out its obligations hereunder, and the execution and delivery by Owner
of this Agreement and the performance by Owner of its obligations hereunder
have been duly authorized by all necessary corporate action of Owner.  This
Agreement has been duly executed and delivered by Owner and constitutes, and
each other agreement or document executed or to be executed by Owner in
connection with the transactions contemplated hereby has been, or when
executed, will be, duly executed and delivered by Owner and constitutes, or
when executed and delivered will constitute, a valid and legally binding
obligation of Owner enforceable against Owner in accordance with their
respective terms, except to the extent enforcement may be limited (a) by
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws
from time to time in effect which affect creditors' rights generally, and (b)
by legal and equitable limitations





                                      -17-
<PAGE>   22
on the availability of equitable remedies, including without limitation
specific performance against Owner under or by virtue of this Agreement.

         Section 4.5.       Non-Contravention.  The execution, delivery and
performance of this Agreement by Owner will not (a) conflict with or result in
a violation of any provision of Owner's charter or bylaws, (b) conflict with or
result in a violation of any provision of, or constitute (with or without the
giving of notice or the passage of time or both) a default under, or give rise
(with or without the giving of notice or the passage of time or both) to any
right of termination, cancellation, or acceleration under, any bond, debenture,
note, mortgage, indenture, lease, agreement or other instrument or obligation
to which Owner is a party or by which Owner or any of its properties or assets
may be bound, which conflict, violation, default, termination, cancellation or
acceleration could reasonably have a material adverse effect on Owner's
business, properties, financial condition or results of operations, (c) result
in the creation or imposition of any lien or incumbrance upon the properties or
assets of Owner, or (d) result in a violation by Owner of any Law or any
judgment, order, decree, rule or regulation of any Governmental Authority to
which Owner is subject; provided, however, that no such representations or
warranties are made by Owner with respect to compliance with any foreign
securities laws or with respect to any Association Contract (it being
understood that representations and warranties with respect to the Association
Contracts are being made by Owner under Section 4.10).

         Section 4.6.       Governmental Consents.  Except for (a) those that
have been duly obtained, and (b) the approval by the American Stock Exchange of
the listing on such exchange of the Common Shares issuable pursuant to Section
6.3 (which Owner will obtain prior to the issuance of such shares), no consent,
order, approval or authorization of, or declaration, filing, or registration
with, any Governmental Authority is required to be obtained or made by Owner in
connection with the execution, delivery or performance by Owner of this
Agreement; provided, however, that no such representations or warranties are
made by Owner with respect to compliance with any foreign securities laws.

         Section 4.7.       Reports and Financial Statements of Owner.  Owner
has heretofore delivered to Investor true and complete copies of all definitive
Form 10-K annual reports, Form 10-Q quarterly reports and proxy statements
filed by Owner with the SEC from and after January 1, 1997 (herein collectively
called "Owner's SEC Filings").  As of their respective dates, Owner's SEC
Filings did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  Owner does not have any debts, liabilities, or obligations,
whether accrued, contingent, unasserted or otherwise, and whether due or to
become due, which are not reflected in the financial statements contained in
Owner's SEC Filings and would be required to be so reflected under generally
accepted accounting principles, except those incurred in the ordinary course of
business since the date of the most recent audited financial statements
contained in Owner's SEC Filings.  Since such date and except as otherwise
disclosed in Owner's SEC Filings,





                                      -18-
<PAGE>   23
Owner has conducted its business in the ordinary course consistent with past
practice and there has not been any material adverse change in the business,
properties, financial condition or results of operations of Owner or in its
relationship with lenders, suppliers, customers, employees or others, whether
such changes have occurred in the ordinary course of business or otherwise.

         Section 4.8.       Disclosure.  All written information provided by
Owner and its officers, directors, agents, representatives and employees to
Investor in connection with this Agreement which is not part of Owner's SEC
Filings has been prepared in good faith by Owner and does not contain any
untrue statement of a material fact or, considered in its entirety along with
Owner's SEC Filings, omit to state therein a material fact (other than those
facts generally recognized to be industry risks normally associated with the
oil and gas business) necessary to make the statements made therein not
misleading.  Owner does not know of any facts (other than those facts generally
recognized to be industry risks normally associated with the oil and gas
business) related to its business, properties, financial condition or results
of operations or the potential Prospects which have not been disclosed orally
or in writing to Investor and which presently or will materially and adversely
affect such business, properties, financial condition, results of operations or
potential Prospects or the ability of Owner to perform its obligations under
this Agreement.

