Document:

<PAGE>

                                                                   Exhibit 10.51

                               EXCHANGE AGREEMENT

     THIS EXCHANGE AGREEMENT (the "Agreement"), dated as of the acceptance date
set forth below, by and between Harken Energy Corporation, a Delaware
corporation, with headquarters located at 580 WestLake Park Boulevard, Suite
600, Houston, Texas 77079 (the "Company"), and Costa Brava Partners III whose
address is 68 Harvard Street, Brookline, MA 02445 ("Costa Brava") and John C.
Lydecker, an individual whose address is 41 Birch Road, Darien, CT 06820
("Lydecker") (Costa Brava and Lydecker hereinafter collectively referred to as
the "Noteholders").

                              W I T N E S S E T H:

     WHEREAS, the undersigned Noteholders hereby offer, upon the terms and
subject to the limitations and conditions contained in this Agreement, to
exchange 5% Senior Convertible Notes Due May 26, 2003 issued by the Company and
held by the Noteholder (the "Exchange Notes") in the combined and outstanding
principal amount of TWO MILLION THREE HUNDRED THOUSAND DOLLARS ($2,300,000) (the
"Exchange Notes Principal") in return for a cash payment as described
hereinafter and Promissory Notes as set forth in the form of Promissory Notes in
Exhibits "A" and "B" attached and incorporated herein by reference for all
purposes; and

     WHEREAS, the Company wishes to accept such offer to exchange the Exchange
Notes for the cash and Promissory Note described herein subject to the
conditions of this Agreement;

     NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

1.   TERMS OF THE EXCHANGE: Upon the terms and subject to the limitations and
conditions set forth in this Agreement, the undersigned Noteholders hereby offer
to exchange, and the Company hereby accepts for exchange, the Exchange Notes.

     1.1  The Company agrees to provide:

          (a). a cash payment payable to Costa Brava on or before May 30, 2003
in the amount of EIGHT HUNDRED FIVE THOUSAND DOLLARS ($805,000) (35% of the
Exchange Notes Principal); and

          (b). a Promissory Note payable to Lydecker in the principal sum of SIX
HUNDRED THIRTY SEVEN THOUSAND FIVE HUNDRED DOLLARS ($637,500) pursuant to the
terms and conditions as set forth in Exhibit "A" hereto.

          (c). a Promissory Note payable to Costa Brava in the principal sum of
THREE HUNDRED NINETY SEVEN THOUSAND FIVE HUNDRED DOLLARS ($397,500) pursuant to
the terms and conditions as set forth in Exhibit "B" hereto.

     1.2  The Noteholders agree to deliver the Exchange Notes to the Company or
its designee within 5

                                       1

<PAGE>

(five) business days or less following the execution of this Agreement. Costa
Brava further agrees to provide to the Company the wire instructions for the
cash payment portion of the exchange no later than 3 business days before
payment is due by the Company.

2.   NOTEHOLDERS REPRESENTATIONS AND WARRANTIES: The Noteholders represent and
warrant to, and covenant and agree with, the Company as follows:

     2.1  Lydecker is the legal owner and holder of SEVEN HUNDRED FIFTY THOUSAND
DOLLARS ($750,000) face amount of the Exchange Notes and will deliver said
Exchange Notes free and clear of all liens, claims, encumbrances, and security
interests;

     2.2  Costa Brava is the legal owner and holder of ONE MILLION FIVE HUNDRED
FIFTY THOUSAND DOLLARS ($1,550,000) face amount of the Exchange Notes and will
deliver said Exchange Notes free and clear of all liens, claims, encumbrances,
and security interests.

     2.3  The Noteholders have all necessary power and authority to execute and
deliver this Agreement and to consummate the transaction contemplated herein;

     2.4  The Noteholders are in compliance with any and all U. S. securities
laws as such laws might apply to the Exchange Notes, and participation by the
Noteholder in the transactions contemplated herein does not and will not violate
such securities laws;

     2.5  The Noteholders are acquiring the Promissory Notes for their own
account for investment only and not with a view towards the public sale or
distribution thereof;

     2.6  This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Noteholders and is a valid and binding agreement of
the Noteholders enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally.

3.   COMPANY REPRESENTATIONS AND WARRANTIES: The Company represents and warrants
to the Noteholder that:

     3.1  The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is qualified to do
business in the State of Texas. The Company has full power and authority to
enter into this Agreement and consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, and this Agreement
is a valid and binding obligation of the Company enforceable in accordance with
its terms.

     3.2  This Agreement, when signed and delivered by Noteholders to the
Company and then accepted by the Company, shall have been duly and validly
authorized, executed and delivered on behalf of the Company and shall be a valid
and binding agreement of the Company enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to bankruptcy
or other laws affecting the enforcement of creditors' rights generally.

                                       2

<PAGE>

     3.3  The Company is not aware of any authorization, approval or consent of
any governmental body which is required to be obtained by the Company for the
issuance of the Promissory Notes to the Noteholder as contemplated by this
Agreement.

4.   ADDITIONAL COMPANY COVENANTS

     4.1  In connection with the Promissory Notes to be provided pursuant to the
terms of this Agreement, the Company agrees, so long as any payment obligation
under the Promissory Notes remains outstanding, to comply with the Section 10.10
"Limitation on Other Indebtedness" and Section 10.11 "Limitation on Liens" as
set out in that certain Trust Indenture executed by the Company on May 28, 1998
in connection with the Exchange Notes (the "Trust Indenture"). Said Sections
10.10 and 10.11 of the Trust Indenture hereby are incorporated by reference for
the limited purpose of this paragraph 4.

     4.2  The Company agrees that the obligations under this Agreement and
respective Promissory Notes shall hold the same status as more fully set out in
Section 14.01 "Seniority of Notes" of the Trust Indenture with respect to the
Indebtedness (as defined in the Trust Indenture) and Subordinated Obligations
(as defined in the Trust Indenture). Said Section 14.01 and definitions for
Indebtedness and Subordinated Obligations of the Trust Indenture hereby are
incorporated by reference for the limited purpose of this paragraph 4.

5.   CONDITIONS TO THE COMPANY'S OBLIGATION TO EXCHANGE

     The Noteholders understand that the Company's obligation to complete the
exchange of the Exchange Notes pursuant to this Agreement is conditioned upon:

     5.1  The receipt and acceptance in its sole and absolute discretion by the
Company of this Exchange Agreement from the Noteholders as evidenced solely by
the execution and delivery to Noteholders of this Agreement by the Company;

     5.2  Timely delivery by the Noteholders of the Exchange Notes in accordance
with this Agreement, and

     5.3  The accuracy on the Acceptance Date of the representations and
warranties of the Noteholder contained in this Agreement.

6.   CONDITIONS TO THE NOTEHOLDERS' OBLIGATION TO EXCHANGE

     The Company understands that the Noteholders' obligation to accept the
Promissory Notes and the cash consideration is conditioned upon:

     6.1  Delivery by the Company to the Note holder of this Agreement duly
executed by the Company in acceptance thereof; and

                                       3

<PAGE>

     6.2  The accuracy on the acceptance date of the representations and
warranties of the Company contained in this Agreement and the performance by the
Company on or before the acceptance date of all covenants and agreements of the
Company required to be performed on or before such acceptance date.

7.   INDEMNITY: The Noteholders and Company acknowledge that M.J. Whitman,
LLC ('MJW") is serving as intermediary in bringing together noteholders signing
this Agreement and the Company. Noteholder and Company agree that the
responsibilities of MJW shall be limited solely to facilitating this Agreement
and that that MJW shall have no responsibility for ensuring compliance of
Noteholder or the Company with any or all legal or regulatory requirements that
may apply to either of them relating to this transaction. Noteholder and Company
each agree to hold MJW and its affiliates, agents and employees harmless against
any claim relating to a failure of either Noteholder or Company or any of their
respective affiliates, agents or employees to fulfill any legal or regulatory
requirement relating to this transaction. Further, Company hereby agrees to
indemnify MJW and its affiliates, agents and employees against any liability
that any of them may incur relating to this transaction (including but not
limited to reasonable attorney's fees) as a result of the failure of Company or
any of its respective affiliates, agents or employees to fulfill any legal or
regulatory requirement relating to this transaction.

8.   GOVERNING LAW; MISCELLANEOUS.

     8.1  This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York without regard to its conflict of law rules.

     8.2  A facsimile transmission of this signed agreement shall be legal and
binding on all parties hereto.

     8.3  The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction.

     8.4  This Agreement may be amended only by an instrument in writing signed
by the party to be charged with enforcement.

9.   ENTIRE UNDERSTANDING. This Agreement (including the attachments hereto)
constitutes the entire understanding of the parties hereto with respect to the
subject matter hereof and supersedes any and all prior agreements, whether
written or oral. This Agreement may be amended only in a written document duly
executed by both parties hereto.

10.  NOTICES. Any notice to be given by the Company hereunder shall be deemed
served if faxed to Noteholder at facsimile number 212-888-6016 with a telephone
confirmation from Noteholder of receipt or if delivered to the Noteholder at its
address set out in this Agreement. Any notice to be given by Noteholder

                                       4

<PAGE>

hereunder shall be given by Noteholder and shall be deemed served if faxed to
the Company at facsimile number (281) 504-6453 (Attention Elmer Johnston) with a
telephone confirmation from the Company of receipt or if delivered to the
Company at its address set out in this Agreement.

11.  COUNTERPARTS. This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument. Either
party may enter into this Agreement by executing any such counterpart.

IN WITNESS whereof, this Agreement has been entered into as of the day and year
first above written.

COSTA BRAVA PARTNERS III

By:
       ---------------------------------
Title:
       ---------------------------------

NOTEHOLDER'S
IRS TAXPAYER NO.: 04-3387028
                  ----------

JOHN C. LYDECKER

By:
      ----------------------------------
Title:
      ----------------------------------

NOTEHOLDER'S
IRS TAXPAYER NO.: ###-##-####
                  -----------

This Agreement has been accepted by the Company as of the date set forth below
(the "Acceptance Date").

HARKEN ENERGY CORPORATION

By:
    ------------------------------------
       Anna M. Williams
Title: Vice President and CFO

Date of Acceptance by the Company:   May 26, 2003

                                       5

<PAGE>

                                   EXHIBIT "A"
                                   -----------
                                 PROMISSORY NOTE

$637,500                                                  April 1, 2003

FOR VALUE RECEIVED, Harken Energy Corporation (hereafter "Maker"), promises to
pay to the order of John C. Lydecker (the "Holder") the principal sum of SIX
HUNDRED THIRTY SEVEN THOUSAND FIVE HUNDRED DOLLARS ($637,500) together with
interest on the unpaid principal from the date hereof at an annual rate of 10%
for the ensuing interest bearing period. An initial installment of principal in
the amount of THREE HUNDRED FIFTY FOUR THOUSAND ONE HUNDRED SIXTY SEVEN DOLLARS
($354,167) together with accrued interest shall be payable on or before October
31, 2003. A second and final installment of principal in the amount of TWO
HUNDRED EIGHTY THREE THOUSAND THREE HUNDRED THIRTY THREE DOLLARS ($283,333)
together with accrued interest shall be payable not later than April 30, 2004.
All installments of principal and interest shall be payable at such place as may
hereafter be designated by the Holder.

