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                                                                   EXHIBIT 10.21

                            HARKEN ENERGY CORPORATION
                          5% CONVERTIBLE NOTE DUE 2003

     Harken Energy Corporation, a Delaware corporation (hereinafter, the
"Issuer" or "Company"), for value received, hereby promises to pay jointly to
Benz Energy, Inc. and Texstar Petroleum, Inc. (collectively, the "Holder") upon
presentation and surrender and delivery of this Convertible Note ("Note") the
principal sum of Six Million Eight Hundred Three Thousand Six Hundred Seventy
Nine and 26/100 United States Dollars (U.S. $ 6,803,679.26) (the "Principal
Amount") on November 26, 2003 ("Maturity"), and, to pay interest thereon from
the date hereof, semi-annually in arrears on May 26 and November 26 of each
year, commencing November 26, 2000, at the rate of 5% per annum, calculated on
the basis of a 360-day year consisting of twelve 30-day months, until the
principal thereof is paid or payment thereof is duly provided for; provided,
however, that the Principal Amount may be reduced from time to time in
connection with puts, conversions, redemptions, purchase and cancellations (as
described below); and provided further that interest accruing after the date of
a reduction in the Principal Amount of the Note shall be calculated with
reference to the new Principal Amount.

                        TERMS AND CONDITIONS OF THE NOTES

     The following, except for the paragraphs in italics, is the text of the
terms and conditions of the Note which will be endorsed on the Note:

1.   Form, Denomination and Title

     (A)  The Note will initially be registered in the name of Benz Energy, Inc.
          and Texstar Petroleum, Inc., whose mailing addresses are 1000
          Louisiana, 15th floor, Houston, TX 77002

     (B)  Title to the Note will remain in the name of the Holder until a
          transfer request is presented to and accepted by the Company.

     The Notes will bear the following legends, which may be modified as the
Company deems necessary to comply with the Securities Act:

     "THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE.
THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF THE
COMPANY THAT, EXCEPT TO PERMITTED ASSIGNEES IN ACCORDANCE WITH THE TERMS OF THE
NOTE, THIS NOTE MAY NOT BE RESOLD, PLEDGED OR

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OTHERWISE TRANSFERRED WITHOUT THE PRIOR WRITTEN CONSENT OF ISSUER AND
UNLESS THE NOTE HAS BEEN REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES OR BLUE SKY LAW OR EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF SUCH LAWS ARE AVAILABLE."

2.   Status

     The Note is a direct, unconditional and unsecured obligation of the Company
and will rank pari passu, without any preference among other indebtedness of the
Company. The Note will not be secured by any assets or property of the Company.
The Note will rank pari passu with all other present and future indebtedness of
the Company, except that the Company may incur and become liable with respect to
indebtedness which is senior in right of payment to the Note provided (i) such
indebtedness is incurred in connection with purchase money obligations in
connection with the purchase of any property or assets purchased after December
30, 1999 ("the Closing Date") or to pay all or a portion of the purchase price
for property or assets acquired by the Company after the Closing Date; (ii) the
Company may grant a security interest in existing or hereafter acquired property
or assets senior in right of payment to the Note, or (iii) such indebtedness is
incurred in connection with project finance transactions by the Company, such
indebtedness will be recourse only to the project and/or project assets or
properties, so encumbered, except to the extent a corporate guarantee by the
Company may be required in connection therewith. Notwithstanding the foregoing,
all such indebtedness contemplated under (i), (ii) and (iii), to the extent it
ranks senior to the Note, shall rank senior to the Note only as to the payment
from the assets or property encumbered and shall rank pari passu to the Note for
all other purposes.

3.   Covenants

     (A) The Company will not merge or consolidate with or sell, convey,
     transfer or lease or otherwise dispose of all, or substantially all, of its
     assets unless: (a) either (i) the Company shall be the surviving Person in
     the case of a merger or (ii) the Person (if other than the Company) formed
     by such consolidation or into which the Company is merged or the Person(s)
     which acquired by conveyance or transfer, or which leases, all or
     substantially all of the Properties and assets of the Company (1) shall be
     organized and validly existing under the laws of the United States of
     America, any state thereof or the District of Columbia and (2) shall
     expressly assume the Company's obligation for the due and punctual payment
     of the principal of and interest on the Note and the performance and
     observance of every covenant on the part of the Company to be performed or
     observed; and (b) immediately after giving effect to such transaction (and
     treating any indebtedness which becomes an obligation of the Company in
     connection with or as a result of such transaction as having been

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     incurred at the time of such transaction), no Default or Event of Default
     shall have occurred and be continuing.

     (B) Upon any consolidation of the Company with or merger of the Company
     with or into any other Person or any conveyance, transfer or lease of all
     or substantially all of the Properties and assets of the Company to any
     Person(s), the successor Person formed by such consolidation or into which
     the Company is merged or to which such conveyance, transfer or lease is
     made shall succeed to, and be substituted for, and may exercise every right
     and power of, the Company as Issuer of the Note with the same effect as if
     such successor Person(s) had been named as the Company herein, and in the
     event of any such conveyance or transfer, the Company, except in the case
     of a lease, shall be discharged of all obligations and covenants under the
     Note.

     (C) The Company shall furnish to Holder, promptly upon becoming aware of
     the existence of any condition or event which constitutes a Default or an
     Event of Default, written notice specifying the nature and period of
     existence thereof and the action which the Company is taking or proposes to
     take with respect thereto.

     (D) The Company will immediately notify Holder of any default under the
     terms of any outstanding indebtedness, if such default is not waived or
     cured within the period provided for such cure by the relevant loan
     documents.

     (E) After an Event of Default, the Company will not purchase or redeem any
     of the Shares, and the Company further agrees not to pay dividends with
     respect to any of its Shares, other than such dividends that it is
     contractually obligated to pay as of the Closing Date of this Note.

     (F) From the Closing Date until Maturity, the Company will not amend its
     articles of incorporation or bylaws in such a manner that will be
     detrimental to the terms of this Note or to the Company's ability to
     perform its obligations under the Note.

4.   Interest

       The Note shall bear interest from (and including) the May 26, 2000 until
the principal thereof is paid in full, at the rate of 5 % per annum on the
principal amount thereof outstanding from time to time. Except as otherwise
provided herein, interest shall be due and payable semi-annually in arrears on
May 26 and November 26 of each year (each an "Interest Payment Date"), the first
such payment to be made on November 26, 2000.

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     The Note will cease to bear interest (i) from its due date for redemption
unless the Company shall default in the payment of the Redemption Price, in
which event interest shall continue to accrue, or (ii) where the Conversion
Right shall have been voluntarily exercised by the Holder, from the Conversion
Date, or (iii) in the case of a Mandatory Conversion, from the Mandatory
Conversion Date. Interest is calculated on the basis of a 360-day year
consisting of 12 months of 30 days each and, in the case of an incomplete month,
the number of days elapsed.

5.   Put Options

     (A) General

     For a period of nine months after the Closing Date (the "Restricted Put
Period"), Holder shall have the right from time to time to compel Issuer
(subject to the provisions stated herein) to redeem the Note (the "Put") into
either cash or the issuance of the Company's $.01 par value common stock
("Shares") ("Put Consideration"), which form of Put Consideration shall be at
the sole option of the Company, provided that (a) the Put Consideration shall be
used solely for the purpose of retiring or exchanging secured obligations of
Holder (including without limitation vendor notes, preferred stock and
indentures of Holder) and (b) the retirement or exchange of the securities is at
a discount to either or both (i) the outstanding amount of the secured
obligation and/or (ii) the amount of the Put Consideration to be received
pursuant to the Put, which discount will be acceptable to Company in its sole
and absolute discretion. If at any time during a term of nine (9) months
beginning after the nine (9) month period stated above or for a term of nine (9)
months beginning during the nine (9) month period if the Letter of Intent
between Company and Holder has terminated, the Put shall be freely exercisable
at the sole discretion of the Holder without restriction and without approval of
Company, for an amount equal to 50% of the then outstanding principal amount of
the Note (plus accrued interest), payable either in cash or in Shares, at the
sole election of Company; provided, however, such Put must be exercised by
Holder(s) of the Note(s) aggregating not less than 50% of the then outstanding
principal balance of the outstanding Note(s). Subject to the exercise of the
Automatic Put described in Section 5(C) below, if such Put is not exercised
within such period of time then the Put shall terminate and be null and void.

     (B) Put Procedure

     To exercise the Put right, the Holder must complete, execute and deliver at
its own expense to the office of the Company at 16285 Park Ten Place, Suite 600,
Houston, TX 77084, Attention: Larry E. Cummings, Secretary, a notice of put
exercise (a "Put Notice"). If the Put Notice is delivered within the Restricted
Put Period, the Put Notice shall set forth

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(i) the Holder's desire to exercise the Put, (ii) the secured obligations of the
Holder to be retired by, or exchanged for, the Put Consideration and (iii) the
amount of the discount (A) at which the secured obligation will be retired or
exchanged and/or (B) to the Put Consideration receivable on exercise of the Put.
If the Company receives a Put Notice during the Restricted Put Period, the
Company will have a period of 30 calendar days after the receipt of the Put
Notice to accept or reject the exercise of the Put by delivering written notice
to the Holder at his registered address in accordance with Section 14 hereof.
Should Company elect to accept the exercise of the Put ("Company Put Acceptance
Notice"), Holder shall have a period of five (5) Business Days after receipt of
the Company Put Acceptance Notice to deliver the Note to Company. If the Put
Notice is delivered within the nine (9) month term after the Restricted Put
Period, the Put Notice shall set forth Holder's desire to exercise the Put, and
shall be accompanied by the applicable Note. As soon as reasonably practicable,
after (i) in the case a Put Notice is given by Holder during the Restricted Put
Period, the Company's receipt of the applicable Note after the mailing of the
Company Put Acceptance Notice and (ii) in the case a Put Notice is given by the
Holder during the nine (9) month period after expiration of the Restricted Put
Period, the Company's receipt of the Put Notice and applicable Note, but either
case not later than 15 days after the Company's receipt of the applicable Note
or the Put Notice and applicable Note, as applicable, the Company shall redeem
the then outstanding principal balance of the Note at the agreed upon discount
(plus accrued interest thereon) as set forth in Section 5(A) above. The
Redemption Price shall be payable in cash or Shares at the Company's sole
discretion. The date of the Put (the "Put Date") shall be deemed the delivery to
the Company of the applicable Put Notice. An election by Holder to exercise the
Put once made and delivered to Company shall be irrevocable by Holder regardless
of whether the Put is accepted or rejected by the Company.

