SECURITY AGREEMENT
 
SECURITY AGREEMENT (this “Agreement”), dated as of August 24, 2007, between
Consolidated Oil and Gas, Inc., a Nevada corporation (the “Company”), and CTI
Petroleum, Inc., a Texas corporation (the “Secured Party”).
 
WHEREAS, The Company is indebted to the Secured Party pursuant to a Promissory
Note, dated August 24, 2007, in the original principal amount of $ $150,000.00
(the “Note”);
 
WHEREAS, the Secured Party has required the Company to grant to the Company a
security interest in all the Company’s assets to secure the full and timely
repayment of the Note and any other indebtedness of the Company to the Secured
Party (the “Secured Obligations”);
 
NOW, THEREFORE, in consideration of the premises, the mutual agreements set
forth herein and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree as follows:
 
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Company agrees for the benefit of the Secured
Party as follows:
 
1.Grant of Security Interest. The Company hereby grants to the Secured Party a
security interest in the property described in Section 2 of this Agreement (the
“Collateral”) to secure payment to the Secured Party of all liabilities and
indebtedness of the Company to the Secured Party under the Secured Obligations,
whether such liabilities or indebtedness is due or to become due, absolute or
contingent, joint or several, now existing or hereafter arising.
 
2.Description of Collateral. The collateral shall consist of all assets and
properties now owned or hereafter acquired by the Company, including, without
limitation, the following:
 
(a)All equipment (consisting of machinery, furniture, fixtures and vehicles) now
owned or hereafter at any time acquired by the Company or in which the Company
has or obtains rights together with all repairs, improvements, attachments,
renewals, additions and accessions thereto, substitutions and replacements
therefor at any time hereafter made or acquired and all guaranties, claims,
rights, remedies and privileges relating to any of the foregoing;
 
(b)All inventory and other personal property owned or hereafter at any time
acquired by the Company, which is held for sale in the ordinary course of
business, or is furnished or to be furnished under contracts for service, or is
held as raw materials, work in process or materials used or consumed or to be
used or consumed in the Company’s business.
 
(c)All accounts receivable of the Company;
 
(d)All customer contracts and other contract rights;
 
(e)All patents, trademarks, service marks, tradenames, trade dress, copyrights,
computer programs, data bases, know-how and all other intellectual, industrial
and intangible property rights;
 
(f)All proceeds of all of the Collateral.
 
Exhibit 10.3
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3.Warranties of the Company. The Company hereby represents and warrants to the
Secured Party as follows:
 
(a)Ownership. The Company is the owner of the Collateral, free of all
encumbrances and security interests other than securing an existing loan in the
approximate amount of $500,000.00 to ___________________________;
 
(b)Authority. The Company has full power and authority to execute this
Agreement, to perform the Company’s obligations hereunder and to subject the
Collateral to the security interest created hereby; and
 
(c)Location of Collateral. The equipment and inventory will be maintained at the
Company’s principal offices and production facilities, and the books and records
concerning the Company’s accounts receivable will be kept at the same address.
The equipment, inventory and books and records concerning the Company’s accounts
receivable will not be removed from such location without prior notice to the
Secured Party.
 
4.Obligations of the Company. During the term of this Agreement, the Company
will comply with each of the following covenants and commitments:
 
(a)Maintenance of Collateral. The Company will keep the Collateral and all
lands, plants, buildings, machinery, equipment and other property now or
hereafter at any time owned or used by the Company in connection with the
storage, sale or lease of the Collateral in good condition and insured against
such risks and in such amounts as the Secured Party may request, with an
insurance company or companies satisfactory to Secured Party, the policies to
protect the Secured Party as Secured Party’s interests may appear and to be
delivered to the Secured Party at Secured Party’s request;
 
(b)Disposition of Collateral. The Company will not sell, lease or otherwise
dispose of the Collateral consisting of equipment, accounts receivable and
inventory other than in the ordinary course of its business at prices
constituting the then fair market value thereof. The Company will not grant to
any account debtor any rebate, refund, allowance or credit on any account
without the prior written consent of the Secured Parties other than in the
ordinary course of business;
 
(c)Collection of Accounts. The Company will collect all accounts receivable
until receipt of notice from Secured Party to notify any or all account debtors
(as that term is defined in the Uniform Commercial Code) of the existence of the
Secured Party’s security interest and upon receipt of such notice the Company
shall so notify such account debtors. The Company will hold all of the proceeds
of such collections and all return and repossessed goods in trust for the
Secured Party, and will not commingle the same with any other funds or property
of the Company, and will deliver the same forthwith to the Secured Party at
Secured Party’s request; provided, however, that with respect to returned and
repossessed goods, the Company will on demand pay to the Secured Party the full
invoice price thereof. All proceeds of Collateral received by the Secured Party
shall be applied against the Secured Obligations in such order and at such times
as the Secured Party shall determine whether or not due;
 
(d)Records and Inspections. The Company will keep accurate books, records and
accounts with respect to the Collateral and will make the same available to
Secured Party at Secured Party’s request for examination. The Company will
permit any authorized representative of the Secured Party from time to time to
examine and inspect, during normal business hours, any and all premises where
the Collateral is or may be kept or located and the Company shall assist the
Secured Party in making such inspections; and
 
Exhibit 10.3
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(e)Maintenance of Security Interest. The Company will at any time or times
hereafter execute such financing statements and other instruments and perform
such acts as the Secured Party may request to establish and maintain a valid
security interest in the Collateral, and will pay all costs of filing and
recording.
 