         Section 4.9.       Owner's Common Shares.  The Common Shares issuable
pursuant to Section 6.3 have been, or when issued hereunder, will have been,
duly authorized for issuance pursuant hereto and, when issued and delivered by
Owner pursuant hereto, will be validly issued, fully paid and non-assessable
and will be free and clear of any claim, lien, pledge, option, charge, security
interest or encumbrance of any nature whatsoever created by Owner.  The
issuance of Common Shares under this Agreement is not subject to any preemptive
rights.  Owner shall, prior to the issuance of Common Shares pursuant to this
Agreement, cause such Common Shares to be listed on each securities exchange or
quotation system on which outstanding Common Shares are then listed.

         Section 4.10.      Association Contracts.  English translations of the
main body of, and the operating agreement attached as an exhibit to, each
Association Contract in force as of the date hereof have been furnished by
Owner to Investor.  Each of such translations is a fair and reasonable
translation of the original document constituting part of the Association
Contract.  Any and all amendments to an Association Contract in force as of the
date hereof of which English translations were not furnished by Owner to
Investor do not contain any provisions that could adversely affect the rights
and interests of Investor under this Agreement.  Each Association Contract is
in full force and effect as of the date hereof.  Harken Colombia is in
compliance in all material respects with its obligations under or relating to
each Association Contract in force as of the date hereof, and, to the best
knowledge of Owner and Harken Colombia after due inquiry, no other party to an
Association Contract is presently in default thereunder.  The execution,
delivery and performance of this Agreement by Owner, and the performance of
this Agreement by Harken Colombia, will not breach or result in a violation of





                                      -19-
<PAGE>   24
any provision of an Association Contract in force as of the date hereof.
Exhibit A-1 hereto contains an accurate description of the areal extent of the
lands covered by the Bocachico Association Contract (which lands are designated
as the Bocachico Block on such Exhibit A-1) as of the date hereof.  Exhibit A-2
hereto contains an accurate description of the areal extent of the lands
covered by the Cambulos Association Contract (which lands are designated as the
Cambulos Block on such Exhibit A-2) as of the date hereof.  Owner agrees to
furnish to Investor written English translations of any and all amendments made
to any Association Contract or related operating agreement after the Effective
Date as promptly as practicable after each such amendment is made.

         Section 4.11.      Ownership of Harken Colombia.  All of the issued
and outstanding shares of capital stock of Harken Colombia have been duly and
validly issued, are fully paid and nonassessable and are owned by Owner, free
and clear of  all liens, encumbrances, equities or claims.  No options,
warrants or other rights to purchase, agreements or other obligations to issue
or other rights to convert any obligations into shares of capital stock or
ownership interests in Harken Colombia are outstanding.

         Section 4.12.      Certain Tax Matters.  All amounts payable under
this Agreement shall be free of Colombian taxes, and Owner shall hold Investor
harmless from, and indemnify Investor against, any and all Colombian taxes
arising due to the transactions contemplated hereby, other than any Colombian
taxes that would not have been incurred but for activities of Investor in
Colombia unrelated to the transactions contemplated hereby, it being further
understood and agreed, however, that it shall be permissible for taxes incurred
by Harken Colombia in connection with its operations to be taken into account
for purposes of calculation of the Net Profits Interest as provided in this
Agreement.

         Section 4.13.      No Defaults.  Neither Owner nor Harken Colombia is
(a) in violation of any provision of its charter or bylaws, (b) in breach,
violation or default, in any material respect, of or under any material
contract, lease, commitment or instrument to which it is a party or by which it
is bound or to which any of its properties or assets are subject, and no event
has occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute such a breach,
violation or default or (c) in material violation of any Law.

