PROMISSORY NOTE SETTLEMENT AGREEMENT

THIS PROMISSORY NOTE SETTLEMENT AGREEMENT (the “Agreement”) is made effective
this 31st day of October, 2008 (the “Effective Date”), by and between Nitro
Petroleum Incorporated, (the “Company”), with a principal business address of
7250 N.W. Expressway, Oklahoma City, Oklahoma 73132 and Highlight Holdings Ltd.
(“Highlight”), with a principal business address of Henville Building, Prince
Charles Street, Charlestown, Nevis, West Indies.

WITNESSETH

WHEREAS, the Company borrowed an aggregate of $2,000,000 from H.E. Capital Ltd
(“H.E. Capital”) pursuant to the terms of certain demand promissory notes issued
by the Company in favor of H.E. Capital, all of which bear interest at a rate of
four percent (4%) per annum (collectively, the “Notes”).

WHEREAS, H.E. Capital assigned to Highlight all or a portion of one or more of
the Notes, transferring to Highlight the right to receive payment of $400,000
principal amount (the “Transferred Amount”) of the Notes and any accrued and
unpaid interest due and payable on the Transferred Amount.

WHEREAS, the Notes that were fully or partially assigned to Highlight that
represent the right to receive the Transferred Amount plus accrued and unpaid
interest on the Transferred Amount are referred to herein as the “Transferred
Notes.”

WHEREAS, the table below sets forth (i) the date each Transferred Note was
issued to H.E. Capital, (ii) the original Transferred Amount that was
transferred to Highlight from each Transferred Note, (iii) the unpaid
Transferred Amount from each Transferred Note as of the Effective Date, (iv) the
accrued and unpaid interest owed on the Transferred Amount of each Transferred
Note as of the Effective Date, and (v) the total of the unpaid Transferred
Amount and accrued and unpaid interest due on the unpaid Transferred Amount of
each Transferred Note as of the Effective Date:

Date Note Issued to H.E. Capital

Original Transferred Amount of Transferred Note

Unpaid Transferred Amount of Transferred Note

Accrued and Unpaid Interest

Total Transferred Amount and Interest due on Transferred Note

February 17, 2006

$150,000

$150,000

$16,258

$166,258

March 1, 2006

$150,000

$150,000

$16,044

$166,044

March 6, 2006

$100,000

$100,000

$10,630

$110,630

Total

$400,000

$400,000

$42,932

$442,932

 

WHEREAS, the aggregate amount of the unpaid Transferred Amount and accrued and
unpaid interest due on the unpaid Transferred Amount of all Transferred Notes as
of the Effective Date is $442,932 (referred to hereafter as the “Settlement
Amount”).

WHEREAS, the Company desires to pay the Settlement Amount through the issuance
of shares of its common stock, par value $0.001 per share (the “Common Stock”)
and Highlight desires to accept shares of the Company’s Common Stock in full
satisfaction of the Settlement Amount pursuant to the terms and conditions of
this Agreement.

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

 

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1.

Payment of Settlement Amount.

(a)   Valuation of Common Stock. The parties agree that, for purposes of paying
the Settlement Amount, each share of the Company’s Common Stock shall be valued
at $0.05 per share (the “Per Share Value”). The parties determined the Per Share
Value through negotiation and, as such, the parties recognize, acknowledge and
agree that the Per Share Value may not be indicative of the true value of a
share of the Company’s Common Stock.

(b)  Issuance of Shares. Based on the Per Share Value, simultaneously with the
execution and delivery of this Agreement, the Company shall issue and deliver to
Highlight a stock certificate or stock certificates representing a total of
8,858,640 shares (the “Settlement Shares”) of the Company’s Common Stock in full
satisfaction of the Settlement Amount. The stock certificate(s) for the
Settlement Shares shall be freely tradable and bear no legends restricting
transfers of the Settlement Shares.

2.         Cancellation of the Notes. Highlight hereby assigns, transfers and
surrenders for cancellation each of the Transferred Notes to the Company.
Simultaneously with the execution of this Agreement, Highlight shall deliver to
the Company each of the Transferred Note, duly endorsed as terminated and
cancelled. Highlight acknowledges that upon its receipt of the Settlement Shares
pursuant to Section 1(b) above and delivery of the Transferred Notes pursuant to
this Section, it shall have no further rights to any payments under the
Transferred Notes.

 

3.         Release of the Company. Highlight, on behalf of its officers,
directors, shareholders, assigns, successors, agents, representatives, attorneys
and all other persons or entities who/which have or could have made claims
through or based on any of its rights, hereby release and discharge the Company,
and any of its officers, directors, shareholders, attorneys, affiliates,
successors, agents and representatives, (collectively the “Company Released
Parties”) from all claims, liabilities, demands and causes of actions, known or
unknown, fixed or contingent, which Highlight has, may have or claim to have
against the Company Released Parties, related to or arising out of the
Transferred Notes.