Upon the occurrence of any one or more of the following events, the entire
principal balance remaining unpaid hereon together with all the interest accrued
thereon shall forthwith become due and payable at the option of the Holder
exercised by written notice:

     (a)  a default in the payment of all or any part of any installment of
          principal or interest when and as the same shall become due and
          payable provided, however, that Holder shall first provide notice in
          writing to Maker of said default and allow Maker a period of no less
          than twenty (20) business days to cure the default; or

     (b)  a receiver, trustee or similar official shall be appointed for the
          Maker or of the whole or any part of its property or any proceeding
          seeking the adjudication of the Maker as insolvent or seeking the
          liquidation, reorganization, adjustment or composition of the Maker's
          debts under any law relating to bankruptcy, insolvency or
          reorganization by or against the Maker and such appointment or
          proceeding continues undismissed or unvacated for a period of sixty
          (60) days; or

     (c)  a breach by the Maker of any of the covenants set out in Section 4 of
          the Exchange Agreement.

This Promissory Note is delivered in the State of New York and shall be
construed and enforced in accordance with, and governed by, the laws of the
State of New York without application of the conflict of laws provisions or
principles thereof. All persons and entities in any manner obligated under this
Promissory Note hereby consent to the jurisdiction of any federal or state court
within the State of New York having proper venue and also consent to service of
process by any means authorized by federal or New York law.

                                        HARKEN ENERGY CORPORATION

                                        By:
                                           -------------------------------------
                                        Name:  Anna M. Williams
                                        Title: Vice President and CFO

                                   EXHIBIT "B"
                                   -----------

                                       6

<PAGE>

                                 PROMISSORY NOTE

$397,500                                                   April 1, 2003

FOR VALUE RECEIVED, Harken Energy Corporation (hereafter "Maker"), promises to
pay to the order of Costa Brava Partners III (the "Holder") the principal sum of
THREE HUNDRED NINETY SEVEN THOUSAND FIVE HUNDRED DOLLARS ($397,500) together
with interest on the unpaid principal from the date hereof at an annual rate of
10% for the ensuing interest bearing period. An initial installment of principal
in the amount of TWO HUNDRED TWENTY THOUSAND EIGHT HUNDRED THIRTY THREE DOLLARS
($220,833) together with accrued interest shall be payable on or before October
31, 2003. A second and final installment of principal in the amount of ONE
HUNDRED SEVENTY SIX THOUSAND SIX HUNDRED SIXTY SEVEN DOLLARS ($176,667) together
with accrued interest shall be payable not later than April 30, 2004. All
installments of principal and interest shall be payable at such place as may
hereafter be designated by the Holder.

Upon the occurrence of any one or more of the following events, the entire
principal balance remaining unpaid hereon together with all the interest accrued
thereon shall forthwith become due and payable at the option of the Holder
exercised by written notice:

     (c)  a default in the payment of all or any part of any installment of
          principal or interest when and as the same shall become due and
          payable provided, however, that Holder shall first provide notice in
          writing to Maker of said default and allow Maker a period of no less
          than twenty (20) business days to cure the default; or

     (d)  a receiver, trustee or similar official shall be appointed for the
          Maker or of the whole or any part of its property or any proceeding
          seeking the adjudication of the Maker as insolvent or seeking the
          liquidation, reorganization, adjustment or composition of the Maker's
          debts under any law relating to bankruptcy, insolvency or
          reorganization by or against the Maker and such appointment or
          proceeding continues undismissed or unvacated for a period of sixty
          (60) days; or

     (c)  a breach by the Maker of any of the covenants set out in Section 4 of
          the Exchange Agreement.

This Promissory Note is delivered in the State of New York and shall be
construed and enforced in accordance with, and governed by, the laws of the
State of New York without application of the conflict of laws provisions or
principles thereof. All persons and entities in any manner obligated under this
Promissory Note hereby consent to the jurisdiction of any federal or state court
within the State of New York having proper venue and also consent to service of
process by any means authorized by federal or New York law.

                                        HARKEN ENERGY CORPORATION

                                        By:
                                           -------------------------------------
                                        Name:  Anna M. Williams
                                        Title: Vice President and CFO

                                       7

<PAGE>

                               EXCHANGE AGREEMENT

     THIS EXCHANGE AGREEMENT (the "Agreement"), dated as of the acceptance date
set forth below, by and between Harken Energy Corporation, a Delaware
corporation, with headquarters located at 580 WestLake Park Boulevard, Suite
600, Houston, Texas 77079 (the "Company"), and Timothy J. Holt and Paula B.
Holt, JTWROS, individuals whose address is 16 Lake Shore Drive, Montville, NJ
07045-9721 (the "Noteholder").

                              W I T N E S S E T H:

     WHEREAS, the undersigned Noteholder hereby offers, upon the terms and
subject to the limitations and conditions contained in this Agreement, to
exchange 5% Senior Convertible Notes Due May 26, 2003 issued by the Company and
held by the Noteholder (the "Exchange Notes") in the combined and outstanding
principal amount of ONE HUNDRED THOUSAND DOLLARS ($100,000) (the "Exchange Notes
Principal") in return for a cash payment as described hereinafter and a
Promissory Note as set forth in the form of Promissory Note in Exhibit "A"
attached and incorporated herein by reference for all purposes; and

     WHEREAS, the Company wishes to accept such offer to exchange the Exchange
Notes for the cash and Promissory Note described herein subject to the
conditions of this Agreement;

     NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

1.   TERMS OF THE EXCHANGE: Upon the terms and subject to the limitations and
conditions set forth in this Agreement, the undersigned Noteholder hereby offers
to exchange, and the Company hereby accepts for exchange, the Exchange Notes.

     1.1  The Company agrees to provide to the Noteholder:

          (a). a cash payment payable on or before May 30, 2003 in an amount of
THIRTY FIVE THOUSAND DOLLARS ($35,000) (35% of the Exchange Notes Principal);
and

          (b). a Promissory Note in a principal sum of FORTY FIVE THOUSAND
DOLLARS ($45,000) (45% of the Exchange Notes Principal) pursuant to the terms
and conditions as set forth in Exhibit "A" hereto.

     1.2  Noteholder agrees to deliver the Exchange Notes to the Company or its
designee within 5 (five) business days or less following the execution of this
Agreement. Noteholder further agrees to provide to the Company the wire
instructions for the cash payment portion of the exchange no later than 3
business days before payment is due by the Company.

                                       1

<PAGE>

2.   NOTEHOLDER REPRESENTATIONS AND WARRANTIES: The Noteholder represents and
warrants to, and covenants and agrees with, the Company as follows:

     2.1  The Noteholder is the legal owner and holder of the Exchange Notes and
will deliver the Exchange Notes free and clear of all liens, claims
encumbrances, and security interests;

     2.2  The Noteholder has all necessary power and authority to execute and
deliver this Agreement and to consummate the transaction contemplated herein;

     2.3  The Noteholder is in compliance with any and all U. S. securities laws
as such laws might apply to the Exchange Notes, and participation by the
Noteholder in the transactions contemplated herein does not and will not violate
such securities laws;

     2.4  The Noteholder is acquiring the Promissory Notes for its own account
for investment only and not with a view towards the public sale or distribution
thereof;

     2.5  This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Noteholder and is a valid and binding agreement of
the Noteholder enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally.

3.   COMPANY REPRESENTATIONS AND WARRANTIES: The Company represents and warrants
to the Noteholder that:

     3.1  The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is qualified to do
business in the State of Texas. The Company has full power and authority to
enter into this Agreement and consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, and this Agreement
is a valid and binding obligation of the Company enforceable in accordance with
its terms.

     3.2  This Agreement, when signed and delivered by Noteholder to the Company
and then accepted by the Company, shall have been duly and validly authorized,
executed and delivered on behalf of the Company and shall be a valid and binding
agreement of the Company enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally.

     3.3  The Company is not aware of any authorization, approval or consent of
any governmental body which is required to be obtained by the Company for the
issuance of the Promissory Notes to the Noteholder as contemplated by this
Agreement.

                                       2

<PAGE>

4.   ADDITIONAL COMPANY COVENANTS

     4.1  In connection with the Promissory Note to be provided pursuant to the
terms of this Agreement, the Company agrees, so long as any payment obligation
under the Promissory Note remains outstanding, to comply with the Section 10.10
"Limitation on Other Indebtedness" and Section 10.11 "Limitation on Liens" as
set out in that certain Trust Indenture executed by the Company on May 28, 1998
in connection with the Exchange Notes (the "Trust Indenture"). Said Sections
10.10 and 10.11 of the Trust Indenture hereby are incorporated by reference for
the limited purpose of this paragraph 4.

     4.2  The Company agrees that the obligations under this Agreement and
respective Promissory Note shall hold the same status as more fully set out in
Section 14.01 "Seniority of Notes" of the Trust Indenture with respect to the
Indebtedness (as defined in the Trust Indenture) and Subordinated Obligations
(as defined in the Trust Indenture). Said Section 14.01 and definitions for
Indebtedness and Subordinated Obligations of the Trust Indenture hereby are
incorporated by reference for the limited purpose of this paragraph 4.

5.   CONDITIONS TO THE COMPANY'S OBLIGATION TO EXCHANGE

     The Noteholder understands that the Company's obligation to complete the
exchange of the Exchange Notes pursuant to this Agreement is conditioned upon:

     5.2  The receipt and acceptance in its sole and absolute discretion by the
Company of this Exchange Agreement from the Noteholder as evidenced solely by
the execution and delivery to Noteholder of this Agreement by the Company;

     5.2  Timely delivery by the Noteholder of the Exchange Notes in accordance
with this Agreement, and

     5.3  The accuracy on the Acceptance Date of the representations and
warranties of the Noteholder contained in this Agreement.

6.   CONDITIONS TO THE NOTEHOLDER'S OBLIGATION TO EXCHANGE

     The Company understands that the Noteholder's obligation to accept the
Promissory Notes and the cash consideration is conditioned upon:

     6.1  Delivery by the Company to the Note holder of this Agreement duly
executed by the Company in acceptance thereof; and

     6.2  The accuracy on the acceptance date of the representations and
warranties of the Company contained in this Agreement and the performance by the
Company on or before the acceptance date of all covenants and agreements of the
Company required to be performed on or before such acceptance date.

                                       3

<PAGE>

7.   INDEMNITY: Noteholder and Company acknowledge that M.J. Whitman, LLC (
'MJW") is serving as intermediary in bringing together noteholders signing this
Agreement and the Company. Noteholder and Company agree that the
responsibilities of MJW shall be limited solely to facilitating this Agreement
and that that MJW shall have no responsibility for ensuring compliance of
Noteholder or the Company with any or all legal or regulatory requirements that
may apply to either of them relating to this transaction. Noteholder and Company
each agree to hold MJW and its affiliates, agents and employees harmless against
any claim relating to a failure of either Noteholder or Company or any of their
respective affiliates, agents or employees to fulfill any legal or regulatory
requirement relating to this transaction. Further, Company hereby agrees to
indemnify MJW and its affiliates, agents and employees against any liability
that any of them may incur relating to this transaction (including but not
limited to reasonable attorney's fees) as a result of the failure of Company or
any of its respective affiliates, agents or employees to fulfill any legal or
regulatory requirement relating to this transaction.