         Section 4.14.      Litigation.  There is no action, suit, proceeding
or investigation pending or, to the knowledge of Owner, threatened against or
affecting Owner or Harken Colombia or any properties or rights of any of them
by or before any Governmental Authority that (a) relates to or challenges the
legality of this Agreement or any Association Contract, (b) would reasonably be
expected to have a material adverse effect upon the business, properties,
financial condition or results of operations of Owner or Harken Colombia
(except as disclosed in Owner's SEC Filings) or (c) would reasonably be
expected to impair the ability of Owner or Harken Colombia to perform fully on
a timely basis any obligations that it has, or any actions specified to be
taken by it, under this Agreement or any Association Contract.





                                      -20-
<PAGE>   25
         Section 4.15.      Compliance with Laws.  Owner and Harken Colombia
are in compliance in all material respects with all Laws in all jurisdictions
in which Owner or Harken Colombia is presently doing business and where the
failure to effect such compliance would reasonably be expected to have a
material adverse effect upon the business, properties, financial condition or
results of operations of Owner or Harken Colombia.

         Section 4.16.      Harken Colombia Organization and Corporate
Authority.  Harken Colombia is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to carry on its business as
now conducted and to own, lease and operate all properties and assets now
owned, leased or operated by it.

         Section 4.17.      Harken Colombia Qualification to do Business.
Harken Colombia is duly qualified to do business as a foreign corporation and
in good standing in each jurisdiction in which its ownership of property or the
conduct of its business requires such qualification, except jurisdictions in
which the failure so to qualify would not have a material adverse effect on
Harken Colombia's business, properties, financial condition or results of
operations.

         Section 4.18.      Harken Colombia Non-Contravention.  The performance
of this Agreement by Owner, and the performance by Harken Colombia of the
actions to be taken by it under this Agreement, will not (a) conflict with or
result in a violation of any provision of Harken Colombia's charter or bylaws,
(b) conflict with or result in a violation of any provision of, or constitute
(with or without the giving of notice or the passage of time or both) a default
under, or give rise (with or without the giving of notice or the passage of
time or both) to any right of termination, cancellation, or acceleration under,
any bond, debenture, note, mortgage, indenture, lease, agreement or other
instrument or obligation to which Harken Colombia is a party or by which Harken
Colombia or any of its properties or assets may be bound, which conflict,
violation, default, termination, cancellation or acceleration could reasonably
have a material adverse effect on Harken Colombia's business, properties,
financial condition or results of operations, (c) result in the creation or
imposition of any lien or incumbrance upon the properties or assets of Harken
Colombia, or (d) result in a violation by Harken Colombia of any Law or any
judgment, order, decree, rule or regulation of any Governmental Authority to
which Harken Colombia is subject; provided, however, that no such
representations or warranties are made by Owner with respect to compliance with
any foreign securities laws or with respect to any Association Contract (it
being understood that representations and warranties with respect to the
Association Contracts are being made by Owner under Section 4.10).

         Section 4.19.      Harken Colombia Governmental Consents.  Except for
those that have been duly obtained, no consent, order, approval or
authorization of, or declaration, filing, or registration with, any
Governmental Authority is required to be obtained or made by Harken Colombia in
connection with the performance by Owner of this Agreement or the performance
by Harken Colombia of the actions to be taken by it under this Agreement;
provided,





                                      -21-
<PAGE>   26
however, that no such representations or warranties are made by Owner with
respect to compliance with any foreign securities laws.

         Section 4.20.      Harken Colombia Disclosure.  Owner, either directly
or indirectly through its subsidiary, Harken Colombia, does not know of any
facts (other than those facts generally recognized to be industry risks
normally associated with the oil and gas business) related to the potential
Prospects or the Subject Interests which have not been disclosed orally or in
writing to Investor and which presently or will materially and adversely affect
a potential Prospect, any Subject Interests or the ability of Harken Colombia
to perform this Agreement.


                                   ARTICLE V

               Investor Representations, Warranties and Covenants

         Investor hereby represents and warrants to and covenants with Owner as
follows:

         Section 5.1.       Organization and Corporate Authority.  Investor is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, with corporate power and authority to carry on
its business as now conducted and to own, lease and operate all properties and
assets now owned, leased or operated by it.

         Section 5.2.       Finders' Fees.  No broker or finder has acted on
behalf of Investor in connection with this Agreement or the transactions
contemplated herein.