     (C)  Automatic Put

     Notwithstanding the exercise of the Put during the time periods set out in
Section 5(A) above and subject to the Company's right to reject the automatic
exercise described below, if at any time from the Closing Date until Maturity
the Permitted Lienholder institutes an action to foreclose on the Note, in whole
or in part, such filing shall immediately cause the exercise of the Put in
accordance with Section 5(A) above (but without regard to the nine month time
restriction contained in the second sentence of Section 5(A)) but only to the
extent it covers the share of the Note pledged by the Noteholder to the
Permitted Lienholder (the "Pledged Portion"). Upon the automatic exercise of the
Put as herein provided, Company shall have a period of five (5) business days
from the date the foreclosure action was filed, to advise Noteholder and
Permitted Lienholder whether it elects to (i) accept the exercise of the Put or
(ii) reject the automatic exercise of the Put. Should Company elect to accept
the automatic exercise of the Put, Noteholder shall have an additional period of
five (5) business days to from the receipt of Company's notice to deliver the
Note. Upon receipt of such Note, the Company shall as soon as reasonably
practicable thereafter (i) redeem the Pledged Portion of the Note at the agreed
upon

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discount (plus accrued interest thereon) if such foreclosure is filed within the
Restricted Put Period, otherwise such redemption will be for an amount equal to
50% of the then outstanding principal balance of the Pledged Portion of the Note
(plus accrued interest thereon) and (ii) issue to Noteholder a new Note
representing the difference, if any, between the principal balance of the
surrendered Note and the Pledged Portion of the Note. If the Company elects to
reject, or fails to timely elect to accept, the automatic exercise of the Put,
the Permitted Lienholder shall become a Holder of the Pledged Portion of the
Note (plus all accrued interest thereon) for all purposes of this Note without
regard to further restrictions under this Section 5(c), and the Company shall be
deemed to have given its prior written consent to the transfer and assignment of
the Pledged Portion of the Note to the Permitted Lienholder in accordance with
Section 15 hereof.

     (D) Payment in Shares

     If the Put is paid in Shares, the number of Shares to be received by the
Holder on exercise of the Put shall be equal to the quotient of (i) the sum of
the outstanding principal balance of the Note plus the accrued interest thereon,
reduced by the applicable discount amount divided by (ii) the average Market
Price of a Share during the 30 consecutive calendar day period ending as of the
Put Date.

6.   Payments

     Except as otherwise provided under this Note, the payment of principal with
respect to the Note, and the semi-annual payment of interest on an Interest
Payment Date, shall be paid by wire transfer in immediately available funds in
accordance with payment instructions set forth on Exhibit "A" or to any account
in the United States which the Holder may designate by written notice to the
Company in accordance with Section 14 hereof at least Five Business Days prior
to the due date. If the date for any payment due under the Note falls on a day
which is not a Business Day, such payment date shall be deemed to have fallen on
the next Business Day. When making payments to the Holder, fractions of one cent
will be rounded down to the nearest whole cent.

7.   Conversion

     (A) Conversion Period and Price

     (i) The Holder has the right, subject as provided herein and to any
applicable laws and regulations, to require the Company to convert the
outstanding principal amount of the Note into fully paid and non-assessable
Shares at any time during the Conversion Period. The Conversion Period begins on
the Closing Date hereof, and ends upon the earliest to occur of (a) the second
Business Day prior to the later of Maturity or the date on which all principal
and interest on the Note is repaid in full,

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(b) if such Notes shall have been called for redemption, the close of the second
Business Day prior to the Redemption Date, or (c) the effective date of a
Mandatory Conversion. Upon conversion, the right of the converting Holder to
repayment of the outstanding principal amount of the Note and accrued interest
thereon shall be extinguished and released, and in consideration and exchange
therefor the Company shall issue Shares for the outstanding principal amount of
the Note plus accrued interest thereon through the Conversion Date at the
Conversion Price. Upon such issuance of the Shares, the Note will be credited as
paid up in full.

     (ii) The number of Shares to be issued on conversion of a Note will be
determined by dividing the outstanding principal amount of the Note plus accrued
interest by the Conversion Price (as defined below) in effect on the Conversion
Date, with the result being rounded down to the nearest whole number.

     (iii) A Conversion Right may only be exercised as to the full outstanding
principal balance of the Note held by the registered Holder. Fractions of Shares
will not be issued on conversion and no cash adjustments will be made with
respect thereof.

     (iv) The price at which Shares will be issued upon conversion (the
"Conversion Price") will be U.S. $6.50 per Share but will be subject to
adjustment in the manner provided in Section 7(C). The Company shall give notice
of any adjustment of the Conversion Price in accordance with Section 14 within
ten (10) days after the date of such adjustment.

     (v) Notwithstanding the provisions of paragraph (i) of this Section 7(A),
if the Company shall default in making payment in full with respect to the Note
which shall have been called for redemption prior to Maturity, then from the
Redemption Date, interest shall continue to accrue on such Note and the
Conversion Right attached to such Note will continue to be exercisable (unless
already exercised by the Company pursuant to Section 7(D)) up to, and including
the close of business on the date upon which the full amount of the monies
payable with respect of such Note is due or, if earlier, Maturity.

     (B)  Procedure for Conversion

     (i) To exercise the Conversion Right attached to the Note, the Holder must
complete, execute and mail at its own expense to the office of the Company at
16285 Park Ten Place, Suite 600, Houston, TX 77084, Attention: Larry E.
Cummings, Secretary, a notice of conversion (a "Conversion Notice") in the form
attached hereto as Exhibit "B" and incorporated herein by reference to this
Note. The Conversion Date will be deemed to be the date of such Conversion
Notice. A Conversion Notice once delivered shall be irrevocable.

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     (ii) As soon as practicable, and in any event not later than fourteen (14)
calendar days after the Conversion Date, the Company will in the case of the
Note converted on exercise of the Conversion Right shall cause the Holder of the
Note as designated in the Conversion Notice to be registered as Holder of the
relevant number of Shares and will make a certificate or certificates for the
relevant Shares available for collection at the Company's principal office in
Houston, Texas or, if so requested in the relevant Conversion Notice, will
deliver such certificate or certificates to the person and at the place
specified in the Conversion Notice, at the risk of the Holder, together with any
other securities, property or cash required to be delivered upon conversion and
such assignments and other documents (if any) as may be required by law to
effect the transfer thereof.

     (iii) The registered Holder of the Note being converted will be deemed for
all purposes to be the holder of record of the number of Shares issuable upon
conversion with effect from the Conversion Date or Mandatory Conversion Date, as
the case may be. The Shares issued upon conversion of the Notes will in all
respects rank pari passu with the issued and outstanding Shares issued on the
relevant Conversion Date or Mandatory Conversion Date, as the case may be,
except for any right excluded by mandatory provisions of applicable law. A
Holder of Shares issued on conversion of Notes shall not be entitled to any
rights for any record date which precedes the relevant Conversion Date or
Mandatory Conversion Date, as the case may be.

     (iv) If any notice requiring the redemption of the Note is given pursuant
to Section 8(B) on or after the fifteenth (15th) calendar day prior to the
record date with respect to any dividend payable with respect to such Shares and
such notice specifies a date for redemption falling on or prior to the next
following Interest Payment Date, interest shall (subject as hereinafter
provided) accrue on Notes which shall have been delivered for conversion on or
after such record date. Any such interest shall be paid by the Company not later
than fourteen (14) calendar days after the relevant Conversion Date pursuant to
instructions given by the Holder.

     (C)  Adjustments in Conversion Price

     The Conversion Price is subject to adjustment upon the occurrence of
certain events, including: (i) stock dividends; (ii) the subdivision,
combination or reclassification of outstanding shares of Common Stock; (iii)
issuances to all stockholders of the Company of securities which are exercisable
or convertible into Shares at a price less than the Market Price for the Shares;
(iv) issuances of Shares to all stockholders of the Company for cash at a price
less than the fair market value, as determined by the Board of Directors, other
than issuances pursuant to the conversion of this Note or the then outstanding
securities of the Company (including, but not limited to, the 5% Convertible
Notes due 2003, Series G Preferred Stock and any warrants to purchase Shares, or
in connection with any plan of the Company for granting rights or options to
purchase stock in connection with any employee compensation or benefit plan of
the Company, whether now in effect

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or hereafter created or amended, including, but not limited to, the Company's
Qualified Stock Option Plan, Non-Qualified Incentive Stock Option Plan,
Directors Stock Option Plan, 1993 Stock Option and Restricted Stock Plan and
1996 Incentive and Nonstatutory Option Plan); and (v) the distribution to all
holders of Common Stock of a class of debt securities of the Company or of
assets or rights or warrants to purchase securities of the Company (excluding
those rights and warrants referred to above and cash dividends or distributions
from current or retained earnings), any one or more of such actions described in
clauses (i) through (v) above referred to herein as an "Adjustment Event". The
Company may at any time or from time to time reduce the Conversion Price under
this Note temporarily or permanently.

     Upon the occurrence of an Adjustment Event under clauses (i) or (ii) above,
the number of Shares issuable upon conversion of the Note immediately prior to
the record date of such Adjustment Event shall be adjusted so that the Holder
shall thereafter be entitled to receive the number of Shares that the Holder
would have owned or have been entitled to receive after the occurrence of such
Adjustment Event or any record date with respect thereto. An adjustment made
pursuant to immediately preceding sentence shall become effective immediately
after the effective date of such Adjustment Event retroactive to the record
date, if any, for such Adjustment Event. Whenever the number of Shares issuable
upon the conversion of the Note is adjusted pursuant to this paragraph, the
Conversion Price for each Share shall be adjusted by multiplying such Conversion
Price in effect immediately prior to such Adjustment Event by a fraction, the
numerator of which shall be the number of Shares issuable upon conversion of the
Note immediately prior to such Adjustment Event, and the denominator of which
shall be the number of Shares so issuable immediately thereafter.

     Upon the occurrence of an Adjustment Event under clause (iii) or (iv)
above, then the Conversion Price per Share shall be adjusted by dividing (i) the
sum of (A) the product obtained by multiplying the number of Shares outstanding
immediately prior to such issuance (on a fully diluted basis) by the Conversion
Price per share in effect immediately prior to such issuance, plus (B) the
aggregate consideration, if any, received by the Company upon such issuance,
plus (C) the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion of exercise thereof, by (ii) the
number of Shares outstanding immediately after such issuance (on a fully diluted
basis). Whenever the Conversion Price per share is adjusted as provided in this
paragraph, the number of Shares issuable upon conversion of the Note immediately
after such Adjustment Event shall be adjusted, to equal the product obtained
(calculated to the nearest full share) by multiplying such number of Shares by a
fraction, the numerator of which is the Conversion Price per share in effect
immediately prior to such Adjustment Event and the denominator of which is the
Conversion Price per share under the immediately preceding sentence, which
adjusted number of Shares shall thereupon be the number of Shares issuable upon
conversion of the Note until further adjusted as provided herein.