8.   GOVERNING LAW; MISCELLANEOUS.

     8.1  This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York without regard to its conflict of law rules.

     8.2  A facsimile transmission of this signed agreement shall be legal and
binding on all parties hereto.

     8.3  The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction.

     8.4  This Agreement may be amended only by an instrument in writing signed
by the party to be charged with enforcement.

9.   ENTIRE UNDERSTANDING. This Agreement (including the attachments hereto)
constitutes the entire understanding of the parties hereto with respect to the
subject matter hereof and supersedes any and all prior agreements, whether
written or oral. This Agreement may be amended only in a written document duly
executed by both parties hereto.

10.  NOTICES. Any notice to be given by the Company hereunder shall be deemed
served if faxed to Noteholder at facsimile number 212-888-6016 with a telephone
confirmation from Noteholder of receipt or if delivered to the Noteholder at its
address set out in this Agreement. Any notice to be given by Noteholder
hereunder shall be given by Noteholder and shall be deemed served if faxed to
the Company at facsimile number (281) 504-6453 (Attention Elmer Johnston) with a
telephone confirmation from the Company of receipt or if delivered to the
Company at its address set out in this Agreement.

                                       4

<PAGE>

11.  COUNTERPARTS. This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument. Either
party may enter into this Agreement by executing any such counterpart.

IN WITNESS whereof, this Agreement has been entered into as of the day and year
first above written.

TIMOTHY J. HOLT AND PAULA B. HOLT, JTWROS

By:
      ----------------------------------
Title:
      ----------------------------------

NOTEHOLDER'S
IRS TAXPAYER NO.:   ###-##-####
                  -------------

This Agreement has been accepted by the Company as of the date set forth below
(the "Acceptance Date").

HARKEN ENERGY CORPORATION

By:
         -------------------------------
         Anna M. Williams
Title:   Vice President and CFO

Date of Acceptance by the Company:  May 26, 2003

                                       5

<PAGE>
                                   EXHIBIT "A"
                                   -----------

                                 PROMISSORY NOTE

$45,000                                                            April 1, 2003

FOR VALUE RECEIVED, Harken Energy Corporation (hereafter "Maker"), promises to
pay to the order of Timothy J. Holt and Paula B. Holt, JTWROS (the "Holder") the
principal sum of FORTY FIVE THOUSAND DOLLARS ($45,000) together with interest on
the unpaid principal from the date hereof at an annual rate of 10% for the
ensuing interest bearing period. An initial installment of principal in the
amount of TWENTY FIVE THOUSAND DOLLARS ($25,000) together with accrued interest
shall be payable on or before October 31, 2003. A second and final installment
of principal in the amount of TWENTY THOUSAND DOLLARS ($20,000) together with
accrued interest shall be payable not later than April 30, 2004. All
installments of principal and interest shall be payable at such place as may
hereafter be designated by the Holder.

Upon the occurrence of any one or more of the following events, the entire
principal balance remaining unpaid hereon together with all the interest accrued
thereon shall forthwith become due and payable at the option of the Holder
exercised by written notice:

     (a)  a default in the payment of all or any part of any installment of
          principal or interest when and as the same shall become due and
          payable provided, however, that Holder shall first provide notice in
          writing to Maker of said default and allow Maker a period of no less
          than twenty (20) business days to cure the default; or

     (b)  a receiver, trustee or similar official shall be appointed for the
          Maker or of the whole or any part of its property or any proceeding
          seeking the adjudication of the Maker as insolvent or seeking the
          liquidation, reorganization, adjustment or composition of the Maker's
          debts under any law relating to bankruptcy, insolvency or
          reorganization by or against the Maker and such appointment or
          proceeding continues undismissed or unvacated for a period of sixty
          (60) days; or

     (c)  a breach by the Maker of any of the covenants set out in Section 4 of
          the Exchange Agreement.

This Promissory Note is delivered in the State of New York and shall be
construed and enforced in accordance with, and governed by, the laws of the
State of New York without application of the conflict of laws provisions or
principles thereof. All persons and entities in any manner obligated under this
Promissory Note hereby consent to the jurisdiction of any federal or state court
within the State of New York having proper venue and also consent to service of
process by any means authorized by federal or New York law.

                                        HARKEN ENERGY CORPORATION

                                        By:
                                           -------------------------------------
                                        Name:  Anna M. Williams
                                        Title: Vice President and CFO

                                       6

<PAGE>

                               EXCHANGE AGREEMENT

     THIS EXCHANGE AGREEMENT (the "Agreement"), dated as of the acceptance date
set forth below, by and between Harken Energy Corporation, a Delaware
corporation, with headquarters located at 580 WestLake Park Boulevard, Suite
600, Houston, Texas 77079 (the "Company"), and Terry Marbach, an individual
whose address is 9704 West Raintree Dr., Columbus, IN 47201 (the "Noteholder").

                              W I T N E S S E T H:

     WHEREAS, the undersigned Noteholder hereby offers, upon the terms and
subject to the limitations and conditions contained in this Agreement, to
exchange 5% Senior Convertible Notes Due May 26, 2003 issued by the Company and
held by the Noteholder (the "Exchange Notes") in the combined and outstanding
principal amount of TWO HUNDRED THOUSAND DOLLARS ($200,000) (the "Exchange Notes
Principal") in return for a cash payment as described hereinafter and a
Promissory Note as set forth in the form of Promissory Note in Exhibit "A"
attached and incorporated herein by reference for all purposes; and

     WHEREAS, the Company wishes to accept such offer to exchange the Exchange
Notes for the cash and Promissory Note described herein subject to the
conditions of this Agreement;

     NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

1.   TERMS OF THE EXCHANGE: Upon the terms and subject to the limitations and
conditions set forth in this Agreement, the undersigned Noteholder hereby offers
to exchange, and the Company hereby accepts for exchange, the Exchange Notes.

     1.1  The Company agrees to provide to the Noteholder:

          (a). a cash payment payable on or before May 30, 2003 in an amount of
SEVENTY THOUSAND DOLLARS ($70,000) (35% of the Exchange Notes Principal); and

          (b). a Promissory Note in a principal sum of NINETY THOUSAND DOLLARS
($90,000) (45% of the Exchange Notes Principal) pursuant to the terms and
conditions as set forth in Exhibit "A" hereto.

     1.2  Noteholder agrees to deliver the Exchange Notes to the Company or its
designee within 5 (five) business days or less following the execution of this
Agreement. Noteholder further agrees to provide to the Company the wire
instructions for the cash payment portion of the exchange no later than 3
business days before payment is due by the Company.

                                       1

<PAGE>

2.   NOTEHOLDER REPRESENTATIONS AND WARRANTIES: The Noteholder represents and
warrants to, and covenants and agrees with, the Company as follows:

     2.1  The Noteholder is the legal owner and holder of the Exchange Notes and
will deliver the Exchange Notes free and clear of all liens, claims
encumbrances, and security interests;

     2.2  The Noteholder has all necessary power and authority to execute and
deliver this Agreement and to consummate the transaction contemplated herein;

     2.3  The Noteholder is in compliance with any and all U. S. securities laws
as such laws might apply to the Exchange Notes, and participation by the
Noteholder in the transactions contemplated herein does not and will not violate
such securities laws;

     2.4  The Noteholder is acquiring the Promissory Notes for its own account
for investment only and not with a view towards the public sale or distribution
thereof;

     2.5  This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Noteholder and is a valid and binding agreement of
the Noteholder enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally.

3.   COMPANY REPRESENTATIONS AND WARRANTIES: The Company represents and warrants
to the Noteholder that:

     3.1  The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is qualified to do
business in the State of Texas. The Company has full power and authority to
enter into this Agreement and consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, and this Agreement
is a valid and binding obligation of the Company enforceable in accordance with
its terms.

     3.2  This Agreement, when signed and delivered by Noteholder to the Company
and then accepted by the Company, shall have been duly and validly authorized,
executed and delivered on behalf of the Company and shall be a valid and binding
agreement of the Company enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy or other laws
-affecting the enforcement of creditors' rights generally.

     3.3  The Company is not aware of any authorization, approval or consent of
any governmental body which is required to be obtained by the Company for the
issuance of the Promissory Notes to the Noteholder as contemplated by this
Agreement.

                                       2

<PAGE>

4.   ADDITIONAL  COMPANY COVENANTS

     4.1  In connection with the Promissory Note to be provided pursuant to the
terms of this Agreement, the Company agrees, so long as any payment obligation
under the Promissory Note remains outstanding, to comply with the Section 10.10
"Limitation on Other Indebtedness" and Section 10.11 "Limitation on Liens" as
set out in that certain Trust Indenture executed by the Company on May 28, 1998
in connection with the Exchange Notes (the "Trust Indenture"). Said Sections
10.10 and 10.11 of the Trust Indenture hereby are incorporated by reference for
the limited purpose of this paragraph 4.

     4.2  The Company agrees that the obligations under this Agreement and
respective Promissory Note shall hold the same status as more fully set out in
Section 14.01 "Seniority of Notes" of the Trust Indenture with respect to the
Indebtedness (as defined in the Trust Indenture) and Subordinated Obligations
(as defined in the Trust Indenture). Said Section 14.01 and definitions for
Indebtedness and Subordinated Obligations of the Trust Indenture hereby are
incorporated by reference for the limited purpose of this paragraph 4.

5.   CONDITIONS TO THE COMPANY'S OBLIGATION TO EXCHANGE

     The Noteholder understands that the Company's obligation to complete the
exchange of the Exchange Notes pursuant to this Agreement is conditioned upon:

     5.1  The receipt and acceptance in its sole and absolute discretion by the
Company of this Exchange Agreement from the Noteholder as evidenced solely by
the execution and delivery to Noteholder of this Agreement by the Company;

     5.2  Timely delivery by the Noteholder of the Exchange Notes in accordance
with this Agreement, and

     5.3  The accuracy on the Acceptance Date of the representations and
warranties of the Noteholder contained in this Agreement.

6.   CONDITIONS TO THE NOTEHOLDER'S OBLIGATION TO EXCHANGE

     The Company understands that the Noteholder's obligation to accept the
Promissory Notes and the cash consideration is conditioned upon:

     6.1  Delivery by the Company to the Note holder of this Agreement duly
executed by the Company in acceptance thereof; and

     6.2  The accuracy on the acceptance date of the representations and
warranties of the Company contained in this Agreement and the performance by the
Company on or before the acceptance date of all covenants and agreements of the
Company required to be performed on or before such acceptance date.