         Section 5.3.       Authority of Investor.  Investor has the corporate
power to enter into, and be bound by the terms and conditions of, this
Agreement and to carry out its obligations hereunder, and the execution and
delivery by Investor of this Agreement and the performance by Investor of its
obligations hereunder have been duly authorized by all necessary corporate
action of Investor.  This Agreement has been duly executed and delivered by
Investor and constitutes, and each other agreement or document executed or to
be executed by Investor in connection with the transactions contemplated hereby
has been, or when executed, will be, duly executed and delivered by Investor
and constitutes, or when executed and delivered will constitute, a valid and
legally binding obligation of Investor enforceable against Investor in
accordance with their respective terms, except to the extent enforcement may be
limited (a) by applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws from time to time in effect which affect creditors' rights
generally and (b) by legal and equitable limitations on the availability of
equitable remedies, including without limitations specific performance against
Investor under or by virtue of this Agreement.

         Section 5.4.       Non-Contravention.  The execution, delivery and
performance of this Agreement by Investor will not (a) conflict with or result
in a violation of any provision of Investor's charter or bylaws, (b) conflict
with or result in a violation of any provision of, or





                                      -22-
<PAGE>   27
constitute (with or without the giving of notice or the passage of time or
both) a default under, or give rise (with or without the giving of notice or
the passage of time or both) to any right of termination, cancellation, or
acceleration under, any bond, debenture, note, mortgage, indenture, lease,
agreement or other instrument or obligation to which Investor is a party or by
which it or any of its properties or assets may be bound, which conflict,
violation, default, termination, cancellation, or acceleration would have a
material adverse effect on the ability of Investor to perform its obligations
hereunder, (c) result in the creation or imposition of any lien or incumbrance
upon the properties or assets of Investor, which lien or incumbrance would have
a material adverse effect on the ability of Investor to perform its obligations
hereunder, or (d) result in a violation by Investor of any Law or any judgment,
order, decree, rule or regulation of any Governmental Authority to which
Investor is subject; provided, however, that no such representations or
warranties are made by Investor with respect to compliance with any foreign
securities laws.

         Section 5.5.       Governmental Consents.  Except for those that have
been duly obtained, no consent, order, approval or authorization of, or
declaration, filing, or registration with, any Governmental Authority is
required to be obtained or made by Investor in connection with the execution,
delivery or performance by Investor of this Agreement; provided, however, that
no such representations or warranties are made by Investor with respect to
compliance with any foreign securities laws.

         Section 5.6.       Investment Intent.  Upon issuance pursuant to this
Agreement, the stockholders of Investor will acquire the Common Shares issuable
pursuant to Section 6.3 for their own account for investment and not with a
view to, or for sale or other disposition in connection with, any distribution
of all or any part of the Common Shares, except (a) in an offering covered by a
registration statement filed with the SEC under the Securities Act covering the
Common Shares or (b) pursuant to an applicable exemption under the Securities
Act.

         Section 5.7.       Disclosure of Information.  Investor represents
that it has had an opportunity to ask questions of and receive answers from
Owner regarding Owner and Harken Colombia, their respective businesses,
properties, financial conditions, operations and plans of business, the Common
Shares, and the Subject Interests and all matters relating thereto.

         Section 5.8.       Accredited Investor and Experience.  Investor
acknowledges that it, and each of its stockholders, is an Accredited Investor
within the meaning of Regulation D under the Securities Act, can bear the
economic risk of the investment in the Net Profits Interest and any investment
in Common Shares and has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
investment in the Net Profits Interest and any investment in Common Shares.

         Section 5.9.       Restricted Securities.  Investor and its
stockholders understand that the Common Shares that are issued pursuant to this
Agreement will not have been registered





                                      -23-
<PAGE>   28
pursuant to the Securities Act, any other federal securities law, any
applicable foreign securities law or any applicable state securities or Blue
Sky law, that such shares will be characterized as "restricted securities"
under the United States securities laws and that under such laws and applicable
regulations such shares cannot be sold or otherwise disposed of without
registration under the Securities Act or an exemption therefrom.

         Section 5.10.      Legend.  Investor and its stockholders understand
and agree that the certificates representing the Common Shares issued pursuant
to this Agreement shall each conspicuously set forth on the face or back
thereof a legend in substantially the following form:

                   "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                   REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
                   MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SHARES
                   ARE FIRST REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION
                   FROM SUCH REGISTRATION IS AVAILABLE."