     For purposes of the immediately preceding paragraph, "on a fully diluted
basis" means that all outstanding options, rights or warrants to subscribe for
Shares and all securities convertible into or exchangeable for Shares (such
options, rights, warrants and securities are collectively referred to herein as
"Convertible Securities") and all options or rights to acquire Convertible
Securities have been exercised, converted or exchanged.

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     Upon the occurrence of an Adjustment Event under clause (v) above, the
Conversion Price and the number of Shares issuable on conversion of the Note
shall be adjusted as appropriate so that the economic benefits and losses that
would have accrued to the Holder of the Note upon conversion of the Note prior
to such Adjustment Event shall be equal as commercially possible to the economic
benefits and losses that would of accrued to such Holder upon conversion of the
Note after such Adjustment Event. Such adjustments shall be effective as of the
earlier of the Adjustment Event or the record date, if any, of such Adjustment
Event.

     No adjustment will be made where such adjustment would be less than five
percent (5%) of the Conversion Price then in effect. Any adjustment not so made
will be carried forward and taken into account in any subsequent adjustment. On
any adjustment, the resultant Conversion Price, if not an integral multiple of
one cent shall be rounded up to the nearest one cent.

     The Conversion Price may not be reduced so that, on conversion of the Note,
Shares would be issued for an amount less than their par value.

     (D)  Mandatory Conversion

     (i) Holder acknowledges and agrees that the Company may elect to exercise
the Conversion Right on behalf of the Holder with respect to the Note at the
Conversion Price applicable as of the date fixed by the Company for such
conversion (the "Mandatory Conversion Date"), provided that the average of the
Market Price of the Shares over any thirty (30) consecutive calendar day period,
on or after the Closing Date is equal to or greater than 125% of the Conversion
Price.

     (ii) Not less than 30 calendar days following the Mandatory Conversion
Date, the Company shall cause written notice of the Mandatory Conversion Date to
be given to the Holder. Following such notice, the Holder will be required
within 30 days after such date to deliver or procure delivery of the Note
together with a duly completed Conversion Notice to the office of Company and to
perform the obligations applicable to it on conversion specified in this Section
7(D). Failure to deliver the Conversion Notice shall not affect the conversion
of the Note pursuant to the terms of this Section 7(D).

     (iii) From and after the Mandatory Conversion Date, the Note shall cease to
constitute indebtedness of the Company and shall thereafter be only deemed to
represent the right to receive Shares.

     (E)  Consolidation, Amalgamation or Merger

     In the event that the Company shall be a party to any transaction,
including without limitation any (i) recapitalization or reclassification of the
Shares (other than

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a change in par value, or from par value to no par value, or from no par value
to par value, or as a result of subdivision or combination of the Shares ), (ii)
any consolidation of the Company with, or merger of the Company into, any other
person, any merger of another person into the Company (other than a merger which
does not result in a reclassification, conversion, exchange or cancellation of
all of the outstanding shares of Common Stock of the Company), (iii) any sale or
transfer of all or substantially all of the assets of the Company, or (iv) any
compulsory share exchange pursuant to which the Shares are converted into the
right to receive other securities, cash or Property, the Company (and to the
extent possible, the resulting entity) will forthwith notify the Holder of such
event and ensure that the Holder of the Note will have the right (during the
period in which such Note shall be convertible) to convert such Note into the
class and amount of shares and other securities and property receivable which
would have become liable to be issued upon conversion of such Note immediately
prior to the transaction.

8.   Payment, Redemption and Purchase

     (A) Unless previously redeemed, converted or purchased and canceled as
provided herein, the Company will pay the Note in full in immediately available
funds the outstanding principal amount plus all accrued and unpaid interest on
through Maturity.

     (B) (i) At any time on or after May 26, 2002, but prior to November 26,
2002, the Company may at its option redeem the Note, in whole or in part, for
the outstanding principal amount, together with interest (if any) accrued to
(but excluding) the Redemption Date, payable in cash or Shares. If Company
elects to redeem the Note for Shares, the Note will be redeemed for the number
of shares of Common Stock equal to the sum of the outstanding principal amount
plus accrued and unpaid interest divided by the average Market Price of the
shares over the 30 calendar days immediately preceding the date of notice of
such redemption.

          (ii) Commencing November 26, 2002 and ending on Maturity, Company may
     at its option redeem, pursuant and subject to the provisions set forth
     above, up to 50% of the Note for Shares, and, on Maturity, Company may
     redeem the outstanding Note for Shares. If Company elects to redeem the
     Note for Shares, each Note will be redeemed for the number of shares of
     Common Stock equal to 110% of the sum of the face value of the Note plus
     interest accrued and unpaid thereon divided by the average Market Price of
     the Shares over the 30 calendar days immediately preceding the date of
     notice of such redemption; provided, however, that if the average of the
     aggregate Market Price of all outstanding shares of Common Stock over such
     30 calendar day period is less than $500 million, each Note will be
     redeemed for the number of shares of Common Stock equal to 115% of the sum
     of the face value of the Note plus interest accrued and unpaid thereon
     divided by

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     the average of the Market Price of the Common Stock over the 30 calendar
     day period immediately preceding the date of notice of such redemption.

     (C) To exercise the Redemption Right, the Company must timely deliver
written notice (the "Redemption Notice") to the Holder of the Note in accordance
with Section 14 not less than 30 days or more than 60 days prior to the
Redemption Date. The Redemption Notice shall set forth (i) the principal amount
of the Notes (plus accrued interest) that the Company shall redeem on the
Redemption Date, (ii) the Redemption Date, (iii) the Redemption Price, (iv) the
place for delivery of the Note and any other necessary transfer instruments to
be executed by the Holder in order to collect the Redemption Price. The
Redemption Notice once given is irrevocable by the Company. Upon the expiration
of any such notice period referred to in Section 8(C), the Company shall pay the
Note as provided in 8(A).

     (D) Subject to applicable law, the Company may at any time purchase the
Note together with all accrued interest thereon from the Holder in any manner
and at any price negotiated between the parties.

     (E) If the Note is redeemed by the Company it will be forthwith canceled
and may not be reissued or resold.

9.   Taxation

     All payments with respect to the Note by the Company shall be made without
withholding or deduction for, or on account of, any present or future taxes,
assessments or governmental charges of whatever nature ("Taxes") imposed or
levied by or on behalf of the U.S. or any political sub-division of the U.S.
having power to tax, unless the withholding or deduction of the Taxes is
required by law. In that event, the Company will pay to the Holder the net
amount due in connection with the Note, after the withholding or deduction of
such Taxes paid (or to be paid), and Company shall not be responsible for the
payment of any additional amounts to third parties on behalf of the Holder.

10.  Additional Covenants

     While any Conversion Right remains exercisable, the Company will:

     (A) at all times keep available for issuance free from any preemptive
rights out of its authorized but unissued capital such number of Shares as would
enable the Conversion Rights to be satisfied in full; and

     (B) not in any way adversely modify the rights attached to the Shares with
respect to voting, dividends or liquidation, except to the extent all Common
Shares are equally affected.

                                       12

<PAGE>

11.  Events of Default

     The Note is, and it shall accordingly become, immediately due and payable
for the outstanding principal amount on the Note together with accrued interest,
if any of the following events (each an "Event of Default") shall have occurred
(unless such Event of Default has been remedied to the satisfaction of the
Holder and waived):

     (A) if default is made for a period of five (5) Business Days or more in
the payment of any interest due with respect to the Note; or

     (B) if the Company fails to perform or observe any of its other
obligations, covenants, conditions or provisions under the Note or Purchase and
Sale Agreement and such failure continues for a period of 30 calendar days (or
such longer period as the Holder may in its absolute discretion permit)
following the service by the Holder on the Company of a notice of default
requiring the same to be remedied; or

     (C) if (i) any other indebtedness of the Company becomes due and payable
prior to its stated maturity by reason of an event of default (howsoever
described) or (ii) any such indebtedness of the Company is not paid when due or,
as the case may be, within any applicable grace period, and in each such case
such event continues unremedied for a period of 30 calendar days, provided in
each such case the indebtedness exceeds $2,000,000; or

     (D) if the Company shall be declared or adjudicated by a competent court to
be insolvent or bankrupt, consents to the entry of an order of relief against it
in an involuntary bankruptcy case, shall enter into any assignment or other
similar arrangement for the benefit of its creditors or consents to the
appointment of a custodian (including, without limitation, a receiver,
liquidator or trustee); or

     (E) if a receiver shall be appointed for the Company or in relation to all
or substantially all of the assets of either of them, or a creditor shall levy
and foreclose upon (and take possession of) all or substantially all of the
assets of Company , and in any of the foregoing cases is not paid out or
discharged within 90 calendar days; or

     (F) if the Company institutes proceedings to be adjudicated a voluntary
bankrupt, or shall consent to the filing of a bankruptcy proceeding against it,
or shall file a petition or answer or consent seeking organization under the
laws of the Federal Bankruptcy Code or any similar applicable U.S. federal or
state law, or shall consent to the filing of any such petition, or shall consent
to the appointment of a receiver or liquidator or trustee or assignee (or other
similar official) in bankruptcy or insolvency of it or its Property, or shall
make an assignment for the benefit of creditors, or shall admit in writing its
inability to pay its debts generally as they come due; or

                                       13

<PAGE>

     (G) if a decree or order by a court of competent jurisdiction shall have
been entered against the Company or any declaring either of them a bankrupt or
insolvent, or approving a petition seeking the reorganization of the Company
under the Federal Bankruptcy Code or any other similar applicable U.S. federal
or state law, and such decree or order shall continue undischarged or unstayed
for a period of 90 calendar days; or a decree or order by a court of competent
jurisdiction for the appointment of a receiver or liquidator or trustee or
assignee (or other similar official) in bankruptcy or insolvency of the Company,
or for the winding up or liquidation of its affairs, shall have been entered,
and such decree or order shall have continued undischarged and unstayed for a
period of 90 calendar days; or

     (H) A material breach of a representation or warranty contained in the
Purchase and Sale Agreement occurs and is not remedied, if curable, within 90
days after notice of such breach.

12.  Replacement of Notes

     Should the Note be lost, stolen, mutilated, defaced or destroyed, it may be
replaced at the office of the Company upon payment by the claimant of the
expenses incurred in connection with the replacement and on such terms as to
evidence indemnity and security as the Company may reasonably require. Mutilated
or defaced Notes must be surrendered before replacements will be issued.