                                       3

<PAGE>

7.   INDEMNITY: Noteholder and Company acknowledge that M.J. Whitman, LLC
( 'MJW") is serving as intermediary in bringing together noteholders signing
this Agreement and the Company. Noteholder and Company agree that the
responsibilities of MJW shall be limited solely to facilitating this Agreement
and that that MJW shall have no responsibility for ensuring compliance of
Noteholder or the Company with any or all legal or regulatory requirements that
may apply to either of them relating to this transaction. Noteholder and Company
each agree to hold MJW and its affiliates, agents and employees harmless against
any claim relating to a failure of either Noteholder or Company or any of their
respective affiliates, agents or employees to fulfill any legal or regulatory
requirement relating to this transaction. Further, Company hereby agrees to
indemnify MJW and its affiliates, agents and employees against any liability
that any of them may incur relating to this transaction (including but not
limited to reasonable attorney's fees) as a result of the failure of Company or
any of its respective affiliates, agents or employees to fulfill any legal or
regulatory requirement relating to this transaction.

8.   GOVERNING LAW; MISCELLANEOUS.

     8.1  This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York without regard to its conflict of law rules.

     8.2  A facsimile transmission of this signed agreement shall be legal and
binding on all parties hereto.

     8.3  The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction.

     8.4  This Agreement may be amended only by an instrument in writing signed
by the party to be charged with enforcement.

9.   ENTIRE UNDERSTANDING. This Agreement (including the attachments hereto)
constitutes the entire understanding of the parties hereto with respect to the
subject matter hereof and supersedes any and all prior agreements, whether
written or oral. This Agreement may be amended only in a written document duly
executed by both parties hereto.

10.  NOTICES.  Any notice to be given by the Company hereunder shall be deemed
served if faxed to Noteholder at facsimile number 212-888-6016 with a telephone
confirmation from Noteholder of receipt or if delivered to the Noteholder at its
address set out in this Agreement. Any notice to be given by Noteholder
hereunder shall be given by Noteholder and shall be deemed served if faxed to
the Company at facsimile number (281) 504-6453 (Attention Elmer Johnston) with a
telephone confirmation from the Company of receipt or if delivered to the
Company at its address set out in this Agreement.

                                       4

<PAGE>

11.  COUNTERPARTS. This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument. Either
party may enter into this Agreement by executing any such counterpart.

IN WITNESS whereof, this Agreement has been entered into as of the day and year
first above written.

TERRY MARBACH

By:
   -------------------------------
Title:
      ----------------------------

NOTEHOLDER'S
IRS TAXPAYER NO.: ###-##-####
                  -----------

This Agreement has been accepted by the Company as of the date set forth below
(the "Acceptance Date").

HARKEN ENERGY CORPORATION

By:
        ---------------------
        Anna M. Williams
Title:  Vice President & CFO

Date of Acceptance by the Company: May 26, 2003

                                       5

<PAGE>

                                   EXHIBIT "A"
                                   -----------

                                 PROMISSORY NOTE

$90,000                                                            April 1, 2003

FOR VALUE RECEIVED, Harken Energy Corporation (hereafter "Maker"), promises to
pay to the order of Terry Marbach(the "Holder") the principal sum of NINETY
THOUSAND DOLLARS ($90,000) together with interest on the unpaid principal from
the date hereof at an annual rate of 10% for the ensuing interest bearing
period. An initial installment of principal in the amount of FIFTY THOUSAND
DOLLARS ($50,000) together with accrued interest shall be payable on or before
October 31, 2003. A second and final installment of principal in the amount of
FORTY THOUSAND DOLLARS ($40,000) together with accrued interest shall be payable
not later than April 30, 2004. All installments of principal and interest shall
be payable at such place as may hereafter be designated by the Holder.

Upon the occurrence of any one or more of the following events, the entire
principal balance remaining unpaid hereon together with all the interest accrued
thereon shall forthwith become due and payable at the option of the Holder
exercised by written notice:

     (a)  a default in the payment of all or any part of any installment of
          principal or interest when and as the same shall become due and
          payable provided, however, that Holder shall first provide notice in
          writing to Maker of said default and allow Maker a period of no less
          than twenty (20) business days to cure the default; or

     (b)  a receiver, trustee or similar official shall be appointed for the
          Maker or of the whole or any part of its property or any proceeding
          seeking the adjudication of the Maker as insolvent or seeking the
          liquidation, reorganization, adjustment or composition of the Maker's
          debts under any law relating to bankruptcy, insolvency or
          reorganization by or against the Maker and such appointment or
          proceeding continues undismissed or unvacated for a period of sixty
          (60) days; or

     (c)  a breach by the Maker of any of the covenants set out in Section 4 of
          the Exchange Agreement.

This Promissory Note is delivered in the State of New York and shall be
construed and enforced in accordance with, and governed by, the laws of the
State of New York without application of the conflict of laws provisions or
principles thereof. All persons and entities in any manner obligated under this
Promissory Note hereby consent to the jurisdiction of any federal or state court
within the State of New York having proper venue and also consent to service of
process by any means authorized by federal or New York law.

                                        HARKEN ENERGY CORPORATION

                                        By:
                                           -------------------------------------
                                        Name:  Anna M. Williams
                                        Title: Vice President & CFO

                                       6

<PAGE>

                               EXCHANGE AGREEMENT

     THIS EXCHANGE AGREEMENT (the "Agreement"), dated as of the acceptance date
set forth below, by and between Harken Energy Corporation, a Delaware
corporation, with headquarters located at 580 WestLake Park Boulevard, Suite
600, Houston, Texas 77079 (the "Company"), and Kirr Marbach & Co. Employee
Profit Sharing Plan, an Employee Profit Sharing Plan whose address is FBO Terry
B. Marbach, P.O. Box 1729, Columbus, IN 47202 (the "Noteholder").

                              W I T N E S S E T H:

     WHEREAS, the undersigned Noteholder hereby offers, upon the terms and
subject to the limitations and conditions contained in this Agreement, to
exchange 5% Senior Convertible Notes Due May 26, 2003 issued by the Company and
held by the Noteholder (the "Exchange Notes") in the combined and outstanding
principal amount of FOUR HUNDRED NINETY THOUSAND DOLLARS ($490,000) (the
"Exchange Notes Principal") in return for a cash payment as described
hereinafter and a Promissory Note as set forth in the form of Promissory Note in
Exhibit "A" attached and incorporated herein by reference for all purposes; and

     WHEREAS, the Company wishes to accept such offer to exchange the Exchange
Notes for the cash and Promissory Note described herein subject to the
conditions of this Agreement;

     NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

1.   TERMS OF THE EXCHANGE: Upon the terms and subject to the limitations and
conditions set forth in this Agreement, the undersigned Noteholder hereby offers
to exchange, and the Company hereby accepts for exchange, the Exchange Notes.

     1.1  The Company agrees to provide to the Noteholder:

          (a). a cash payment payable on or before May 30, 2003 in an amount of
ONE HUNDRED SEVENTY ONE THOUSAND FIVE HUNDRED DOLLARS ($171,500) (35% of the
Exchange Notes Principal); and

          (b). a Promissory Note in a principal sum of TWO HUNDRED TWENTY
THOUSAND FIVE HUNDRED DOLLARS ($220,500) (45% of the Exchange Notes Principal)
pursuant to the terms and conditions as set forth in Exhibit "A" hereto.

     1.2  Noteholder agrees to deliver the Exchange Notes to the Company or its
designee within 5 (five) business days or less following the execution of this
Agreement. Noteholder further agrees to provide to the Company the wire
instructions for the cash payment portion of the exchange no later than 3
business days before payment is due by the Company.

                                       1

<PAGE>

2.   NOTEHOLDER REPRESENTATIONS AND WARRANTIES: The Noteholder represents and
warrants to, and covenants and agrees with, the Company as follows:

     2.1  The Noteholder is the legal owner and holder of the Exchange Notes and
will deliver the Exchange Notes free and clear of all liens, claims
encumbrances, and security interests;

     2.2  The Noteholder has all necessary power and authority to execute and
deliver this Agreement and to consummate the transaction contemplated herein;

     2.3  The Noteholder is in compliance with any and all U. S. securities laws
as such laws might apply to the Exchange Notes, and participation by the
Noteholder in the transactions contemplated herein does not and will not violate
such securities laws;

     2.4  The Noteholder is acquiring the Promissory Notes for its own account
for investment only and not with a view towards the public sale or distribution
thereof;

     2.5  This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Noteholder and is a valid and binding agreement of
the Noteholder enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally.

3.   COMPANY REPRESENTATIONS AND WARRANTIES: The Company represents and warrants
to the Noteholder that:

     3.1  The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is qualified to do
business in the State of Texas. The Company has full power and authority to
enter into this Agreement and consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, and this Agreement
is a valid and binding obligation of the Company enforceable in accordance with
its terms.

     3.2  This Agreement, when signed and delivered by Noteholder to the Company
and then accepted by the Company, shall have been duly and validly authorized,
executed and delivered on behalf of the Company and shall be a valid and binding
agreement of the Company enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally.

     3.3  The Company is not aware of any authorization, approval or consent of
any governmental body which is required to be obtained by the Company for the
issuance of the Promissory Notes to the Noteholder as contemplated by this
Agreement.

                                       2

<PAGE>

4.   ADDITIONAL COMPANY COVENANTS

     4.1  In connection with the Promissory Note to be provided pursuant to the
terms of this Agreement, the Company agrees, so long as any payment obligation
under the Promissory Note remains outstanding, to comply with the Section 10.10
"Limitation on Other Indebtedness" and Section 10.11 "Limitation on Liens" as
set out in that certain Trust Indenture executed by the Company on May 28, 1998
in connection with the Exchange Notes (the "Trust Indenture"). Said Sections
10.10 and 10.11 of the Trust Indenture hereby are incorporated by reference for
the limited purpose of this paragraph 4.

     4.2  The Company agrees that the obligations under this Agreement and
respective Promissory Note shall hold the same status as more fully set out in
Section 14.01 "Seniority of Notes" of the Trust Indenture with respect to the
Indebtedness (as defined in the Trust Indenture) and Subordinated Obligations
(as defined in the Trust Indenture). Said Section 14.01 and definitions for
Indebtedness and Subordinated Obligations of the Trust Indenture hereby are
incorporated by reference for the limited purpose of this paragraph 4.

5.   CONDITIONS TO THE COMPANY'S OBLIGATION TO EXCHANGE

     The Noteholder understands that the Company's obligation to complete the
exchange of the Exchange Notes pursuant to this Agreement is conditioned upon:

     5.2  The receipt and acceptance in its sole and absolute discretion by the
Company of this Exchange Agreement from the Noteholder as evidenced solely by
the execution and delivery to Noteholder of this Agreement by the Company;

     5.2  Timely delivery by the Noteholder of the Exchange Notes in accordance
with this Agreement, and

     5.3  The accuracy on the Acceptance Date of the representations and
warranties of the Noteholder contained in this Agreement.

6.   CONDITIONS TO THE NOTEHOLDER'S OBLIGATION TO EXCHANGE

     The Company understands that the Noteholder's obligation to accept the
Promissory Notes and the cash consideration is conditioned upon:

     6.1  Delivery by the Company to the Note holder of this Agreement duly
executed by the Company in acceptance thereof; and

     6.2  The accuracy on the acceptance date of the representations and
warranties of the Company contained in this Agreement and the performance by the
Company on or before the acceptance date of all covenants and agreements of the
Company required to be performed on or before such acceptance date.