                                   ARTICLE VI

                                 Miscellaneous

         Section 6.1.       Assignment by Harken Colombia.  Harken Colombia may
at any time assign, sell, transfer, convey, mortgage or pledge all or any
portion of any Association Contract or the Subject Interests; provided, that
Owner shall remain fully liable to perform all of their respective duties and
obligations hereunder, including, without limitation, the obligations of Owner
to provide access to information relating to the Subject Interests as set forth
in Section 3.18.

         Section 6.2.       Assignment by Investor.  Investor shall not assign,
sell, transfer, convey, mortgage or pledge all or any part of the Net Profits
Interest or its rights and obligations hereunder or create a security interest
therein without the prior written consent of Owner.

         Section 6.3.       Commitment Fees.  Concurrently (except as provided
in clause (b)) with the payment by Investor to Owner of the Advance pursuant to
Section 2.1, and as additional compensation for the Commitment, Owner shall (a)
pay to Rauscher Pierce & Clark Limited a cash fee of $175,000 by wire transfer
of immediately available funds and (b) issue and deliver to the stockholders of
Investor, immediately upon receipt of listing approval by the American Stock
Exchange,  an aggregate of 42,000 Common Shares, as follows: 18,000 Common
Shares to Sidro S.A.; 12,000 Common Shares to Lambertine Holdings Ltd.; and
12,000 Common Shares to Rauscher Pierce & Clark (Guernsey) Ltd.  It is
expressly





                                      -24-
<PAGE>   29
acknowledged by the parties hereto that the representations, warranties and
covenants made in Article V with respect to the Common Shares issued pursuant
to this Agreement, including without limitation the representations and
warranties made in Sections 5.9 and 5.10, apply to the Common Shares issued
pursuant to this Section 6.3.

         Section 6.4.       Indemnification.

                   (a)      Owner agrees to indemnify and hold harmless
         Investor and its directors, officers, employees, agents, partners,
         shareholders and affiliates from and against any and all claims,
         damages, losses, liabilities, penalties and expenses (including
         without limitation reasonable fees and disbursements of counsel) that
         may be incurred by or asserted against any such person, in each case
         arising out of or in connection with or by reason of any breach of any
         representation, warranty, covenant or agreement of Owner contained in
         this Agreement or any failure of Harken Colombia to take any actions
         specified to be taken by it under, or to otherwise act in accordance
         with the provisions of, this Agreement.  The obligations of Owner
         under this Section 6.4(a) shall survive the termination of this
         Agreement.

                   (b)      Investor agrees to indemnify and hold harmless
         Owner and Harken Colombia and their respective directors, officers,
         employees, agents, partners, shareholders and Affiliates from and
         against any and all claims, damages, losses, liabilities, penalties
         and expenses (including without limitation reasonable fees and
         disbursements of counsel) that may be incurred by or asserted against
         any such person, in each case arising out of or in connection with or
         by reason of any breach of any representation, warranty, covenant or
         agreement of Investor contained in this Agreement.  The obligations of
         Investor under this Section 6.4(b) shall survive the termination of
         this Agreement.

         Section 6.5.       Public Announcements.  Except as set forth in the
following sentence, the parties to this Agreement agree that prior to making
any public announcement or statement with respect to the transactions
contemplated by this Agreement, the party desiring to make such public
announcement or statement shall consult with the other party and exercise
reasonable efforts to (a) agree upon the text of a joint public announcement or
statement to be made by the parties or (b) obtain approval of the other party
to the text of a public announcement or statement to be made solely by Owner or
Investor, as the case may be.  Nothing contained in this Section shall be
construed to require any party to obtain approval of the other party to
disclose information with respect to any disclosure (a) required by applicable
Law or by any applicable rules, regulations or orders of any Governmental
Authority having jurisdiction or (b) necessary to comply with disclosure
requirements of any applicable stock exchange.  Owner agrees that, prior to
making any public announcement or statement with respect to the transactions
contemplated by this Agreement that names any stockholder or stockholders of
Investor, Owner will notify such stockholder or stockholders and furnish it or
them with a copy of the text of the proposed public announcement or statement.