4.         Release of Highlight. The Company, on behalf of its officers,
directors, shareholders, assigns, successors, agents, representatives, attorneys
and all other persons or entities who/which have or could have made claims
through or based on any of its rights, hereby release and discharge Highlight,
and any of its officers, directors, shareholders, attorneys, affiliates,
successors, agents and representatives, (collectively the “Highlight Released
Parties”) from all claims, liabilities, demands and causes of actions, known or
unknown, fixed or contingent, which the Company has, may have or claim to have
against the Highlight Released Parties, related to or arising out of the
Transferred Notes.

 

5.

Representations and Warranties of the Company.

(a)  Organization. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada and has all requisite
power and authority to execute and deliver this Agreement and all other
instruments which are ancillary hereto.

(b)  Authorization; Approvals. The execution and delivery of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all requisite corporate action on the part
of the Company. This Agreement has been duly and validly executed and delivered
by the Company and, assuming the due execution and delivery of this Agreement by
Highlight, shall constitute the valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
limited by bankruptcy, moratorium, fraudulent transfer, reorganization and other
laws of general applicability affecting the rights and remedies of creditors and
by general equitable principles (whether considered in a proceeding in equity or
at law).

(c)  Settlement Shares. Once issued in accordance with the terms of this
Agreement, the Settlement Shares shall be duly authorized, validly issued, fully
paid and non-assessable shares of the Company’s Common Stock.

 

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6.

Representations and Warranties of Highlight.

(a)  Organization. Highlight is a corporation duly organized, existing and in
good standing under the laws of Nevis, West Indies and has all requisite power
and authority to execute and deliver this Agreement and all other instruments
which are ancillary hereto.

(b)  Authorization; Approvals. The execution and delivery of this Agreement by
Highlight and the consummation by Highlight of the transactions contemplated
hereby have been duly authorized by all requisite action on the part of
Highlight. This Agreement has been duly and validly executed and delivered by
Highlight and, assuming the due execution and delivery of this Agreement by the
Company, shall constitute the valid and legally binding obligation of Highlight,
enforceable against Highlight in accordance with its terms, except as limited by
bankruptcy, moratorium, fraudulent transfer, reorganization and other laws of
general applicability affecting the rights and remedies of creditors and by
general equitable principles (whether considered in a proceeding in equity or at
law).

 

(c)

Investment Representations.

(i)   Highlight is fully aware of the Company’s business, operations and
financial condition and has had full access to the information it considers
necessary or appropriate to make an investment decision with respect to
accepting the Settlement Shares in full satisfaction of the Settlement Amount
and has had an opportunity to ask questions of and receive answers from a person
or persons acting on the Company’s behalf concerning the terms and conditions of
this Agreement, and all such questions have been answered to its full
satisfaction.

(ii)  Highlight (i) is acquiring the Settlement Shares for its own account, for
investment only, and not with a view toward the resale or distribution thereof;
(ii) has such knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of making investment decisions of
this type; (iii) has knowledge of finance, securities and investments generally;
(iv) has experience and skill in investments based on actual participation; and
(v) has the ability to bear the economic risk of this investment and the
ability, at the present time, to afford a complete loss of such investment.

 

7.         Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the state of Oklahoma.

8.         Binding Effect. This Agreement shall inure to the benefit of, and
shall be binding upon, the parties hereto and their respective successors and
assigns.

9.         Entire Agreement. This Agreement constitutes the entire understanding
and agreement of the parties with respect to the subject matter hereof,
supercedes any prior written or oral communications with respect thereto, and
may not be modified except by a writing signed by all the parties.

10.       Counterparts-Facsimile Signatures. This Agreement may be executed in
multiple counterparts each of which when duly executed and delivered shall be an
original. Telefacsimilies signatures of the parties or counterparts of this
Agreement will be binding as if such signatures were originals.

11.       Survival of Representations, Warranties and Agreements. All of the
representations, warranties, covenants, promises and agreements of the parties
contained in this Agreement (or in any document delivered or to be delivered
pursuant to this Agreement) shall survive the execution, acknowledgment, sealing
and delivery of this Agreement and the consummation of the transactions
contemplated hereby.

 

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Executed as of this 5th day of December, 2008.

Nitro Petroleum Incorporated

 

 

By:  /s/  Larry Wise  

Larry Wise, President

 

Highlight Holdings Ltd.

 

 

By:  /s/  R. Seeley  

Name: R. Seeley

Title: Authorized Signatory

 

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