                                       3

<PAGE>

7.   INDEMNITY: Noteholder and Company acknowledge that M.J. Whitman, LLC
( 'MJW") is serving as intermediary in bringing together noteholders signing
this Agreement and the Company. Noteholder and Company agree that the
responsibilities of MJW shall be limited solely to facilitating this Agreement
and that that MJW shall have no responsibility for ensuring compliance of
Noteholder or the Company with any or all legal or regulatory requirements that
may apply to either of them relating to this transaction. Noteholder and Company
each agree to hold MJW and its affiliates, agents and employees harmless against
any claim relating to a failure of either Noteholder or Company or any of their
respective affiliates, agents or employees to fulfill any legal or regulatory
requirement relating to this transaction. Further, Company hereby agrees to
indemnify MJW and its affiliates, agents and employees against any liability
that any of them may incur relating to this transaction (including but not
limited to reasonable attorney's fees) as a result of the failure of Company or
any of its respective affiliates, agents or employees to fulfill any legal or
regulatory requirement relating to this transaction.

8.   GOVERNING LAW; MISCELLANEOUS.

     8.1  This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York without regard to its conflict of law rules.

     8.2  A facsimile transmission of this signed agreement shall be legal and
binding on all parties hereto.

     8.3  The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction.

     8.4  This Agreement may be amended only by an instrument in writing signed
by the party to be charged with enforcement.

9.   ENTIRE UNDERSTANDING. This Agreement (including the attachments hereto)
constitutes the entire understanding of the parties hereto with respect to the
subject matter hereof and supersedes any and all prior agreements, whether
written or oral. This Agreement may be amended only in a written document duly
executed by both parties hereto.

10.  NOTICES. Any notice to be given by the Company hereunder shall be deemed
served if faxed to Noteholder at facsimile number 212-888-6016 with a telephone
confirmation from Noteholder of receipt or if delivered to the Noteholder at its
address set out in this Agreement. Any notice to be given by Noteholder
hereunder shall be given by Noteholder and shall be deemed served if faxed to
the Company at facsimile number (281) 504-6453 (Attention Elmer Johnston) with a
telephone confirmation from the Company of receipt or if delivered to the
Company at its address set out in this Agreement.

                                       4

<PAGE>

11.  COUNTERPARTS. This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument. Either
party may enter into this Agreement by executing any such counterpart.

IN WITNESS whereof, this Agreement has been entered into as of the day and year
first above written.

KIRR MARBACH & CO. EMPLOYEE PROFIT SHARING PLAN

By:
   -------------------------------
Title:
      ----------------------------

NOTEHOLDER'S
IRS TAXPAYER NO.: 35-1339807
                  ----------

This Agreement has been accepted by the Company as of the date set forth below
(the "Acceptance Date").

HARKEN ENERGY CORPORATION

By:
       ---------------------------
       Anna M. Williams
Title: Vice President and CFO

Date of Acceptance by the Company: May 26, 2003

                                       5

<PAGE>

                                   EXHIBIT "A"
                                   -----------

                                 PROMISSORY NOTE

$220,500                                                           April 1, 2003

FOR VALUE RECEIVED, Harken Energy Corporation (hereafter "Maker"), promises to
pay to the order of Kirr Marbach & Co. Employee Profit Sharing Plan (the
"Holder") the principal sum of TWO HUNDRED TWENTY THOUSAND FIVE HUNDRED DOLLARS
($220,500) together with interest on the unpaid principal from the date hereof
at an annual rate of 10% for the ensuing interest bearing period. An initial
installment of principal in the amount of ONE HUNDRED TWENTY TWO THOUSAND FIVE
HUNDRED DOLLARS ($122,500) together with accrued interest shall be payable on or
before October 31, 2003. A second and final installment of principal in the
amount of NINETY EIGHT THOUSAND DOLLARS ($98,000) together with accrued interest
shall be payable not later than April 30, 2004. All installments of principal
and interest shall be payable at such place as may hereafter be designated by
the Holder.

Upon the occurrence of any one or more of the following events, the entire
principal balance remaining unpaid hereon together with all the interest accrued
thereon shall forthwith become due and payable at the option of the Holder
exercised by written notice:

     (a)  a default in the payment of all or any part of any installment of
          principal or interest when and as the same shall become due and
          payable provided, however, that Holder shall first provide notice in
          writing to Maker of said default and allow Maker a period of no less
          than twenty (20) business days to cure the default; or

     (b)  a receiver, trustee or similar official shall be appointed for the
          Maker or of the whole or any part of its property or any proceeding
          seeking the adjudication of the Maker as insolvent or seeking the
          liquidation, reorganization, adjustment or composition of the Maker's
          debts under any law relating to bankruptcy, insolvency or
          reorganization by or against the Maker and such appointment or
          proceeding continues undismissed or unvacated for a period of sixty
          (60) days; or

     (c)  a breach by the Maker of any of the covenants set out in Section 4 of
          the Exchange Agreement.

This Promissory Note is delivered in the State of New York and shall be
construed and enforced in accordance with, and governed by, the laws of the
State of New York without application of the conflict of laws provisions or
principles thereof. All persons and entities in any manner obligated under this
Promissory Note hereby consent to the jurisdiction of any federal or state court
within the State of New York having proper venue and also consent to service of
process by any means authorized by federal or New York law.

                                        HARKEN ENERGY CORPORATION

                                        By:
                                           -------------------------------------
                                        Name:  Anna M. Williams
                                        Title: Vice President & CFO

                                       6<PAGE>
                                                                  Exhibit 10.52
                           CERTIFICATE OF DESIGNATIONS

     Harken Energy Corporation, a Delaware corporation, DOES HEREBY CERTIFY:

     That, pursuant to the authority conferred upon the Board of Directors of
said corporation by virtue of its certificate of incorporation as amended and in
accordance with Section 151 of the General Corporation Law of the State of
Delaware (the "DGCL"), said Board of Directors has duly adopted a resolution at
a special meeting of the Board of Directors held on May 6, 2003, providing for
the issuance of a series of preferred stock, par value $1.00 per share,
designated as Series G3 Convertible Preferred Stock, which resolution reads as
follows:

     "RESOLVED, that the Board of Directors (the "Board of Directors") of Harken
Energy Corporation (the "Corporation") hereby authorizes the issuance of a
series of preferred stock and fixes its designation, powers, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations and restrictions thereof, as follows:

     Section 1.  Designation. The distinctive serial designation of said series
shall be "Series G3 Convertible Preferred Stock" (hereinafter called "Series G3
Preferred Stock"). Each share of Series G3 Preferred Stock shall be identical in
all respects with all other shares of Series G3 Preferred Stock.

     Section 2.  Number of Shares. The number of authorized shares of Series G3
Preferred Stock shall be, in aggregate, 150,000 shares. The number of authorized
shares of Series G3 Preferred Stock may be increased or reduced by the Board of
Directors of the Corporation by the filing of a certificate pursuant to the
provisions of the DGCL stating that the change has been so authorized. When
shares of Series G3 Preferred Stock are purchased or otherwise acquired by the
Corporation or converted into Common Stock, par value $0.01 per share, of the
Corporation (the "Common Stock"), the Corporation shall take all necessary
action to cause the shares of Series G3 Preferred Stock so purchased or acquired
to be canceled and reverted to authorized but unissued shares of Series G3
Preferred Stock undesignated as to series.

     Section 3.  Rank. The Series G3 Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding-up and dissolution, rank (i)
junior to all claims of creditors, including holders of the Corporation's
outstanding debt securities, (ii) junior to all obligations of the Corporation's
Subsidiaries (as defined in Section 13 below), (iii) senior to all classes of
Common Stock and to each other class of preferred stock established hereafter by
the Board of Directors of the Corporation, the terms of which expressly provide
that it ranks junior to the Series G3 Preferred Stock as to dividend rights and
rights on liquidation, winding-up and dissolution of the Corporation
(collectively referred to, together with all classes of Common Stock of the
Corporation, as "Junior Stock"), and (iv) on a parity with each other class of
preferred stock established or issued hereafter by the Board of Directors of the
Corporation the terms of which expressly provide that such class or series shall
rank on a parity with the Series G3 Preferred Stock as to dividend rights and
rights on liquidation, winding-up and dissolution (collectively referred to as
"Parity Stock"). The Corporation may authorize the issuance of any amount of
Parity Stock (which may provide for the payment of dividends in additional
shares of Parity Stock in lieu of cash dividends) without the approval of the
holders of the Series G3 Preferred Stock. The Series G3 Preferred Stock shall
rank as Parity Stock to the Series G1 Preferred Stock and Series G2 Preferred
Stock of the Corporation, previously authorized by the Board.

     Section 4.  Dividends.

     (a)  The holders of record, as of the Record Date therefor, of the
outstanding shares of Series G3 Preferred Stock shall be entitled to receive,
out of funds legally available therefor, dividends on the Series G3 Preferred
Stock at a rate equal to $3.50 per share per annum (equivalent to 3.5% of the
liquidation preference annually), payable semi-annually in arrears in cash.

     (b)  All dividends shall accrue from the date of issuance of the Series G3
Preferred Stock and shall be payable semi-annually in arrears. Such dividends
will be payable on June 30 and December 31 of each year (a "Dividend Payment
Date"), commencing on December 31, 2003; provided, however, that if a Dividend
Payment Date is not a Stock Exchange Business Day, then the dividend shall be
payable on the first immediately succeeding Stock Exchange Business Day.
Dividends shall be paid to the holders of record

<PAGE>

of the Series G3 preferred Stock as their names appear on the stock transfer
records of the Corporation on the date designated by the Board of Directors
("Record Date"), provided, however, that such Record Date may not precede the
date upon which the resolution fixing the Record Date is adopted, and which
Record Date may not be more than sixty (60) days prior to the Dividend Payment
Date. Dividends shall be computed on the basis of a 360-day year of twelve
30-day months.

     (c)  No dividends may be declared or paid or funds set apart for the
payment of dividends on any Parity Stock for any period unless full dividends
shall have been or contemporaneously are declared and paid in full or declared
and a sum in cash sufficient for such payment set apart for such payment on the
Series G3 Preferred Stock. No dividends may be paid or set apart for such
payment on Junior Stock (except dividends on Junior Stock payable in additional
shares of Junior Stock) and no Junior Stock or Parity Stock may be repurchased
or otherwise retired for value nor may funds be set apart for payment with
respect thereto, if dividends have not been paid in full on the Series G3
Preferred Stock in cash; provided, however, that the Corporation may repurchase
Junior Stock (i) in the open market from time to time as and to the fullest
extent permitted by Rule 10b-18 promulgated under the Securities Exchange Act of
1934, as amended (240 C.F.R. ' 10b-18), or corresponding rule from time to
time in effect, and (ii) in a private purchase or in an "issuer tender offer" as
defined in Rule 13e-4 under the Exchange Act from time to time so long as such
repurchases do not exceed ten percent (10%) of the then outstanding shares of
Junior Stock. Interest of 5% per annum shall be payable with respect to any
dividend payment that may be in arrears. Except as provided above, so long as
any shares of the Series G3 Preferred Stock are outstanding, the Corporation
shall not make payment on account of the purchase or other retirement of any
Parity Stock or Junior Stock, and shall not permit any corporation or other
entity directly or indirectly controlled by the Corporation to purchase any
Parity Stock, Junior Stock or any warrants, rights, calls or options unless full
dividends determined to be in accordance herewith on the Series G3 Preferred
Stock have been paid (or are deemed paid) in full.