                                      -25-
<PAGE>   30
         Section 6.6.       Brokers.  Without limiting the parties' respective
representations in Sections 4.3 and 5.2, each party agrees to indemnify and
hold the others harmless from and against any claim for a brokerage or finder's
fee or commission in connection with this Agreement or the transactions
contemplated by this Agreement to the extent such claim arises from or is
attributable to the actions of such indemnifying party.

         Section 6.7.       Notices.  All notices, requests, demands, consents
and other communications required or permitted to be given or made hereunder
shall be in writing and shall be deemed to have been duly given or made if
delivered personally, or sent by a nationally recognized overnight delivery
service or by telecopy or similar facsimile transmission, or mailed by prepaid
registered or certified mail, return receipt requested, to the other party at
the respective address set forth below (or to such other address as a party
shall designate for itself by written notice given or made in accordance
herewith):



         (a)   if to Owner, at:

                        Harken Energy Corporation
                        MacArthur Center II
                        5605 N. MacArthur Blvd., Suite 400
                        Irving, Texas 75038
                        Telephone: (972)753-6900
                        Telecopy: (972) 753-6963
                        Attention:  Mr. Bruce N. Huff, Senior Vice President and
                                    Mr. Larry E. Cummings, Vice President and
                                          General Counsel

         (b)   if to Investor or any stockholder of Investor, at:

                        Rauscher Pierce & Clark Limited
                        56 Green Street
                        London W1Y 3RH
                        Telephone: 0171 491 2434
                        Telecopy: 0171 491 9081
                        Attention: David P. Quint

         Any such notice, request, demand, consent or other communication shall
be deemed delivered and given or made on the third Business Day after the date
of mailing, if mailed by registered or certified mail, or on the first Business
Day after the date of transmittal, if sent by overnight delivery service or by
telecopy or similar facsimile transmission (provided such telecopy or
transmission is followed promptly by the mailing of the original of such
notice), or on the date of delivery, if delivered personally.





                                      -26-
<PAGE>   31
         Section 6.8.       Waivers and Amendments.  This Agreement may be
amended or supplemented only by a written instrument signed by the parties
hereto.  The terms of this Agreement may be waived only by a written instrument
signed by the party waiving compliance.  No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege, or any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.  The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity.

         Section 6.9.       Governing Law.  This Agreement and all actions,
proceedings or matters arising out of this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Texas,
without regard to the principles of conflicts of laws.

         Section 6.10.      Binding Effect; No Assignment; No Third Party
Benefit.  This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns.  Unless
otherwise expressly provided herein, no rights or obligations under this
Agreement are assignable.  Except as expressly provided in Sections 3.17, 6.3
and 6.4, nothing in this Agreement, whether expressed or implied, is intended
to confer any rights or remedies under or by reason of this Agreement on any
person other than the parties to this Agreement and their respective successors
and permitted assigns.

         Section 6.11.      Entire Agreement.  This Agreement constitutes the
full and complete agreement of the parties hereto with respect to the subject
matter hereof, and supersede all previous oral and written and all
contemporaneous oral negotiations, commitments, writings and understandings.

         Section 6.12.      Severability.  Every provision of this Agreement is
intended to be severable.  If any term or provision hereof is determined to be
invalid, illegal, or unenforceable for any reason whatsoever, such invalidity,
illegality, or unenforceability shall not affect the validity, legality and
enforceability of the remainder of this Agreement.

         Section 6.13.      United States Dollars.  All references in this
Agreement to dollar amounts are to United States dollars.

         Section 6.14.      Survival of Representations and Warranties.  The
representations and warranties of the parties made herein shall survive the
execution and delivery of this Agreement.

         Section 6.15.      Counterparts.  This Agreement may be executed in
one or more counterparts (and separately by each party hereto), each of which
shall be an original and all of which shall constitute but one and the same
document.