13.  Registration Statement

     Company agrees that in the event Shares are issued to Holder under the
terms of this Convertible Note, Company will file, or cause to be filed, a
separate registration statement with the Securities and Exchange Commission for
purposes of registering for resale Holder's Shares under the U. S. Securities
Act of 1933, as amended, and any applicable state securities or blue sky law,
within five (5) months following the issuance of such Shares, and shall use its
commercially reasonable best efforts to have such registration statement
declared effective as soon as reasonably possible after such filing, as more
fully set forth in Section 4.11 of that certain Purchase and Sale Agreement
dated contemporaneously with this Note.

14.  Notices

     All Notices required or permitted under this Note shall be in writing and
shall be personally delivered or by certified mail, postage prepaid and return
receipt requested or by telecopier to the address designated by Holder. All
notices given by personal delivery or mail shall be effective on the date of
actual receipt. All notices by telecopier shall be confirmed in writing on the
day of transmission by personal delivery or certified mail.

                                       14

<PAGE>

15.  Transferability.

     Except for transfers by Noteholder to a Permitted Assignee, this Note may
not be transferred, assigned, hypothecated, sold or conveyed ("Transfers" or
"Transferred") in any manner, in whole or in part, by Holder or any Permitted
Assignee, without Company's prior written consent, which consent may be withheld
for any reason at Company's sole and absolute discretion. Any attempt transfer
of the Note by Holder or Permitted Assignee in violation of this Section 15
shall be void ab initio and of no force and effect.

16.  Definitions

     The terms set forth below shall have the meanings ascribed to them below:

     "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person and the terms "controlling" and "controlled"
have meanings correlative to the foregoing.

     "Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board.

     "Business Day" means each Monday, Tuesday, Wednesday, Thursday, and Friday
which is a day on which banking institutions in Houston, Texas are not
authorized or obliged by law, regulation or executive order to close.

     "Closing Date" means December 30, 1999.

     "Common Stock" means, with respect to any Person, any and all shares,
interests, participation and other equivalents (however designated, whether
voting or non-voting) of such Person's common stock, whether now outstanding or
issued after the date of this Indenture, and includes, without limitation, all
series and classes of such common stock.

     "Company" means Harken Energy Corporation.

     "Conversion Date" means the Business Day during the Conversion Period on
which the Conversion Right is exercised by delivery to the Company of the Note
surrendered for conversion and the completed "Conversion Date" means the
Business Day during the Conversion Period on which the Conversion Right is
exercised by delivery to the Company of the Note surrendered for conversion and
the completed notice of a Holder's intention to exercise its Conversion Right
with respect to the Note.

                                       15

<PAGE>

     "Conversion Period" means, with respect to any Note, the period which is
provided in Section 7(A) of this Note.

     "Conversion Price" means the price at which Conversion Shares shall be
issued upon conversion as provided in Section 7(A) hereof, subject to adjustment
as set forth herein.

     "Conversion Right" means the right of a Holder of the Note to convert such
Note into Conversion Shares.

     "Conversion Shares" means the Shares into which the Notes are convertible.

     "Corporation" includes corporations, limited liability companies, limited
and general partnerships, associations, joint-stock companies and business
trusts.

     "Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default. "Event of Default" has the meaning specified
in Section 11.

     "Holder" means a Person who is the registered holder of a Note.

     "Indebtedness" of any Person means and includes all present and future
obligations of such Person.

     "Interest Payment Date" means May 26 and November 26 of each year while any
portion of this Note remains outstanding, commencing November 26, 2000.

     "Mandatory Conversion" means conversion of the Notes at the option of the
Company pursuant to Section 7(D).

     "Mandatory Conversion Date" means the date specified in a notice published
by the Company in accordance with Section 7(D), on which the Holder is
required to surrender its Note for conversion.

     "Market Price" of a Share on any day shall mean (i) the closing sales price
on the immediately preceding business day of a Share as reported on the
principal securities exchange on which Shares are then listed or admitted to
trading or (ii) if not so reported, the average of the closing bid and asked
prices for a Share on the immediately preceding business day as quoted on the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
or (iii) if not quoted on NASDAQ, the average of the closing bid and asked
prices for a Share as quoted by the National Quotation Bureau's "Pink Sheets" or
the National Association of Securities Dealers' OTC Bulletin Board System. If
the price of a Share shall not be so reported, the Market Price of a Share shall
be determined by the Company's board of directors in good faith.

                                       16

<PAGE>

     "Maturity," when used with respect to any Note, means the date on which the
principal of such Note becomes due and payable as therein or herein provided,
whether at Maturity or the Redemption Date and whether by declaration of
acceleration, call for redemption or otherwise. As used in this Note, Maturity
is November 26, 2003.

     "Note" has the meaning stated in the first recital of this Convertible
Note.

     "Permitted Assignees" means (i) Stewart Peck, in his capacity as Collateral
Agent for Participating Creditors in the Debt Restructure Agreement dated August
6, 1999, for an amount up to $4,071,320.74 out of the Principal Amount of the
Note plus interest accrued or thereafter payable thereon and (ii) the Permitted
Lienholder for an amount up to $6,803,679.26 out of the Principal Amount of the
Note plus interest accrued or thereafter payable thereon; provided, however, any
Transfer to the Permitted Lienholder shall be for the sole purpose of Holder
granting to Permitted Lienholder a security interest in, or lien on, the Note or
subject to Section 5c foreclosing upon such security interest or lien.

     "Permitted Lienholder" means Encap Energy Capital Fund III, L.P. for an
amount equal to $6,803,679.26 out of the Principal Amount of the Note, plus
interest accrued or thereafter payable thereon.

     "Person" means any individual, corporation, limited liability corporation,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government entity or any agency or
political subdivision thereof.

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

     "Put Consideration" when used with respect to this Note, means the value
paid, in cash or Shares, for the redemption of the Note in the manner set forth
in Section 5.

     "Put Date" has the meaning specified in Section 5.

     "Put Notice" has the meaning specified in Section 5.

     "Redemption Date," when used with respect to any Note to be redeemed, in
whole or in part, means the date fixed for such redemption by or pursuant to
this Note.

                                       17

<PAGE>

     "Redemption Price," when used with respect to any Note to be redeemed,
means the price at which they are to be redeemed pursuant to the terms hereof,
plus accrued interest to the Redemption Date if applicable.

     "Restricted Put Period" has the meaning specified in Section 5.

     "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated from time to time by the Commission pursuant
thereto.

     "Shares" means the common stock, par value U.S.$0.01, of the Company (and
all other (if any) shares or stock resulting from any sub-division,
consolidation or reclassification or such shares).

17.  Governing Law

     This Note is governed by, and will be construed in accordance with, the
laws of the State of Texas.

18.  Other Defined Terms

     Capitalized words and terms used in this Note that are defined elsewhere in
this Note are used herein as therein defined.

19.  Renewal

     This note is given in renewal and replacement of, but not in extinguishment
or novation of, that certain promissory note dated December 30, 1999 payable
jointly to the order of Benz Energy, Inc. and Texstar Petroleum, Inc.
(collectively designated as the "Holder") in the original amount of
$7,928,679.26.

     IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed in
its corporate name by the signature of the undersigned duly authorized officer
of the Issuer.

     DATED as of March ___, 2000.

                                     HARKEN ENERGY CORPORATION

                                     By: /s/ Larry E. Cummings, Vice President
                                        --------------------------------------
                                         Larry E. Cummings, Vice President

                                       18

<PAGE>

[Corporate Seal]

ATTEST:

By:
    -------------------------------------

Name:
     -------------------------------------
                Assistant Secretary

                    ACKNOWLEDGEMENT AND ACCEPTANCE BY HOLDER

Holder acknowledges and accepts this note in renewal and replacement of, but not
in extinguishment or novation of, that certain promissory note dated December
30, 1999 payable jointly to the order of Benz Energy, Inc. and Texstar
Petroleum, Inc. (collectively designated as the "Holder") in the original amount
of $7,928,679.26.

BENZ ENERGY, INC.                             TEXSTAR PETROLEUM, INC.

BY:                                           BY:
   ----------------------------------            ------------------------------

                                       19

<PAGE>

                            HARKEN ENERGY CORPORATION
                          5% CONVERTIBLE NOTE DUE 2003

     Harken Energy Corporation, a Delaware corporation (hereinafter, the
"Issuer" or "Company"), for value received, hereby promises to pay jointly to
Benz Energy, Inc. and Texstar Petroleum, Inc. (collectively, the "Holder") upon
presentation and surrender and delivery of this Convertible Note ("Note") the
principal sum of Four Million Seventy-One Thousand Three Hundred Twenty and
Seventy-Four United States Dollars (U.S. $4,071,320.74) (the "Principal Amount")
on May 26, 2003 ("Maturity"), and, to pay interest thereon from the date hereof,
semi-annually in arrears on May 26 and November 26 of each year, commencing May
26, 2000, at the rate of 5% per annum, calculated on the basis of a 360-day year
consisting of twelve 30-day months, until the principal thereof is paid or
payment thereof is duly provided for; provided, however, that the Principal
Amount may be reduced from time to time in connection with puts, conversions,
redemptions, purchase and cancellations (as described below); and provided
further that interest accruing after the date of a reduction in the Principal
Amount of the Note shall be calculated with reference to the new Principal
Amount.

                        TERMS AND CONDITIONS OF THE NOTES

     The following, except for the paragraphs in italics, is the text of the
terms and conditions of the Note which will be endorsed on the Note:

1.   Form, Denomination and Title

     (A)  The Note will initially be registered in the name of Benz Energy, Inc.
          and Texstar Petroleum, Inc., whose mailing addresses are 1000
          Louisiana, 15th floor, Houston, TX 77002

     (B)  Title to the Note will remain in the name of the Holder until a
          transfer request is presented to and accepted by the Company.

     The Notes will bear the following legends, which may be modified as the
Company deems necessary to comply with the Securities Act:

     "THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE.
THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF THE
COMPANY THAT, EXCEPT TO PERMITTED ASSIGNEES IN ACCORDANCE WITH THE TERMS OF THE
NOTE, THIS NOTE MAY NOT BE RESOLD, PLEDGED OR

                                       1

<PAGE>

OTHERWISE TRANSFERRED WITHOUT THE PRIOR WRITTEN CONSENT OF ISSUER AND UNLESS THE
NOTE HAS BEEN REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES OR BLUE SKY LAW OR EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SUCH LAWS ARE AVAILABLE."