     (d)  All dividends payable on the Series G3 Preferred Stock shall be paid
net of withholding tax, if any, under all applicable laws (including applicable
income tax treaties). The Corporation will, subject to certain exceptions and
limitations set forth below, pay, as additional dividends, such additional
amounts (the "Additional Amounts") to the holder of any Series G3 Preferred
Stock as may be necessary in order that every net payment of the principal or
dividends on such Series G3 Preferred Stock, after withholding for or on account
of any present or future tax, duty, assessment or governmental charge imposed or
levied upon or as a result of such payment by or on behalf of the United States
(or any political subdivision, authority or agency thereof or therein having the
power to tax) (collectively, "Taxes"), will not be less than the amount such
holder would have received if such Taxes had not been withheld, provided that no
Additional Amounts will be payable with respect to a payment which is subject to
such Taxes by reason of such holder being connected with the United States (or
any political subdivision thereof) otherwise than by the mere holding of the
Series G3 Preferred Stock or the receipt of payments made under or with respect
to the Series G3 Preferred Stock. In addition, the Corporation will indemnify
and hold harmless each holder of the Series G3 Preferred Stock (subject to the
exclusion set forth above) and will, upon written request of each holder
(subject to the exclusion set forth above), and provided that reasonable
supporting documentation is provided, reimburse each other holder for the amount
of any Taxes levied or imposed by the United States and paid by or on behalf of
the holder as a result of payments made under or with respect to the Series G3
Preferred Stock. Any payment made pursuant to this paragraph shall be considered
an Additional Amount. If the Corporation becomes generally subject at any time
to any taxing jurisdiction other than or in addition to the United States,
references in this Certificate of Designations to the United States shall be
read and construed as reference to the United States and/or such other
jurisdiction.

     Section 5.  Preference on Liquidation.

     (a)  Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, holders of Series G3 Preferred Stock shall be
entitled to be paid, out of the assets of the Corporation available for
distribution to stockholders, the liquidation preference of $100.00 per share of
Series G3 Preferred Stock, plus, without duplication, an amount in cash equal to
all accrued and unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding-up (including an amount equal to a prorated dividend for
the period from the last Dividend Payment Date, or if such event is prior to the
first Dividend Payment Date, from the Closing Date, to the date fixed for
liquidation, dissolution or winding-up), before any distribution is made on any
Junior Stock, including, without limitation, any class of common stock of the
Corporation.

<PAGE>

     (b)  If, upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, the amounts payable with respect to the Series G3
Preferred Stock and all Parity Stock are not paid in full, then the assets of
the Corporation available for distribution among the holders of the Series G3
Preferred Stock and any Parity Stock shall bear to each other the same ratio
that the full amounts payable on liquidation, dissolution or winding-up of the
Corporation to the holders of shares of Series G3 Preferred Stock and any Parity
Stock bear to each other.

     (c)  After payment of the full amount of the liquidation preference and
accumulated and unpaid dividends to which they are entitled, the holders of
shares of Series G3 Preferred Stock shall not be entitled to any further
participation in any distribution of assets of the Corporation.

     (d)  Neither the sale, conveyance, exchange or transfer (for cash, shares
of stock, securities or other consolidation) of all or substantially all of the
property or assets of the Corporation nor the consolidation or merger of the
Corporation with one or more entities shall be deemed to be or constitute a
liquidation, dissolution or winding-up of the Corporation.

     (e)  Notice of any payment to the holders of Series G3 Preferred Stock as a
result of the liquidation, dissolution or winding-up of the Corporation, stating
the payment date or dates when and the place or places where the amounts
distributable in such circumstances shall be payable, shall be given not more
than sixty (60) but not less than thirty (30) days prior to any payment date
stated therein, to the holders of shares of Series G3 Preferred Stock as
provided in Section 11 herein.

     Section 6.  Voting. The holders of Series G3 Preferred Stock shall have no
voting rights except as required by law. In exercising any voting rights, each
outstanding share of Series G3 Preferred Stock shall be entitled to one vote.

     Section 7.  Holder Conversion Rights.

     (a)  Each holder of shares of Series G3 Preferred Stock shall have the
right ("Conversion Right"), subject as provided herein and to any applicable
laws and regulations, at any time and from time to time at the holder's option
to convert the liquidation preference of $100 for each share of Series G3
Preferred Stock plus the amount of any accrued and unpaid dividends (whether or
not earned or declared) on the Series G3 Preferred Stock delivered for
conversion as specified herein (including an amount equal to a prorated dividend
from the immediately preceding Dividend Payment Date to the date of such
conversion, or, if such conversion is prior to the first Dividend Payment Date,
from the Closing Date to the date of such conversion) into shares of Common
Stock at the conversion price (subject to adjustment as described in Section 8
below) of $0.50 per share (the "Conversion Price"); provided, however, that the
holder will on his request receive and the Corporation may, at its sole
discretion, pay, any or all of such accrued and unpaid dividends in cash.
Subject to the provisions of the DGCL, no fractional shares of Common Stock
shall be issued upon conversions, but the number of shares shall be rounded up
or down to the nearest whole number.

     (b)  If the Corporation pays any accrued and unpaid dividends in cash, the
amount of any such accrued and unpaid dividends shall be promptly sent to the
holder thereof by means of check or other means provided by the Corporation
after the receipt of the notice and funds, if any, referred to in Sections 7(d)
and 7(e) below.

     (c)  As promptly as practicable after the surrender of certificates for
shares of the Series G3 Preferred Stock for conversion and the receipt of the
notice and funds, if any, as described in Sections 7(d) and 7(e) below, the
Corporation shall issue and shall deliver to such holder, or on such holder's
written order, a certificate or certificates for the number of shares of Common
Stock issuable upon the conversion of such shares of the Series G3 Preferred
Stock in accordance with the provisions of this Section 7, together with
certificates representing the number of shares of Common Stock (if any) in
payment of any accrued but unpaid dividends if the holder elects to receive such
dividends in Common Stock. Each conversion with respect to such shares of the
Series G3 Preferred Stock shall be deemed to have been effected immediately
prior to the close of business on the date on which the certificates for shares
of the Series G3 Preferred Stock shall have been surrendered and such notice
shall have been received by the Corporation as aforesaid, and the Person or
Persons entitled to receive the Common Stock issuable upon such conversion shall
be deemed for all purposes to be the record holder or holders of such Common
Stock upon that date.

<PAGE>

     (d)  In order to exercise the conversion right, the holder of each share of
Series G3 Preferred Stock to be converted shall surrender that certificate
representing such shares, duly endorsed or assigned to the Corporation or in
blank, at the office of the transfer agent for the Series G3 Preferred Stock and
shall give written notice to the Corporation in the form of Exhibit A attached
hereto. Such notice shall also state the name or names (with address) in which
the shares of Common Stock that shall be issuable upon such conversion shall be
issued. Each share surrendered for conversion shall, unless the shares issuable
on conversion are to be issued in the same name as the name in which such shares
of the Series G3 Preferred Stock is registered, be duly endorsed by, or
accompanied by, instruments of transfer (in each case, in form reasonably
satisfactory to the Corporation), duly executed by the holder or such holder's
duly authorized attorney-in-fact.

     (e)  If a holder converts shares of the Series G3 Preferred Stock, the
Corporation shall pay any and all documentary, stamp or similar issue or
transfer tax payable in respect of the issue or delivery of the shares of the
Series G3 Preferred Stock (or any other securities issued on account thereof
pursuant hereto) or Common Stock upon the conversion; provided, however, the
Corporation shall not be required to pay any such tax that may be payable
because any such shares are issued at the request of the holder in a name other
than the name of the holder. In the event that the shares are to be issued in a
name other than that of the holder, the holder shall provide funds necessary to
pay any and all of the foregoing taxes, if any shall be applicable.

     (f)  The Corporation shall reserve out of its authorized but unissued
Common Stock or its Common Stock held in treasury enough shares of Common Stock
to permit the conversion of all of the outstanding shares of the Series G3
Preferred Stock, but in no event shall the Corporation be required to reserve
sufficient shares of Common Stock to permit the conversion of any accrued and
unpaid dividends on the Series G3 Preferred Stock. The Corporation shall from
time to time, in accordance with the DGCL, increase the authorized amount of its
Common Stock if at any time the authorized amount of its Common Stock remaining
unissued shall not be sufficient to permit the conversion of all shares of the
Series G3 Preferred Stock at the time outstanding. If any shares of Common Stock
required to be reserved for issuance upon conversion of shares of the Series G3
Preferred Stock hereunder require registration with or approval of any
governmental authority under any federal or state law before the shares may be
issued upon conversion, the Corporation shall in good faith and as expeditiously
as possible endeavor to cause the shares to be so registered or approved. All
shares of Common Stock delivered upon conversion of the shares of the Series G3
Preferred Stock will, upon delivery, be duly authorized and validly issued,
fully paid and nonassessable, free from all taxes, liens and charges with
respect to the issue thereof.

     Section 8.  Conversion Price Adjustments.

     (a)  Dividends or Distributions of Common Stock. In case the Corporation
shall pay or make a dividend or other distribution on its Common Stock
exclusively in Common Stock or shall pay or make a dividend or other
distribution on any other class of capital stock of the Company which dividend
or distribution includes Common Stock, the Conversion Price in effect at the
opening of business on the day next following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such Conversion Price by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such reduction to
become effective immediately after the opening of business on the day next
following the date fixed for such determination. For the purposes of this
calculation, the number of shares of Common Stock at any time outstanding shall
not include shares held in the treasury of the Corporation. For the avoidance of
doubt, this provision does not apply to dividends or other distributions in
shares of Common Stock pursuant to the terms of the securities to which such
dividend or other distribution may be made.

     (b)  Dividends or Distributions of Rights, Warrants or Options to Purchase
Common Stock. In case the Corporation shall pay or make a dividend or other
distribution on its Common Stock consisting exclusively of, or shall otherwise
issue to all holders of its Common Stock, rights, warrants or options entitling
the holders thereof to subscribe for or purchase shares of Common Stock at a
price per share less than the Market Price per share of the Common Stock on the
date fixed for the determination of stockholders entitled to receive such
rights, warrants or options, the Conversion Price in effect at the opening of
business on the day following the date fixed for such determination shall be
reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at

<PAGE>

the close of business on the date fixed for such determination plus the number
of shares of Common Stock which the aggregate of the offering price of the total
number of shares of Common Stock so offered for subscription or purchase would
purchase at such Market Price and the denominator shall be the number of shares
of Common Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, outstanding at the close of business on the date fixed
for such reduction to become effective immediately after the opening of business
on the day following the date fixed for such determination. For the purposes of
this paragraph (b), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Corporation. The
Corporation shall not issue any rights, warrants or options in respect of shares
of Common Stock held in the treasury of the Corporation.