                                      -27-
<PAGE>   32
         Section 6.16.      Arbitration.  Owner and Investor agree to submit to
final and binding arbitration any and all disputes, claims, and/or
disagreements concerning the interpretation or application of this Agreement.
Any dispute, claim, and/or disagreement subject to arbitration pursuant to the
terms of this Section shall be resolved by arbitration in New York, New York by
three arbitrators in accordance with the Commercial Arbitration Rules of the
American Arbitration Association or any successor organization (the
"Association") then in effect.  Within 10 days of the initiation of an
arbitration hereunder, Owner will designate one arbitrator and the stockholders
of Investor, acting together, will designate one arbitrator, in accordance with
the Association's rules.  The appointed arbitrators will appoint a neutral
arbitrator in the manner prescribed in the Association's rules.  Owner and
Investor agree that the decision of the three arbitrators selected hereunder
will be final and binding on all parties.  A judgment on the award rendered by
the arbitrator may be entered in any court having jurisdiction, or application
may be made to such court for judicial acceptance of the award and an order of
enforcement, as the case may be.

         Section 6.17.      Consent to Jurisdiction.  Subject to the provisions
of Section 6.16, Owner and Investor agree that, in addition to any other courts
that may have jurisdiction under applicable laws, any action or proceeding to
enforce or arising out of this Agreement may be commenced in the Court of the
State of Texas for Dallas County, or in the United States District Court for
the Northern District of Texas, and Owner and Investor consent and submit in
advance to such jurisdiction and agree that venue will be proper in such courts
on any such matter.  Owner and Investor each hereby waives personal service of
process and agrees that a summons and complaint commencing an action or
proceeding in any such court shall be properly served and shall confer personal
jurisdiction if served by registered or certified mail to it.  The choice of
forum set forth in this Section shall not be deemed to preclude the enforcement
of any judgment obtained in such forum, or the taking of any action under this
Agreement to enforce the same, in any appropriate jurisdiction.

         Section 6.18.      Guaranty of Owner.  Owner agrees to cause Harken
Colombia to take the actions specified to be taken by Harken Colombia under,
and to cause Harken Colombia to otherwise act in accordance with the provisions
of, this Agreement.  Furthermore, Owner hereby irrevocably, absolutely and
unconditionally guarantees, as principal and not as surety (this being a
guarantee of payment and not of collection), to and for the benefit of
Investor, prompt and complete payment and performance by Harken Colombia of any
and all obligations of or actions specified to be taken by Harken Colombia
under or arising out of or in connection with this Agreement, including any
liabilities arising from a failure by Harken Colombia to take any actions
specified to be taken by it under this Agreement (the "Obligations"), and
agrees to pay any and all expenses (including reasonable counsel fees and
expenses) which may be paid or incurred by Investor in collecting any or all of
the Obligations and/or enforcing their rights under this Agreement.  The
obligations of Owner hereunder shall not be (i) subject to any reduction,
limitation, impairment or termination for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to any set-off, counterclaim or recoupment whatsoever, or (ii) conditioned or





                                      -28-
<PAGE>   33
contingent upon the pursuit by Investor or any other person at any time of any
right or remedy against Harken Colombia or any other person which may become
liable in respect of all or any part of the Obligations or against any
collateral or security or guarantee therefor or right of set-off with respect
thereto.  Owner shall not exercise any rights it may acquire by way of
subrogation under this Section, whether acquired by any payment made hereunder,
by any set-off or application of funds of Owner by Investor or otherwise, until
(i) the payment in full of the Obligations and (ii) the payment of all other
expenses to be paid by Owner pursuant hereto.

         Section 6.19.      No Partnership.  The parties hereto do not intend
by entering into this Agreement to form a partnership, joint venture or similar
arrangement for tax purposes or otherwise and shall not take any action
inconsistent with the foregoing statement of intent.

         Section 6.20.      Expenses.  All fees and expenses (including legal
fees and expenses) incurred by a party hereto in connection with the
negotiation, preparation and execution of this Agreement shall be the
responsibility of such party.

         IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by the respective officers hereunto duly authorized as of the date
first above written.




                                  HARKEN ENERGY CORPORATION


                                  By:     
                                       -----------------------------------
                                       Name: Larry E. Cummings
                                       Title: Vice President and Secretary



                                  HARKEN CAPITAL CORPORATION


                                  By:                                     
                                       ------------------------------------
                                       Name: Larry E. Cummings
                                       Title: Vice President and Secretary





                                      -29-
<PAGE>   34
                                  EXHIBIT A-1

                                BOCACHICO BLOCK





<PAGE>   35
                                  EXHIBIT A-2

                                 CAMBULOS BLOCK