2.   Status

     The Note is a direct, unconditional and unsecured obligation of the Company
and will rank pari passu, without any preference among other indebtedness of the
Company. The Note will not be secured by any assets or property of the Company.
The Note will rank pari passu with all other present and future indebtedness of
the Company, except that the Company may incur and become liable with respect to
indebtedness which is senior in right of payment to the Note provided (i) such
indebtedness is incurred in connection with purchase money obligations in
connection with the purchase of any property or assets purchased after December
30, 1999 ("the Closing Date") or to pay all or a portion of the purchase price
for property or assets acquired by the Company after the Closing Date; (ii) the
Company may grant a security interest in existing or hereafter acquired property
or assets senior in right of payment to the Note, or (iii) such indebtedness is
incurred in connection with project finance transactions by the Company, such
indebtedness will be recourse only to the project and/or project assets or
properties, so encumbered, except to the extent a corporate guarantee by the
Company may be required in connection therewith. Notwithstanding the foregoing,
all such indebtedness contemplated under (i), (ii) and (iii), to the extent it
ranks senior to the Note, shall rank senior to the Note only as to the payment
from the assets or property encumbered and shall rank pari passu to the Note for
all other purposes.

3.   Covenants

     (A) The Company will not merge or consolidate with or sell, convey,
     transfer or lease or otherwise dispose of all, or substantially all, of its
     assets unless: (a) either (i) the Company shall be the surviving Person in
     the case of a merger or (ii) the Person (if other than the Company) formed
     by such consolidation or into which the Company is merged or the Person(s)
     which acquired by conveyance or transfer, or which leases, all or
     substantially all of the Properties and assets of the Company (1) shall be
     organized and validly existing under the laws of the United States of
     America, any state thereof or the District of Columbia and (2) shall
     expressly assume the Company's obligation for the due and punctual payment
     of the principal of and interest on the Note and the performance and
     observance of every covenant on the part of the Company to be performed or
     observed; and (b) immediately after giving effect to such transaction (and
     treating any indebtedness which becomes an obligation of the

                                       2

<PAGE>

     Company in connection with or as a result of such transaction as having
     been incurred at the time of such transaction), no Default or Event of
     Default shall have occurred and be continuing.

     (B) Upon any consolidation of the Company with or merger of the Company
     with or into any other Person or any conveyance, transfer or lease of all
     or substantially all of the Properties and assets of the Company to any
     Person(s), the successor Person formed by such consolidation or into which
     the Company is merged or to which such conveyance, transfer or lease is
     made shall succeed to, and be substituted for, and may exercise every right
     and power of, the Company as Issuer of the Note with the same effect as if
     such successor Person(s) had been named as the Company herein, and in the
     event of any such conveyance or transfer, the Company, except in the case
     of a lease, shall be discharged of all obligations and covenants under the
     Note.

     (C) The Company shall furnish to Holder, promptly upon becoming aware of
     the existence of any condition or event which constitutes a Default or an
     Event of Default, written notice specifying the nature and period of
     existence thereof and the action which the Company is taking or proposes to
     take with respect thereto.

     (D) The Company will immediately notify Holder of any default under the
     terms of any outstanding indebtedness, if such default is not waived or
     cured within the period provided for such cure by the relevant loan
     documents.

     (E) After an Event of Default, the Company will not purchase or redeem any
     of the Shares, and the Company further agrees not to pay dividends with
     respect to any of its Shares, other than such dividends that it is
     contractually obligated to pay as of the Closing Date of this Note.

     (F) From the Closing Date until Maturity, the Company will not amend its
     articles of incorporation or bylaws in such a manner that will be
     detrimental to the terms of this Note or to the Company's ability to
     perform its obligations under the Note.

4.   Interest

     The Note shall bear interest from (and including) the Closing Date until
the principal thereof is paid in full, at the rate of 5 % per annum on the
principal amount thereof outstanding from time to time. Except as otherwise
provided herein, interest shall be due and payable semi-annually in arrears on
May 26 and November 26 of

                                       3

<PAGE>

each year (each an "Interest Payment Date"), the first such payment to be made
on May 26, 2000.

     The Note will cease to bear interest (i) from its due date for redemption
unless the Company shall default in the payment of the Redemption Price, in
which event interest shall continue to accrue, or (ii) where the Conversion
Right shall have been voluntarily exercised by the Holder, from the Conversion
Date, or (iii) in the case of a Mandatory Conversion, from the Mandatory
Conversion Date. Interest is calculated on the basis of a 360 day year
consisting of 12 months of 30 days each and, in the case of an incomplete month,
the number of days elapsed.

5.   Put Options

     (A)  General

     For a period of nine months after the Closing Date (the "Restricted Put
Period"), Holder shall have the right from time to time to compel Issuer
(subject to the provisions stated herein) to redeem the Note (the "Put") into
either cash or the issuance of the Company's $.01 par value common stock
("Shares") ("Put Consideration"), which form of Put Consideration shall be at
the sole option of the Company, provided that (a) the Put Consideration shall be
used solely for the purpose of retiring or exchanging secured obligations of
Holder (including without limitation vendor notes, preferred stock and
indentures of Holder) and (b) the retirement or exchange of the securities is at
a discount to either or both (i) the outstanding amount of the secured
obligation and/or (ii) the amount of the Put Consideration to be received
pursuant to the Put, which discount will be acceptable to Company in its sole
and absolute discretion. If at any time during a term of nine (9) months
beginning after the nine (9) month period stated above or for a term of nine (9)
months beginning during the nine (9) month period if the Letter of Intent
between Company and Holder has terminated, the Put shall be freely exercisable
at the sole discretion of the Holder without restriction and without approval of
Company, for an amount equal to 50% of the then outstanding principal amount of
the Note (plus accrued interest), payable either in cash or in Shares, at the
sole election of Company; provided, however, such Put must be exercised by
Holder(s) of the Note(s) aggregating not less than 50% of the then outstanding
principal balance of the outstanding Note(s). Subject to the exercise of the
Automatic Put described in Section 5(C) below, if such Put is not exercised
within such period of time then the Put shall terminate and be null and void.

     (B)  Put Procedure

                                       4

<PAGE>

     To exercise the Put right, the Holder must complete, execute and deliver at
its own expense to the office of the Company at 16285 Park Ten Place, Suite 600,
Houston, TX 77084, Attention: Larry E. Cummings, Secretary, a notice of put
exercise (a "Put Notice"). If the Put Notice is delivered within the Restricted
Put Period, the Put Notice shall set forth (i) the Holder's desire to exercise
the Put, (ii) the secured obligations of the Holder to be retired by, or
exchanged for, the Put Consideration and (iii) the amount of the discount (A) at
which the secured obligation will be retired or exchanged and/or (B) to the Put
Consideration receivable on exercise of the Put. If the Company receives a Put
Notice during the Restricted Put Period, the Company will have a period of 30
calendar days after the receipt of the Put Notice to accept or reject the
exercise of the Put by delivering written notice to the Holder at his registered
address in accordance with Section 14 hereof. Should Company elect to accept the
exercise of the Put ("Company Put Acceptance Notice"), Holder shall have a
period of five (5) Business Days after receipt of the Company Put Acceptance
Notice to deliver the Note to Company. If the Put Notice is delivered within the
nine (9) month term after the Restricted Put Period, the Put Notice shall set
forth Holder's desire to exercise the Put, and shall be accompanied by the
applicable Note. As soon as reasonably practicable, after (i) in the case a Put
Notice is given by Holder during the Restricted Put Period, the Company's
receipt of the applicable Note after the mailing of the Company Put Acceptance
Notice and (ii) in the case a Put Notice is given by the Holder during the nine
(9) month period after expiration of the Restricted Put Period, the Company's
receipt of the Put Notice and applicable Note, but either case not later than 15
days after the Company's receipt of the applicable Note or the Put Notice and
applicable Note, as applicable, the Company shall redeem the then outstanding
principal balance of the Note at the agreed upon discount (plus accrued interest
thereon) as set forth in Section 5(A) above. The Redemption Price shall be
payable in cash or Shares at the Company's sole discretion. The date of the Put
(the "Put Date") shall be deemed the delivery to the Company of the applicable
Put Notice. An election by Holder to exercise the Put once made and delivered to
Company shall be irrevocable by Holder regardless of whether the Put is accepted
or rejected by the Company.

     (C)  Automatic Put

     Notwithstanding the exercise of the Put during the time periods set out in
Section 5(A) above and subject to the Company's right to reject the automatic
exercise described below, if at any time from the Closing Date until Maturity
the Permitted Lienholder institutes an action to foreclose on the Note, in whole
or in part, such filing shall immediately cause the exercise of the Put in
accordance with Section 5(A) above (but without regard to the nine month time
restriction contained in the second sentence of Section 5(A)) but only to the
extent it covers the share of the Note pledged by the Noteholder to the
Permitted Lienholder (the "Pledged Portion"). Upon the automatic exercise of the
Put as herein provided, Company shall have a period of five (5) business days
from the date the foreclosure action was filed, to advise Noteholder and
Permitted Lienholder whether it elects to (i) accept the

                                       5

<PAGE>

exercise of the Put or (ii) reject the automatic exercise of the Put. Should
Company elect to accept the automatic exercise of the Put, Noteholder shall have
an additional period of five (5) business days to from the receipt of Company's
notice to deliver the Note. Upon receipt of such Note, the Company shall as soon
as reasonably practicable thereafter (i) redeem the Pledged Portion of the Note
at the agreed upon discount (plus accrued interest thereon) if such foreclosure
is filed within the Restricted Put Period, otherwise such redemption will be for
an amount equal to 50% of the then outstanding principal balance of the Pledged
Portion of the Note (plus accrued interest thereon) and (ii) issue to Noteholder
a new Note representing the difference, if any, between the principal balance of
the surrendered Note and the Pledged Portion of the Note. If the Company elects
to reject, or fails to timely elect to accept, the automatic exercise of the
Put, the Permitted Lienholder shall become a Holder of the Pledged Portion of
the Note (plus all accrued interest thereon) for all purposes of this Note
without regard to further restrictions under this Section 5(c), and the Company
shall be deemed to have given its prior written consent to the transfer and
assignment of the Pledged Portion of the Note to the Permitted Lienholder in
accordance with Section 15 hereof.

     (D) Payment in Shares

     If the Put is paid in Shares, the number of Shares to be received by the
Holder on exercise of the Put shall be equal to the quotient of (i) the sum of
the outstanding principal balance of the Note plus the accrued interest thereon,
reduced by the applicable discount amount divided by (ii) the average Market
Price of a Share during the 30 consecutive calendar day period ending as of the
Put Date.