     (c)  Dividends or Distributions in Cash. In case the Corporation shall, by
dividend or otherwise, make a distribution to all holders of its Common Stock
exclusively in cash in an aggregate amount that, together with (1) the aggregate
amount of any other distributions to all holders of its Common Stock made
exclusively in cash within the 12 months preceding the date of payment of such
distribution and in respect of which no Conversion Price adjustment pursuant to
this Section has been made and (2) the aggregate of any cash plus the fair
market value (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the
Corporation's Board of Directors), as of the expiration of the tender or
exchange offer referred to below, of consideration payable in respect of any
tender or exchange offer by the Corporation or a Subsidiary for all or any
portion of the Common Stock concluded within the 12 months preceding the date of
payment of such distribution and in respect of which no Conversion Price
adjustment pursuant to this Section has been made, exceeds five percent (5%) of
the product of the Market Price per share of the Common Stock on the date fixed
for stockholders entitled to receive such distribution times the number of
shares of Common Stock outstanding on such date, the Conversion Price shall be
reduced so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this paragraph (c) by a fraction of
which the numerator shall be the Market Price per share on the date of such
effectiveness less the amount of cash so distributed applicable to one share of
Common Stock and the denominator shall be such Market Price per share of the
Common Stock, such reduction to become effective immediately prior to the
opening of business on the day following the date fixed for the payment of such
distribution.

     (d)  All Other Distributions or Dividends. Subject to the last sentence of
this paragraph (d), in case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its indebtedness,
shares of any class of capital stock, securities, cash or Property (excluding
any rights, warrants or options referred to in paragraph (b), any dividend or
distribution paid exclusively in cash and any dividend or distribution referred
to in paragraph (a), the Conversion Price shall be reduced so that the same
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to the effectiveness of the Conversion Price reduction
contemplated by this paragraph (d) by a fraction of which the numerator shall be
the Market Price per share of the Common Stock on the date of such effectiveness
less the fair market value (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a resolution
of the Corporation's Board of Directors and shall, in the case of securities
being distributed for which prior thereto there is an actual or when issued
trading market, be no less than the value determined by reference to the average
of the Market Price over the period specified in the succeeding sentence), on
the date of such effectiveness, of the portion of the evidences of indebtedness,
shares of capital stock, securities, cash and Property so distributed applicable
to one share of Common Stock and the denominator shall be such Market Price per
share of the Common Stock, such reduction to become effective immediately prior
to the opening of business on the day next following the date fixed for the
payment of such distribution (such date to being referred to as the "Reference
Date"). If the Board of Directors determines the fair market value of any
distribution for purposes of this paragraph (d) by reference to the actual or
when issued trading market for any securities comprising such distribution, it
must in doing so consider the prices in such market over the same period used in
computing the Market Price per share pursuant to paragraph (f). For purposes of
this paragraph (d), any dividend or distribution that includes shares of Common
Stock or rights, warrants or options to subscribe for or purchase shares of
Common Stock shall be deemed instead to be (1) a dividend or distribution of the
evidences of indebtedness, cash, Property, shares of capital stock or securities
other than such shares of Common Stock or such rights, warrants or options
(making any Conversion Price reduction required by this paragraph (d))
immediately followed by (2) a dividend or distribution of such shares of Common
Stock or such rights, warrants or options (making any further Conversion Price
reduction required by paragraph (a) or (b)), except (A) the Reference Date of
such dividend or distribution as defined in this paragraph (d) shall be
substituted as "the date fixed for the

<PAGE>

determination of stockholders entitled to receive such dividend or other
distribution," "the date fixed for the determination of stockholders entitled to
receive such rights, warrants or options," and "the date fixed for such
determination" within the meaning of paragraph (a) or (b) and (B) any shares of
Common Stock included in such dividend or distribution shall not be deemed
"outstanding at the close of business on the date fixed for such determination"
within the meaning of paragraph (a)).

     (e)  Subdivision of Common Stock. In case outstanding shares of Common
Stock shall be subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day following the
day upon which such subdivision becomes effective shall be proportionately
reduced, and, conversely, in case outstanding shares of Common Stock shall each
be combined into a smaller number of shares of Common Stock, the Conversion
Price in effect at the opening of business on the day following the day upon
which such combination becomes effective shall be proportionately increased,
such reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.

     (f)  Tender or Exchange Offer for Common Stock. In case a tender or
exchange offer made by the Corporation or any Subsidiary for all or any portion
of the Common Stock shall expire and such tender or exchange offer shall involve
an aggregate consideration having a fair market value (as determined in good
faith by the Board of Directors, whose determination shall be conclusive and
described in a resolution of the Corporation's Board of Directors) at the last
time (the "Expiration Time") tenders or exchanges may be made pursuant to such
tender or exchange offer (as it may be amended) that, together with (A) the
aggregate of the cash plus the fair market value (as determined in good faith by
the Board of Directors, whose determination shall be conclusive and described in
a resolution of the Corporation's Board of Directors), as of the expiration of
the other tender or exchange offer referred to below, of consideration payable
in respect of any other tender or exchange offer by the Company or a Subsidiary
for all or any portion of the Common Stock concluded within the preceding 12
months and in respect of which no Conversion Price adjustment pursuant to this
paragraph (f) has been made and (B) the aggregate amount of any distributions to
all holders of the Common Stock made exclusively in cash within the preceding 12
months and in respect of which no Conversion Price adjustment pursuant to this
Section has been made, exceeds five percent (5%) of the product of the Market
Price per share of the Common Stock on the Expiration Time times the number of
shares of Common Stock outstanding (including any tendered shares) on the
Expiration Time, the Conversion Price shall be reduced (but not increased) so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the Expiration Time by a fraction of which
the numerator shall be (1) the product of the Market Price per share of the
Common Stock at the Expiration Time times the number of shares of Common Stock
outstanding (including any tendered or exchanged shares) at the Expiration Time
minus (2) the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of all shares validly
tendered or exchanged and not withdrawn as of the Expiration Time (the shares
deemed so accepted, up to any such maximum, being referred to as the "Purchased
Shares") and the denominator shall be the product of (1) such Market Price per
share at the Expiration Time times (2) such number of outstanding shares at the
Expiration Time less the number of Purchased Shares, such reduction to become
effective immediately prior to the opening of business on the day following the
Expiration Time.

     (g)  Certificate of Adjustment and Notice. Whenever the Conversion Price is
adjusted as herein provided, the Corporation shall promptly file with the
transfer agent for the Series G3 Preferred Stock a certificate of an officer of
the Corporation setting forth the Conversion Price after the adjustment and
setting forth a brief statement of the facts requiring such adjustment and a
computation thereof. The Corporation shall promptly cause a notice of the
adjusted Conversion Price be given to the holders of shares of the Series G3
Preferred Stock as provided in Section 11 herein.

     (h)  Adjustment in Conversion Price in Case of Certain Events. In case the
Corporation shall take any action affecting the Common Stock, other than actions
described in Section 7 or this Section 8, which in the opinion of the Board of
Directors would materially adversely affect the conversion right of the holders
of the shares of the Series G3 Preferred Stock, the Conversion Price may be
adjusted, to the extent permitted by law, in such manner, if any, and at such
time, as the Board of Directors may determine to be equitable in the
circumstances; provided, however, that in no event shall the Board of Directors
be required to take any such action.

<PAGE>

     (i)  Registration of Conversion Shares. On or before each of 30 June, 2004,
30 June 2005 and 30 June 2006, the Corporation shall file a registration
statement on Form S-3 (or such other form as the Corporation may determine is
appropriate) with respect to one third of the Common Stock that may be issuable
at any time upon the conversion or redemption of the Series G3 Preferred Stock
("Conversion Shares") so that by 30 June 2006, the Corporation shall have filed
registration statements on Form S-3 (or such other forms as the Corporation may
determine are appropriate) with respect to all the Common Stock that may be
issuable at the time upon the conversion or redemption of any of the Series G3
Preferred Stock-. The Corporation shall use its best efforts to cause the
Commission to declare such registration statements (and any necessary amendments
thereto) effective. The Corporation shall also use its best efforts to maintain
the effectiveness of such registration statements, and to refile such
registration statements from time to time in the event their effectiveness
lapses, until all Conversion Shares either issued or that may be issued are
Freely Tradeable (as defined in Section 13 below) in the United States.

     Section 9.  Mandatory Conversion by Corporation.

     (a)  Provided that the Conversion Shares to be issued on any mandatory
conversion are Freely Tradeable, the Corporation may, at its option, cause all
of the outstanding Series G3 Preferred Stock to be converted into shares of
Common Stock, in accordance with Section 9(b), at any time and from time to
time, if the average of the Market Prices of the Common Stock over the Stock
Exchange Business Days in any twenty (20) consecutive calendar day period ending
not more than five (5) days prior to the giving of the notice referred to below
equaled or exceeded 125% of the Conversion Price.

     (b)  Each share of Series G3 Preferred Stock shall be converted into a
number of shares of Common Stock equal to: (x) $100.00 liquidation preference
per share of Series G3 Preferred Stock plus the amount of any accrued and unpaid
dividends (whether or not earned or declared) on the Series G3 Preferred Stock
(including an amount equal to a prorated dividend from the immediately preceding
Dividend Payment Date, or if such conversion is prior to the first Dividend
Payment Date, from the Closing Date, to the date of such conversion) divided by
(y) the Conversion Price.

     Notwithstanding the preceding, the Corporation will, on the request of the
holder, and may, at its sole discretion, pay any or all of the accrued and
unpaid dividends in cash. Subject to the provisions of the DGCL, no fractional
shares of Common Stock shall be issued on the mandatory conversion, but the
number of shares shall be rounded up or down to the nearest whole number. The
amount of any accrued and unpaid dividends that the Corporation elects to pay in
cash shall be promptly sent to the holder thereof by means of check or other
means provided by the Corporation.

     (c)  The Corporation shall give thirty (30) days notice as provided in
Section 11 hereof of its intent to convert in accordance with this Section 9 no
later than five (5) calendar days from the end of the twenty (20) day period
described above. Upon the giving of the notice referred to above, the
Corporation shall be bound to convert the Series G3 Preferred Stock as to which
notice has been provided. During the 30 day notice period, holders of the Series
G3 Preferred Stock will retain their right to convert their shares of Series G3
Preferred Stock in accordance with Section 7 above.

     Section 10. Optional Redemption by Corporation.

     (a)  Optional Redemption. In addition to its right to redeem the Series G3
Preferred Stock as provided in Section 9 above, the Corporation shall have the
option to redeem the Series G3 Preferred Stock in whole or in part in cash at
any time, and from time to time, unless the holder thereof shall have converted
such stock into Common Stock pursuant to Section 7 prior to the date of
redemption hereof, at a redemption price ("Redemption Price") equal to (i)
$100.00 per share and (ii) accrued and unpaid dividends (whether or not
declared), such dividends being payable in cash (including an amount equal to a
prorated dividend from the immediately preceding Dividend Payment Date, or if
such conversion is prior to the first Dividend Payment Date, from the Closing
Date, to the redemption date).