5.Rights of Secured Party.
 
(a)Authority to Perform for the Company. Upon default by the Company in the
performance of the Company’s obligations hereunder, the Secured Party at Secured
Party’s option may (i) effect such insurance and repairs and pay the premiums
therefor and the costs thereof and (ii) pay and discharge any taxes, liens and
encumbrances on the Collateral. All sums so advanced or paid by the Secured
Party shall be payable by the Company on demand with interest at the highest
rate allowed by law and shall be a part of the Secured Obligations.
 
(b)Rights with Respect to Collateral. The Secured Party shall have the
authority, but shall not be obligated: (i) to notify any or all account debtors
of the existence of the Secured Party’s security interest and to pay or remit
all sums due or to become due directly to the Secured Party or Secured Party’s
respective nominees; (ii) to place on any chattel paper (as that term is defined
in the Uniform Commercial Code) received as proceeds a notation or legend
showing the Secured Party’s security interest; (iii) to place upon the Company’s
books and records relating to accounts receivable covered by the security
interest granted hereby a notation or legend stating that such account is
subject to a security interest held by the Secured Party; (iv) in the name of
the Company, or otherwise, to demand, collect, receive and receipt for,
compound, compromise, settle and give acquittance for, and prosecute and
discontinue any suits or proceedings in respect of any or all of the accounts in
which the Secured Party have a security interest; (v) to take any action which
Secured Party may deem necessary or desirable in order to realize on the
Collateral, including, the power to perform any contract, to endorse in the name
of the Company any checks, drafts, notes or other instruments or documents
received in payment of or on account of the Collateral; and (vi) after any Event
of Default, to enter upon and into and take possession of all or such part or
parts of the properties of the Company, as may be necessary or appropriate in
the judgment of the Secured Party to permit or enable the Secured Party to
process, store, and sell all or any part of the inventory, as the Secured Party
may elect, and to use and operate said properties for such purposes and for such
length of time as the Secured Party may deem necessary or appropriate for such
purposes without the payment of any compensation to the Company therefor.
 
6.Default.
 
(a)Events of Default. The occurrence of any of the following events shall
constitute a default (“Event of Default”) under this Agreement:
 
(1)The Company shall fail to observe or perform any of the other covenants or
agreements binding on the Company under this Agreement and such default shall
have continued uncured for a period of 20 days after written notice thereof is
delivered to the Company; or
 
(2)The Company shall be in default in the payment to the Secured Party of any
indebtedness evidenced by the Secured Obligations.
 
Exhibit 10.3
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(b)Remedies. Upon the occurrence of an Event of Default, the Secured Party shall
have all of the rights and remedies of a secured party under the provisions of
the Uniform Commercial Code.
 
7.Miscellaneous.
 
(a)Entire Agreement. This Agreement and the Guarantee contain the entire
understanding between the parties hereto with respect to the subject matter
hereof and thereof and supersedes any prior understandings, agreements or
representations, written or oral, relating to the subject matter hereof and
thereof.
 
(b)Counterparts. This Agreement may be executed in separate counterparts, each
of which will be an original and all of which taken together shall constitute
one and the same agreement, and any party hereto may execute this Agreement by
signing any such counterpart.
 
(c)Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable under any applicable law or rule, the validity, legality and
enforceability of the other provision of this Agreement will not be affected or
impaired thereby.
 
(d)Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
 
(e)Modification, Amendment, Waiver or Termination. No provision of this
Agreement may be modified, amended, waived or terminated except by an instrument
in writing signed by the parties to this Agreement. No course of dealing between
the parties will modify, amend, waive or terminate any provision of this
Agreement or any rights or obligations of any party under or by reason of this
Agreement. No delay on the part of the Secured Party in the exercise of any
right or remedy under this Agreement shall operate as a waiver thereof, and no
single or partial exercise by the Secured Party of any right or remedy under
this Agreement shall preclude other or further exercise thereof or the exercise
of any other right or remedy. No waiver by the Secured Party of any right or
remedy under this Agreement shall be deemed to be or construed as a further or
continuing waiver of such right or remedy or as a waiver of any other right or
remedy.
 
(f)Notices. All notices, consents, requests, instructions, approvals or other
communications provided for herein shall be in writing and delivered by personal
delivery, overnight courier, mail, electronic facsimile or e-mail addressed to
the receiving party at the address set forth herein. All such communications
shall be effective when received.
 
CTI Petroleum, Inc.
700 Technology Drive,
Pittsburgh, Pennsylvania 15219
Attention: Richard C. Jackson
 
Consolidated Oil and Gas, Inc.
316 Main Street, Suite L
Humble TX 77338

 
Exhibit 10.3
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Any party may change the address set forth above by notice to each other party
given as provided herein.
 
(g)Headings. The headings and any table of contents contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
 
(h)Governing Law. ALL MATTERS RELATING TO THE INTERPRETATION, CONSTRUCTION,
VALIDITY AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW
PROVISIONS THEREOF.
 
(i)Third-Party Benefit. Nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights, remedies, obligations or
liabilities of any nature whatsoever.
 
Exhibit 10.3
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth in the first paragraph.
 

        CTI PETROLEUM, INC.       By:       Name:

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    Title:

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        CONSOLIDATED OIL AND GAS, INC.  
   
   
    By:       Name:

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    Title:

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Exhibit 10.3
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