6.   Payments

     Except as otherwise provided under this Note, the payment of principal with
respect to the Note, and the semi-annual payment of interest on an Interest
Payment Date, shall be paid by wire transfer in immediately available funds in
accordance with payment instructions set forth on Exhibit "A" or to any account
in the United States which the Holder may designate by written notice to the
Company in accordance with Section 14 hereof at least Five Business Days prior
to the due date. If the date for any payment due under the Note falls on a day
which is not a Business Day, such payment date shall be deemed to have fallen on
the next Business Day. When making payments to the Holder, fractions of one cent
will be rounded down to the nearest whole cent.

7.   Conversion

     (A)  Conversion Period and Price

                                       6

<PAGE>

     (i) The Holder has the right, subject as provided herein and to any
applicable laws and regulations, to require the Company to convert the
outstanding principal amount of the Note into fully paid and non-assessable
Shares at any time during the Conversion Period. The Conversion Period begins on
the Closing Date hereof, and ends upon the earliest to occur of (a) the second
Business Day prior to the later of Maturity or the date on which all principal
and interest on the Note is repaid in full, (b) if such Notes shall have been
called for redemption, the close of the second Business Day prior to the
Redemption Date, or (c) the effective date of a Mandatory Conversion. Upon
conversion, the right of the converting Holder to repayment of the outstanding
principal amount of the Note and accrued interest thereon shall be extinguished
and released, and in consideration and exchange therefor the Company shall issue
Shares for the outstanding principal amount of the Note plus accrued interest
thereon through the Conversion Date at the Conversion Price. Upon such issuance
of the Shares, the Note will be credited as paid up in full.

     (ii) The number of Shares to be issued on conversion of a Note will be
determined by dividing the outstanding principal amount of the Note plus accrued
interest by the Conversion Price (as defined below) in effect on the Conversion
Date, with the result being rounded down to the nearest whole number.

     (iii) A Conversion Right may only be exercised as to the full outstanding
principal balance of the Note held by the registered Holder. Fractions of Shares
will not be issued on conversion and no cash adjustments will be made with
respect thereof.

     (iv) The price at which Shares will be issued upon conversion (the
"Conversion Price") will be U.S. $6.50 per Share but will be subject to
adjustment in the manner provided in Section 7(C). The Company shall give notice
of any adjustment of the Conversion Price in accordance with Section 14 within
ten (10) days after the date of such adjustment.

     (v) Notwithstanding the provisions of paragraph (i) of this Section 7(A),
if the Company shall default in making payment in full with respect to the Note
which shall have been called for redemption prior to Maturity, then from the
Redemption Date, interest shall continue to accrue on such Note and the
Conversion Right attached to such Note will continue to be exercisable (unless
already exercised by the Company pursuant to Section 7(D)) up to, and including
the close of business on the date upon which the full amount of the monies
payable with respect of such Note is due or, if earlier, Maturity.

     (B)  Procedure for Conversion

                                       7

<PAGE>

     (i) To exercise the Conversion Right attached to the Note, the Holder must
complete, execute and mail at its own expense to the office of the Company at
16285 Park Ten Place, Suite 600, Houston, TX 77084, Attention: Larry E.
Cummings, Secretary, a notice of conversion (a "Conversion Notice") in the form
attached hereto as Exhibit "B" and incorporated herein by reference to this
Note. The Conversion Date will be deemed to be the date of such Conversion
Notice. A Conversion Notice once delivered shall be irrevocable.

     (ii) As soon as practicable, and in any event not later than fourteen (14)
calendar days after the Conversion Date, the Company will in the case of the
Note converted on exercise of the Conversion Right shall cause the Holder of the
Note as designated in the Conversion Notice to be registered as Holder of the
relevant number of Shares and will make a certificate or certificates for the
relevant Shares available for collection at the Company's principal office in
Houston, Texas or, if so requested in the relevant Conversion Notice, will
deliver such certificate or certificates to the person and at the place
specified in the Conversion Notice, at the risk of the Holder, together with any
other securities, property or cash required to be delivered upon conversion and
such assignments and other documents (if any) as may be required by law to
effect the transfer thereof.

     (iii) The registered Holder of the Note being converted will be deemed for
all purposes to be the holder of record of the number of Shares issuable upon
conversion with effect from the Conversion Date or Mandatory Conversion Date, as
the case may be. The Shares issued upon conversion of the Notes will in all
respects rank pari passu with the issued and outstanding Shares issued on the
relevant Conversion Date or Mandatory Conversion Date, as the case may be,
except for any right excluded by mandatory provisions of applicable law. A
Holder of Shares issued on conversion of Notes shall not be entitled to any
rights for any record date which precedes the relevant Conversion Date or
Mandatory Conversion Date, as the case may be.

     (iv) If any notice requiring the redemption of the Note is given pursuant
to Section 8(B) on or after the fifteenth (15th) calendar day prior to the
record date with respect to any dividend payable with respect to such Shares and
such notice specifies a date for redemption falling on or prior to the next
following Interest Payment Date, interest shall (subject as hereinafter
provided) accrue on Notes which shall have been delivered for conversion on or
after such record date. Any such interest shall be paid by the Company not later
than fourteen (14) calendar days after the relevant Conversion Date pursuant to
instructions given by the Holder.

     (C)  Adjustments in Conversion Price

     The Conversion Price is subject to adjustment upon the occurrence of
certain events, including:

                                       8

<PAGE>

     (i) stock dividends; (ii) the subdivision, combination or reclassification
of outstanding shares of Common Stock; (iii) issuances to all stockholders of
the Company of securities which are exercisable or convertible into Shares at a
price less than the Market Price for the Shares; (iv) issuances of Shares to all
stockholders of the Company for cash at a price less than the fair market value,
as determined by the Board of Directors, other than issuances pursuant to the
conversion of this Note or the then outstanding securities of the Company
(including, but not limited to, the 5% Convertible Notes due 2003, Series G
Preferred Stock and any warrants to purchase Shares, or in connection with any
plan of the Company for granting rights or options to purchase stock in
connection with any employee compensation or benefit plan of the Company,
whether now in effect or hereafter created or amended, including, but not
limited to, the Company's Qualified Stock Option Plan, Non-Qualified Incentive
Stock Option Plan, Directors Stock Option Plan, 1993 Stock Option and Restricted
Stock Plan and 1996 Incentive and Nonstatutory Option Plan); and (v) the
distribution to all holders of Common Stock of a class of debt securities of the
Company or of assets or rights or warrants to purchase securities of the Company
(excluding those rights and warrants referred to above and cash dividends or
distributions from current or retained earnings), any one or more of such
actions described in clauses (i) through (v) above referred to herein as an
"Adjustment Event". The Company may at any time or from time to time reduce the
Conversion Price under this Note temporarily or permanently.

     Upon the occurrence of an Adjustment Event under clauses (i) or (ii) above,
the number of Shares issuable upon conversion of the Note immediately prior to
the record date of such Adjustment Event shall be adjusted so that the Holder
shall thereafter be entitled to receive the number of Shares that the Holder
would have owned or have been entitled to receive after the occurrence of such
Adjustment Event or any record date with respect thereto. An adjustment made
pursuant to immediately preceding sentence shall become effective immediately
after the effective date of such Adjustment Event retroactive to the record
date, if any, for such Adjustment Event. Whenever the number of Shares issuable
upon the conversion of the Note is adjusted pursuant to this paragraph, the
Conversion Price for each Share shall be adjusted by multiplying such Conversion
Price in effect immediately prior to such Adjustment Event by a fraction, the
numerator of which shall be the number of Shares issuable upon conversion of the
Note immediately prior to such Adjustment Event, and the denominator of which
shall be the number of Shares so issuable immediately thereafter.

     Upon the occurrence of an Adjustment Event under clause (iii) or (iv)
above, then the Conversion Price per Share shall be adjusted by dividing (i) the
sum of (A) the product obtained by multiplying the number of Shares outstanding
immediately prior to such issuance (on a fully diluted basis) by the Conversion
Price per share in effect immediately prior to such issuance, plus (B) the
aggregate consideration, if any, received by the Company upon such issuance,
plus (C) the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion of exercise thereof, by (ii) the
number of Shares outstanding immediately after such issuance (on a fully diluted
basis). Whenever the Conversion Price per share is adjusted as provided in this
paragraph, the number of Shares issuable upon conversion of the Note immediately
after such Adjustment Event shall be adjusted, to equal the product obtained
(calculated to the nearest full share) by multiplying such number of Shares by a
fraction, the numerator of which is the Conversion Price per share in

                                       9

<PAGE>

effect immediately prior to such Adjustment Event and the denominator of which
is the Conversion Price per share under the immediately preceding sentence,
which adjusted number of Shares shall thereupon be the number of Shares issuable
upon conversion of the Note until further adjusted as provided herein.

     For purposes of the immediately preceding paragraph, "on a fully diluted
basis" means that all outstanding options, rights or warrants to subscribe for
Shares and all securities convertible into or exchangeable for Shares (such
options, rights, warrants and securities are collectively referred to herein as
"Convertible Securities") and all options or rights to acquire Convertible
Securities have been exercised, converted or exchanged.

     Upon the occurrence of an Adjustment Event under clause (v) above, the
Conversion Price and the number of Shares issuable on conversion of the Note
shall be adjusted as appropriate so that the economic benefits and losses that
would have accrued to the Holder of the Note upon conversion of the Note prior
to such Adjustment Event shall be equal as commercially possible to the economic
benefits and losses that would of accrued to such Holder upon conversion of the
Note after such Adjustment Event. Such adjustments shall be effective as of the
earlier of the Adjustment Event or the record date, if any, of such Adjustment
Event.

     No adjustment will be made where such adjustment would be less than five
percent (5%) of the Conversion Price then in effect. Any adjustment not so made
will be carried forward and taken into account in any subsequent adjustment. On
any adjustment, the resultant Conversion Price, if not an integral multiple of
one cent shall be rounded up to the nearest one cent.

     The Conversion Price may not be reduced so that, on conversion of the Note,
Shares would be issued for an amount less than their par value.

     (D)  Mandatory Conversion

     (i) Holder acknowledges and agrees that the Company may elect to exercise
the Conversion Right on behalf of the Holder with respect to the Note at the
Conversion Price applicable as of the date fixed by the Company for such
conversion (the "Mandatory Conversion Date"), provided that the average of the
Market Price of the Shares over any thirty (30) consecutive calendar day period,
on or after the Closing Date is equal to or greater than 125% of the Conversion
Price.

     (ii) Not less than 30 calendar days following the Mandatory Conversion
Date, the Company shall cause written notice of the Mandatory Conversion Date to
be given to the Holder. Following such notice, the Holder will be required
within 30 days after such date to deliver or procure delivery of the Note
together with a duly completed Conversion Notice to the office of Company and to
perform the obligations applicable to it on conversion specified in this Section
7(D). Failure to

                                       10

<PAGE>

deliver the Conversion Notice shall not affect the conversion of the Note
pursuant to the terms of this Section 7(D).