     (b)  Procedures for Redemption.

          (i)   In case of redemption of less than all shares of Series G3
Preferred Stock at the time outstanding, the shares to be redeemed shall be
selected pro rata, at random, or by lot or a method that complies with the
requirements of any national stock exchange on

<PAGE>

which Series G3 Preferred Stock is listed as determined by the Board of
Directors in its sole discretion.

          (ii)  Notice of any redemption shall be given as provided in Section
11 by or on behalf of the Corporation not more than sixty (60) days or less than
thirty (30) days prior to the date of redemption. No failure to give such notice
or any defect therein or in the transmission or mailing thereof shall affect the
validity of the proceedings for the redemption of any shares of Series G3
Preferred Stock except as to the holder to whom the Corporation has failed to
give notice or except as to the holder to whom notice was defective. In addition
to any information required by law, such notice shall state: such redemption is
being made pursuant to the optional redemption provisions hereof; the date of
redemption; the Redemption Price; the number of shares of Series G3 Preferred
Stock to be redeemed and, if less than all shares held by such holder are to be
redeemed; the number of such shares to be redeemed; the place or places where
certificates for such issued shares are to be surrendered for payment of the
Redemption Price; and that dividends on the shares to be redeemed shall cease to
accrue on the date of redemption. Upon the expiry of the notice so given, except
with respect to the conditions specified above, the Corporation shall become
obligated to redeem at the time of redemption specified thereon all shares
called for redemption.

          (iii) If notice has been given in accordance with Section 10(b)(ii)
above and provided that on or before the date of redemption specified in such
notice, all funds necessary for such redemption shall have been set aside by the
Corporation, separate and apart from its other funds in trust for the pro rata
benefit of the holders of the shares so called for redemption, so as to be, and
to continue to be available therefor, then, from and after the date of
redemption, dividends on the shares of the Series G3 Preferred Stock so called
for redemption shall cease to accrue, and said shares shall no longer be deemed
to be outstanding and shall not have the status of shares of Series G3 Preferred
Stock, and all rights of the holders thereof as shareholders of the Corporation
(except the right to receive from the Corporation the Redemption Price) shall
cease. Upon surrender, in accordance with said notice, of the certificates for
any issued shares so redeemed (properly endorsed or assigned for transfer, if
the Corporation shall so require and the notice shall so state), such shares
shall be redeemed by the Corporation at the Redemption Price by mailing a check
to such holder's last registered address listed on the stock transfer records of
the Corporation, or as otherwise agreed by the holders of Series G3 Preferred
Stock and the Corporation. In case fewer than all the shares represented by any
such certificate are redeemed, a new certificate or certificates shall be issued
representing the unredeemed shares without cost to the holder thereof.

          (iv)  Any funds deposited with a bank or trust corporation for the
purpose of redeeming Series G3 Preferred Stock shall be irrevocable except that:
the Corporation shall be entitled to receive from such bank or trust company the
interest or other earnings, if any, earned on any money so deposited in trust,
and the holders of any shares redeemed shall have no claim to such interest or
other earnings; and any balance of monies so deposited by the Corporation and
unclaimed by the holders of the Series G3 Preferred Stock entitled thereto at
the expiration of two years from the applicable date of redemption shall be
repaid, together with any interest or other earnings earned thereon, to the
Corporation, and after any such repayment, the holders of the shares entitled to
the funds so repaid to the Corporation shall look only to the Corporation for
payment without interest or other earnings.

          (v)   No Series G3 Preferred Stock may be redeemed except with funds
legally available for the payment of the Redemption Price.

          (vi)  Holders of Series G3 Preferred Stock shall retain the conversion
rights described in Section 7 hereof until the date of any redemption of the
shares of Series G3 Preferred Stock in accordance with this Section 10.

     (c)  Redemption by Conversion. In addition to the rights of conversion
pursuant to Section 9 hereof, on or after June 30, 2006, the Corporation may
further elect, in any six (6) month period, to redeem

<PAGE>

up to 50% of the outstanding Series G3 Preferred Stock in accordance with this
Section 10(c) by requiring their redemption on thirty (30) days notice pursuant
to the terms of this Section 10(c) (the "Redemption by Conversion Option"). The
redemption price for purposes of this Section 10(c) shall be equal to the
average Market Price of the Common Stock during the twenty (20) consecutive
Stock Exchange Business Days ending not more than five (5) Stock Exchange
Business days prior to the date notice is given by the Corporation concerning
its exercise of this Redemption by Conversion Option, subject to appropriate
adjustments to account for the effects of dividends, distributions, stock
splits, recapitalizations and similar events. If the Market Capitalization of
the Corporation is less than $300 million on the date the notice by the
Corporation of its exercise of this Redemption by Conversion Option is given,
then each share of Series G3 Preferred Stock will be redeemed for the number of
shares of Common Stock equal to 110% of the $100.00 liquidation preference per
share divided by the redemption price. If the Market Capitalization of the
Corporation is $300 million or more on the date the notice by the Corporation of
its exercise of this Redemption by Conversion Option is given, then each share
of Series G3 Preferred Stock will be redeemed for the number of shares of Common
Stock equal to 105% of the $100.00 liquidation preference per share divided by
the redemption price. The amount of the accrued and unpaid dividends on the
Series G3 Preferred Stock delivered for redemption as specified above (computed
to the end of the day the Series G3 Preferred Stock is so redeemed) shall be
sent to the holder thereof in cash by means of check or other means established
by the Corporation. All Common Stock issued pursuant to the Redemption by
Conversion Option shall be Freely Tradeable.

     Section 11. Notice. Where this Certificate of Designations provides for
notice of any event to the holders of the Series G3 Preferred Stock by the
Corporation or any other Person, such notice shall be sufficiently given (unless
otherwise herein specifically provided) sent to the registered holder of the
Series G3 Preferred Stock at the address of such holder on the register.

     Section 12. General Provisions Relating to the Series G3 Preferred Stock.

     (a)  Form. The Series G3 Preferred Stock shall be issued in fully
registered form in the form satisfactory to the Corporation.

     (b)  Compliance with United States Securities Laws. Nothing contained
herein shall be deemed to authorize any transfers of certificates of the Series
G3 Preferred Stock otherwise than in accordance with the Securities Act. Neither
the Corporation or its transfer agent shall recognize or give effect to any
attempt to transfer (by book entry or otherwise) or convert any Series G3
Preferred Stock or any interest therein in violation of either the Securities
Act. The certificates representing the Series G3 Preferred Stock and the
Conversion Shares shall bear restrictive legends thereon recommended by legal
counsel for the Corporation regarding the restrictions on the transferability
thereof to ensure compliance the Securities Act until the Series G3 Preferred
Stock and/or the Conversion Shares, as the case may be become Freely Tradeable.

     Section 13. Certain Definitions.

     "Alternative Stock Exchange" means any other national or regional stock
exchange or quotation service such as the Nasdaq Market System or any similar
quotation service maintained by the National Quotation Bureau or any successor
thereto.

     "Capital Stock" of any Person means the common stock or preferred stock of
such Person. Unless otherwise stated herein or the context otherwise requires,
"Capital Stock" means Capital Stock of the Corporation

     "Closing Date" means the date of which the Series G3 Preferred Stock is
sold to the holders thereof.

     "Commission" means the Securities and Exchange Commission.

     "Conversion Agent" means any Person (including the Corporation acting as
Conversion Agent) authorized by the Corporation to effect conversions of the
Series G3 Preferred Stock on behalf of the Corporation.

     "Dividend Payment Date" has the meaning given to it in Section 4(b) hereof.

<PAGE>

     "Freely Tradeable" means, with respect to the Common Stock issuable upon
the conversion or redemption of or, if relevant, on the payment of a dividend
upon the Series G3 Preferred Stock, that under the Securities Act the holders
thereof may then offer and sell any amount of such outstanding securities to the
public in the United States in transactions that are not brokers' transactions
(as defined in the Securities Act) either (i) pursuant to an effective
registration statement then in effect or (ii) pursuant to Rule 144(k). For
purposes of determining whether such securities are Freely Tradeable, it shall
be assumed that no affiliate of the issuer has ever held such securities from
and after their issuance.

     "Group" means the Corporation and all its Principal Subsidiaries.

     "Market Capitalization" means, on any date, the average, over the thirty
(30) calendar day period commencing thirty-five (35) calendar days prior to such
date, of the product of the Market Price of the Common Stock and the number of
shares of Common Stock of the Corporation issued and outstanding on such date;
provided, however, that appropriate adjustments shall be made to the Market
Prices and number of shares used in determining such Market Capitalization to
account fairly for the effect of dividends payable in equity securities of the
Corporation or any other Person, spin-offs of subsidiaries, mergers in which the
Corporation or a Principal Subsidiary is a constituent party, and similar
events.

     "Market Price" means the closing sales price on the American Stock Exchange
or any Alternative Stock Exchange on any Stock Exchange Business Day.

     "Person" means any individual, corporation, partnership, association, trust
or other entity or organization, including a government or political subdivision
or any agency or instrumentality thereof.

     "Principal Subsidiary" means a Subsidiary of either the Corporation or any
Principal Subsidiary:

     (a)  whose gross assets represent 10 percent or more of the consolidated
gross assets of the Group as calculated by reference to the then latest audited
financial statements of the Group; or

     (b)  to which is transferred all or substantially all of the business,
undertaking and assets of a Subsidiary of the Corporation which immediately
prior to such transfer is a Principal Subsidiary, whereupon the transferor
Subsidiary shall immediately cease to be a Principal Subsidiary and the
transferee Subsidiary shall cease to be a Principal Subsidiary under the
provisions of this sub-paragraph (b) (but without prejudice to the provisions of
sub-paragraph (a) above), upon publication of its next audited financial
statements.

     "Property" means any kind of property or asset, whether real, personal,
mixed, or tangible or intangible, and any interest therein.

     "Securities Act" means the United States Securities Act of 1933 as in
effect on the date of the filing of this Certificate with the Secretary of State
of Delaware or as such act may hereafter be amended.

     "Series G3 Preferred Stock" means the Corporation's Series G3 Convertible
Preferred Stock, $1.00 par value.

     "Stock Exchange Business Day" means any day (other than a Saturday or
Sunday) on which the American Stock Exchange or the Alternative Stock Exchange,
as the case may be, is open for business.

     "Subsidiary" of any Person means any Corporation of which at least a
majority of the shares of stock having by the terms thereof ordinary voting
power to elect a majority of the Board of Directors of such Corporation
(irrespective of whether or not at the time stock of any other class or classes
of such Corporation shall have voting power by reason of the happening of any
contingency) is directly or indirectly owned or controlled by any one of or any
combinations of the Corporation or one or more of its Subsidiaries."

                                     *****

<PAGE>

     IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly
executed on its behalf by its undersigned Secretary this ____day of_____________
, 2003.

                                        HARKEN ENERGY CORPORATION,
                                        a Delaware corporation

                                        By:  /s/
                                           -------------------------------------
                                        Name:
                                        Title: Secretary

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