DEVELOPMENT FINANCE AGREEMENT

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

ARTICLE I 
Definitions and References

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

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

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

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

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

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

"Bocachico Association Contract" shall mean that certain Bocachico Association Contract executed January 6, 1994, between Ecopetrol and Harken Colombia, together with the operating agreement attached thereto and all modifications, amendments and/or supplements heretofore or hereafter made with respect to such Association Contract or operating agreement.

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

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

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

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

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

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

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

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

"Designated Percentage" shall mean 1.4%.

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

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

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

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

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

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

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

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

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

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