     (iii) From and after the Mandatory Conversion Date, the Note shall cease to
constitute indebtedness of the Company and shall thereafter be only deemed to
represent the right to receive Shares.

     (E)  Consolidation, Amalgamation or Merger

     In the event that the Company shall be a party to any transaction,
including without limitation any (i) recapitalization or reclassification of the
Shares (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of subdivision or combination of
the Shares ), (ii) any consolidation of the Company with, or merger of the
Company into, any other person, any merger of another person into the Company
(other than a merger which does not result in a reclassification, conversion,
exchange or cancellation of all of the outstanding shares of Common Stock of the
Company), (iii) any sale or transfer of all or substantially all of the assets
of the Company, or (iv) any compulsory share exchange pursuant to which the
Shares are converted into the right to receive other securities, cash or
Property, the Company (and to the extent possible, the resulting entity) will
forthwith notify the Holder of such event and ensure that the Holder of the Note
will have the right (during the period in which such Note shall be convertible)
to convert such Note into the class and amount of shares and other securities
and property receivable which would have become liable to be issued upon
conversion of such Note immediately prior to the transaction.

8.   Payment, Redemption and Purchase

     (A) Unless previously redeemed, converted or purchased and canceled as
provided herein, the Company will pay the Note in full in immediately available
funds the outstanding principal amount plus all accrued and unpaid interest on
through Maturity.

     (B) (i) At any time on or after May 26, 2002, but prior to November 26,
2002, the Company may at its option redeem the Note, in whole or in part, for
the outstanding principal amount, together with interest (if any) accrued to
(but excluding) the Redemption Date, payable in cash or Shares. If Company
elects to redeem the Note for Shares, the Note will be redeemed for the number
of shares of Common Stock equal to the sum of the outstanding principal amount
plus accrued and unpaid interest divided by the average Market Price of the
shares over the 30 calendar days immediately preceding the date of notice of
such redemption.

                                       11

<PAGE>

     (ii) Commencing November 26, 2002 and ending on Maturity, Company may at
its option redeem, pursuant and subject to the provisions set forth above, up to
50% of the Note for Shares, and, on Maturity, Company may redeem the outstanding
Note for Shares. If Company elects to redeem the Note for Shares, each Note will
be redeemed for the number of shares of Common Stock equal to 110% of the sum of
the face value of the Note plus interest accrued and unpaid thereon divided by
the average Market Price of the Shares over the 30 calendar days immediately
preceding the date of notice of such redemption; provided, however, that if the
average of the aggregate Market Price of all outstanding shares of Common Stock
over such 30 calendar day period is less than $500 million, each Note will be
redeemed for the number of shares of Common Stock equal to 115% of the sum of
the face value of the Note plus interest accrued and unpaid thereon divided by
the average of the Market Price of the Common Stock over the 30 calendar day
period immediately preceding the date of notice of such redemption.

     (C) To exercise the Redemption Right, the Company must timely deliver
written notice (the "Redemption Notice") to the Holder of the Note in accordance
with Section 14 not less than 30 days or more than 60 days prior to the
Redemption Date. The Redemption Notice shall set forth (i) the principal amount
of the Notes (plus accrued interest) that the Company shall redeem on the
Redemption Date, (ii) the Redemption Date, (iii) the Redemption Price, (iv) the
place for delivery of the Note and any other necessary transfer instruments to
be executed by the Holder in order to collect the Redemption Price. The
Redemption Notice once given is irrevocable by the Company. Upon the expiration
of any such notice period referred to in Section 8(C), the Company shall pay the
Note as provided in 8(A).

     (D) Subject to applicable law, the Company may at any time purchase the
Note together with all accrued interest thereon from the Holder in any manner
and at any price negotiated between the parties.

     (E) If the Note is redeemed by the Company it will be forthwith canceled
and may not be reissued or resold.

9.   Taxation

     All payments with respect to the Note by the Company shall be made without
withholding or deduction for, or on account of, any present or future taxes,
assessments or governmental charges of whatever nature ("Taxes") imposed or
levied by or on behalf of the U.S. or any political sub-division of the U.S.
having power to tax, unless the withholding or deduction of the Taxes is
required by law. In that event, the Company will pay to the Holder the net
amount due in connection with the Note, after the withholding or deduction of
such Taxes paid (or to be paid), and

                                       12

<PAGE>

Company shall not be responsible for the payment of any additional amounts to
third parties on behalf of the Holder.

10.  Additional Covenants

     While any Conversion Right remains exercisable, the Company will:

     (A) at all times keep available for issuance free from any preemptive
rights out of its authorized but unissued capital such number of Shares as would
enable the Conversion Rights to be satisfied in full; and

     (B) not in any way adversely modify the rights attached to the Shares with
respect to voting, dividends or liquidation, except to the extent all Common
Shares are equally affected.

11.  Events of Default

     The Note is, and it shall accordingly become, immediately due and payable
for the outstanding principal amount on the Note together with accrued
interest, if any of the following events (each an "Event of Default") shall have
occurred (unless such Event of Default has been remedied to the satisfaction of
the Holder and waived):

     (A) if default is made for a period of five (5) Business Days or more in
the payment of any interest due with respect to the Note; or

     (B) if the Company fails to perform or observe any of its other
obligations, covenants, conditions or provisions under the Note or Purchase and
Sale Agreement and such failure continues for a period of 30 calendar days (or
such longer period as the Holder may in its absolute discretion permit)
following the service by the Holder on the Company of a notice of default
requiring the same to be remedied; or

     (C) if (i) any other indebtedness of the Company becomes due and payable
prior to its stated maturity by reason of an event of default (howsoever
described) or (ii) any such indebtedness of the Company is not paid when due or,
as the case may be, within any applicable grace period, and in each such case
such event continues unremedied for a period of 30 calendar days, provided in
each such case the indebtedness exceeds $2,000,000; or

     (D) if the Company shall be declared or adjudicated by a competent court to
be insolvent or bankrupt, consents to the entry of an order of relief against it
in an involuntary bankruptcy case, shall enter into any assignment or other
similar arrangement for the benefit of its creditors or consents to the
appointment of a custodian (including, without limitation, a receiver,
liquidator or trustee); or

                                       13

<PAGE>

     (E) if a receiver shall be appointed for the Company or in relation to all
or substantially all of the assets of either of them, or a creditor shall levy
and foreclose upon (and take possession of) all or substantially all of the
assets of Company, and in any of the foregoing cases is not paid out or
discharged within 90 calendar days; or

     (F) if the Company institutes proceedings to be adjudicated a voluntary
bankrupt, or shall consent to the filing of a bankruptcy proceeding against it,
or shall file a petition or answer or consent seeking organization under the
laws of the Federal Bankruptcy Code or any similar applicable U.S. federal or
state law, or shall consent to the filing of any such petition, or shall consent
to the appointment of a receiver or liquidator or trustee or assignee (or other
similar official) in bankruptcy or insolvency of it or its Property, or shall
make an assignment for the benefit of creditors, or shall admit in writing its
inability to pay its debts generally as they come due; or

     (G) if a decree or order by a court of competent jurisdiction shall have
been entered against the Company or any declaring either of them a bankrupt or
insolvent, or approving a petition seeking the reorganization of the Company
under the Federal Bankruptcy Code or any other similar applicable U.S. federal
or state law, and such decree or order shall continue undischarged or unstayed
for a period of 90 calendar days; or a decree or order by a court of competent
jurisdiction for the appointment of a receiver or liquidator or trustee or
assignee (or other similar official) in bankruptcy or insolvency of the Company,
or for the winding up or liquidation of its affairs, shall have been entered,
and such decree or order shall have continued undischarged and unstayed for a
period of 90 calendar days; or

     (H) A material breach of a representation or warranty contained in the
Purchase and Sale Agreement occurs and is not remedied, if curable, within 90
days after notice of such breach.

12.  Replacement of Notes

     Should the Note be lost, stolen, mutilated, defaced or destroyed, it may
be replaced at the office of the Company upon payment by the claimant of the
expenses incurred in connection with the replacement and on such terms as to
evidence indemnity and security as the Company may reasonably require. Mutilated
or defaced Notes must be surrendered before replacements will be issued.

13.  Registration Statement

     Company agrees that in the event Shares are issued to Holder under the
terms of this Convertible Note, Company will file, or cause to be filed, a
separate registration statement with the Securities and Exchange Commission for
purposes of

                                       14

<PAGE>

registering for resale Holder's Shares under the U. S. Securities Act of 1933,
as amended, and any applicable state securities or blue sky law, within five (5)
months following the issuance of such Shares, and shall use its commercially
reasonable best efforts to have such registration statement declared effective
as soon as reasonably possible after such filing, as more fully set forth in
Section 4.11 of that certain Purchase and Sale Agreement dated contemporaneously
with this Note.

14.  Notices

     All Notices required or permitted under this Note shall be in writing and
shall be personally delivered or by certified mail, postage prepaid and return
receipt requested or by telecopier to the address designated by Holder. All
notices given by personal delivery or mail shall be effective on the date of
actual receipt. All notices by telecopier shall be confirmed in writing on the
day of transmission by personal delivery or certified mail.

15.  Transferability.

     Except for transfers by Noteholder to a Permitted Assignee, this Note may
not be transferred, assigned, hypothecated, sold or conveyed ("Transfers" or
"Transferred") in any manner, in whole or in part, by Holder or any Permitted
Assignee, without Company's prior written consent, which consent may be withheld
for any reason at Company's sole and absolute discretion. Any attempt transfer
of the Note by Holder or Permitted Assignee in violation of this Section 15
shall be void ab initio and of no force and effect.

16.  Definitions

     The terms set forth below shall have the meanings ascribed to them
below:

     "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person and the terms "controlling" and "controlled"
have meanings correlative to the foregoing.

     "Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board.

                                       15

<PAGE>

     "Business Day" means each Monday, Tuesday, Wednesday, Thursday, and Friday
which is a day on which banking institutions in Houston, Texas are not
authorized or obliged by law, regulation or executive order to close.

     "Closing Date" means December 30, 1999.

     "Common Stock" means, with respect to any Person, any and all shares,
interests, participation and other equivalents (however designated, whether
voting or non-voting) of such Person's common stock, whether now outstanding or
issued after the date of this Indenture, and includes, without limitation, all
series and classes of such common stock.

     "Company" means Harken Energy Corporation.

     "Conversion Date" means the Business Day during the Conversion Period on
which the Conversion Right is exercised by delivery to the Company of the Note
surrendered for conversion and the completed "Conversion Date" means the
Business Day during the Conversion Period on which the Conversion Right is
exercised by delivery to the Company of the Note surrendered for conversion and
the completed notice of a Holder's intention to exercise its Conversion Right
with respect to the Note.

     "Conversion Period" means, with respect to any Note, the period which is
provided in Section 7(A) of this Note.

     "Conversion Price" means the price at which Conversion Shares shall be
issued upon conversion as provided in Section 7(A) hereof, subject to adjustment
as set forth herein.

     "Conversion Right" means the right of a Holder of the Note to convert such
Note into Conversion Shares.

     "Conversion Shares" means the Shares into which the Notes are convertible.

     "Corporation" includes corporations, limited liability companies, limited
and general partnerships, associations, joint-stock companies and business
trusts.

     "Event of Default" has the meaning specified in Section 11.

     "Holder" means a Person who is the registered holder of a Note.

     "Indebtedness" of any Person means and includes all present and future
obligations of such Person.

     "Interest Payment Date" means May 26 and November 26 of each year while any
portion of this Note remains outstanding, commencing May 26, 2000.

                                       16

<PAGE>

     "Mandatory Conversion" means conversion of the Notes at the option of the
Company pursuant to Section 7(D).

     "Mandatory Conversion Date" means the date specified in a notice published
by the Company in accordance with Section 7(D), on which the Holder is required
to surrender its Note for conversion.

     "Market Price" of a Share on any day shall mean (i) the closing sales price
on the immediately preceding business day of a Share as reported on the
principal securities exchange on which Shares are then listed or admitted to
trading or (ii) if not so reported, the average of the closing bid and asked
prices for a Share on the immediately preceding business day as quoted on the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
or (iii) if not quoted on NASDAQ, the average of the closing bid and asked
prices for a Share as quoted by the National Quotation Bureau's "Pink Sheets" or
the National Association of Securities Dealers' OTC Bulletin Board System. If
the price of a Share shall not be so reported, the Market Price of a Share shall
be determined by the Company's board of directors in good faith.

     "Maturity," when used with respect to any Note, means the date on which
the principal of such Note becomes due and payable as therein or herein
provided, whether at Maturity or the Redemption Date and whether by declaration
of acceleration, call for redemption or otherwise. As used in this Note,
Maturity is May 26, 2003.

     "Note" has the meaning stated in the first recital of this Convertible
Note.

     "Permitted Assignees" means (i) Stewart Peck, in his capacity as Collateral
Agent for Participating Creditors in the Debt Restructure Agreement dated August
6, 1999, for an amount up to $4,071,320.74 out of the Principal Amount of the
Note plus interest accrued or thererafter payable thereon and (ii) the Permitted
Lienholder for an amount up to $7,928,679.26 out of the Principal Amount of the
Note plus interest accrued or thereafter payable thereon; provided, however, any
Transfer to the Permitted Lienholder shall be for the sole purpose of Holder
granting to Permitted Lienholder a security interest in, or lien on, the Note.
The Permitted Lienholder shall foreclose upon such security interest or pledge,
provided, further, if Permitted Lienholder shall foreclose on such security
interest or pledge, the Permitted Lienholder shall be subject to the Automatic
Put provisions contained in Section 5(c) of the Note.

     "Permitted Lienholder" means Encap Energy Capital Fund III, L.P. for an
amount equal to $7,928,679.26 out of the Principal Amount of the Note, plus
interest accrued or thereafter payable thereon.

                                       17

<PAGE>

     "Person" means any individual, corporation, limited liability corporation,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government entity or any agency or
political subdivision thereof.

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

     "Put Consideration" when used with respect to this Note, means the value
paid, in cash or Shares, for the redemption of the Note in the manner set forth
in Section 5.

     "Put Date" has the meaning specified in Section 5.

     "Put Notice" has the meaning specified in Section 5.

     "Redemption Date," when used with respect to any Note to be redeemed, in
whole or in part, means the date fixed for such redemption by or pursuant to
this Note.

     "Redemption Price," when used with respect to any Note to be redeemed,
means the price at which they are to be redeemed pursuant to the terms hereof,
plus accrued interest to the Redemption Date if applicable.

     "Restricted Put Period" has the meaning specified in Section 5.

     "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated from time to time by the Commission pursuant
thereto.

     "Shares" means the common stock, par value U.S.$0.01, of the Company (and
all other (if any) shares or stock resulting from any sub-division,
consolidation or reclassification or such shares).

17.  Governing Law

     This Note is governed by, and will be construed in accordance with, the
laws of the State of Texas.

18.  Other Defined Terms

     Capitalized words and terms used in this Note that are defined elsewhere in
this Note are used herein as therein defined.

                                       18

<PAGE>

     IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed in
its corporate name by the signature of the undersigned duly authorized officer
of the Issuer.

     DATED as of December ___, 1999.

                                           HARKEN ENERGY CORPORATION

                                           By: /s/ Larry E. Cummings
                                              ---------------------------------
                                               Larry E. Cummings, Vice President

[Corporate Seal]

ATTEST:

By:
   -------------------------------------

Name:
     -----------------------------------
                Assistant Secretary

                                       19<PAGE>

                                                                   Exhibit 10.76

July 30 2002

Hanover Compressor Company
12001 North Houston Rosslyn
Houston, Texas 77086
Attn: Board of Directors

Gentlemen:

This letter agreement sets forth my agreement to assign and transfer the Shares
(as hereafter defined) from me to Hanover Compressor Company (the "Company")
effective the date hereof. In consideration of a payment by the Company of
$1,320,000 (the "Funds") to me and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, I hereby transfer,
convey and assign to the Company 147,322 shares of common stock, no par value,
of the Company (the "Shares"), which amount was derived by dividing $1,320,000
by $8.96, which was the closing price of the Company's common stock quoted on
the New York Stock Exchange Composite Tape on July 29, 2002 (the "Shares"). In
connection with the transfer of the Shares, I represent and warrant to the
Company that I am the record and beneficial owner of, and have good and
marketable title to the Shares. I represent and warrant to the Company that the
Shares are free and clear of any liens (including judgment and mechanics liens,
regardless of whether liquidated), mortgages, assessments, security interests,
pledges, options or other charges, claims, encumbrances, hypothecations,
restrictions, or adverse claims of any kind (collectively the "Liens"), other
than (a) the security interest and claim of Herndon Plant Oakley Ltd. ("HPO") on
the Shares (the "Broker's Lien"), which will be released upon receipt of funds
sufficient to satisfy margin loan requirements, and (b) restrictions which may
be imposed by the securities laws. I will use the Funds to effect release of the
Broker's Lien. Upon delivery of the Shares pursuant to this letter, together
with a duly executed stock power, the Company will have good and marketable
title to the Shares, free and clear of all Liens, created by or through me. I
represent and warrant to the Company that I have full power and authority to
execute and deliver this letter and perform my obligations hereunder, that no
approval, authorization, consent or other action by, or filing with, any
governmental authority or other party is required in connection with my
execution and delivery of this letter and the performance of my obligations
hereunder (except the filing of Form 4 with the Securities and Exchange
Commission), and that this letter constitutes a legal, valid and binding
obligation, enforceable against me in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights generally.
I represent and warrant to the Company that the execution, delivery and
performance of this letter and the consummation of the transactions contemplated
hereby will not conflict with or result in a breach or violation of any term or
provision of, or constitute a default under any agreement, instrument, judgment,
or order binding upon me, or violate the requirements of any applicable law,
other than the Broker's Lien. I covenant and agree to defend, indemnify and hold
harmless the Company from and against any

<PAGE>

inaccuracy in or breach of any representations or warranties made by me in this
letter, provided that my liability under this sentence shall not exceed the
amount paid to me hereunder by the Company for the Shares. I also agree to take
any other action and execute any other documents or agreements that the Company
may reasonably request to carry out the purpose and intent of this letter.

The parties understand that the Company is currently in a blackout period and
each party acknowledges that it may possess material nonpublic information about
the Company and therefore cannot sell the Shares on the open market and the
Company agrees that it shall not publicly sell the Shares during the blackout
period. I hereby represent that the purpose of the transaction described in this
letter is to prevent HPO from selling in the open market shares of Hanover stock
in my account to cover a margin call. In consideration for allowing me to sell
the Shares to the Company in the private transaction described in this letter,
each party hereby waives and releases any claim that it might have against the
other party (which includes for this purpose the Company's officers and
directors) solely with respect to the transaction described in this letter,
including but not limited to any claim that such party may possess certain
nonpublic information about the Company, its businesses, finances, prospects or
other matters, that the other party does not have and which might affect a
decision to buy or sell the Shares in the transaction described in this letter.

It is understood that the Company has wire transferred the Funds to my account
at HPO pursuant to the wire instructions set forth on an attachment hereto and
that HPO will deposit the Shares into the account of the Company as soon as
reasonably possible. HPO hereby represents and warrants that there are
sufficient shares in the account of Michael J. McGhan to enable him to perform
his obligations hereunder.

This letter shall be governed by the laws of the state of Texas without regard
to conflicts of laws principles and venue for any dispute hereunder shall lie in
the state or federal courts of Harris County, Texas.

                                                Very truly yours,

                                                /s/ Michael J. McGhan
                                                -------------------------------
                                                Michael J. McGhan

Acknowledged and agreed with respect to
the matters in the penultimate paragraph
of this letter:

HERNDON PLANT OAKLEY LTD.

By:    /s/ Phillip M. Plant
   ------------------------------------
Name:  Phillip M. Plant
     ----------------------------------
Title: Partner
      ---------------------------------

                                       2

<PAGE>

Acknowledged and agreed:

HANOVER COMPRESSOR COMPANY

By:     /s/ John Jackson
   -----------------------------------
Name:   John Jackson
     ---------------------------------
Title:  Chief Financial Officer
      --------------------------------

                                       3

<PAGE>

                                 SPOUSAL CONSENT

     The spouse of Michael J. McGhan by executing this letter is aware of,
understands, and consents to the provisions of the letter and its binding effect
upon any community property interest or marital settlement awards she may now or
hereafter own or receive.

         /s/ Ruth Lynn McGhan
         ----------------------------------
         Ruth Lynn McGhan

                                       4

<PAGE>

                                   STOCK POWER

     For the full and adequate consideration received, Michael J. McGhan, hereby
sells, assigns, and transfers to_____________ his interest in ____________ and
all of his legal and beneficial interest in_____________ being ________ (____)
fully paid and non-assessable shares of common stock, now registered in the name
of _________ on the books of said Corporation, being Certificate No.___, and
hereby appoints ____________, to transfer the aforesaid shares of stock on the
books of the Corporation.

         Dated the____ day of July, 2002.

                                       5

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