Document:

EXHIBIT 10.21

                                 PROMISSORY NOTE

$1,128,522.63                                                December  31,  2002

     After  date,  without  grace,  for  value received, HOUSTON AMERICAN ENERGY
CORP.,  a Delaware corporation having its principal office and place of business
in  Harris  County,  Texas  (the "Maker") hereby promises to pay to the order of
JOHN  F.  TERWILLIGER,  an  individual  having his principal office and place of
business in Harris County, Texas (the "Payee"), the original principal amount of
ONE  MILLION  ONE  HUNDRED  TWENTY-EIGHT  THOUSAND  FIVE  HUNDRED  TWENTY-TWO  &
sixty-three  cents, together with interest, as hereinafter described.  This Note
is  payable in lawful money of the United States of America at 801 Travis, Suite
2020, Houston, Harris County, Texas  77002, or such other place as the Payee may
designate  in  writing  to  the  Maker.

     This  note  may  be  assigned  by Payee at any time without prior notice to
Maker.

     This  Note  shall  be  due  and  payable on demand as to both principal and
interest.  Interest at a rate of ten percent (10%) per annum shall accrue on the
unpaid  principal  balance  of this Note.  If this Note is not paid at maturity,
however  maturity  may  be  brought about, all principal due on the date of such
maturity  shall  bear  interest  from  the  date of such maturity at the maximum
contract  rate of interest which the Payee may charge the Maker under applicable
law.  Interest  on  this  Note  shall  be computed for the actual number of days
elapsed  and  on  the  basis  of  a  year  consisting  of  360  days.

     If,  for  any  reason whatever, the interest paid on this Note shall exceed
the  maximum non-usurious amount permitted by law, the Payee shall refund to the
Maker  such  portion  of said interest as may be necessary to cause the interest
paid on this Note to equal the maximum non-usurious amount permitted by law, and
no  more.  All  sums  paid  or  agreed  to  be  paid  to  the Payee for the use,
forbearance  or  detention  of  the  indebtedness  evidenced hereby shall to the
extent  permitted by applicable law be amortized, prorated, allocated and spread
throughout  the  full  term  of  this  Note  until  payment  in  full.

     The  Maker shall be entitled to prepay this Note in whole or in part at any
time  without  the  payment  of  a  prepayment  premium.

     In the event of default in the payment of this Note or under any instrument
executed  in  connection  with this Note, the Maker agrees to  pay on demand all
costs  incurred  by  the Payee (i) in the collection of any sums, including, but
not  limited  to,  principal,  interest,  expenses,  and  reimbursements due and
payable  on  this  Note,  and  (ii)  in  the  enforcement of the other terms and
provisions  of this Note, whether such collection or enforcement be accomplished
by  suit  or  otherwise,  including  the  Payee's  reasonable  attorney's  fees.

     Except  as otherwise provided for herein, each maker, surety, guarantor and
endorser  of  this Note expressly waives all notices, including, but not limited
to, all demands for payment, presentations for payment, notice of opportunity to
cure  default, notice of intention to accelerate the maturity, notice of protest
and  notice  of  acceleration  of  the maturity, notice of protest and notice of
acceleration  of  the  maturity of this Note, and consents that this Note may be
renewed  and  the  time of payment extended without notice and without releasing
any  of  the  parties.

     Any  check,  draft, money order or other instrument given in payment of all
or  any  portion  of  this Note may be accepted by the Payee or any other holder
hereof and handled in collection in the customary manner, but the same shall not
constitute  payment  hereunder  or diminish any rights of the Payee or any other
holder hereof, except to the extent that actual cash proceeds of such instrument
are unconditionally received by the Payee or any other holder hereof and applied
to  the  indebtedness  as  herein  provided.

     This Note shall be governed by and construed in accordance with the laws of
the  State  of  Texas  and  applicable  federal  law.

                                   HOUSTON  AMERICAN  ENERGY  CORP.

                                   By   /s/  John  F.  Terwilliger
                                      ----------------------------
                                       John  F.  Terwilliger,  President

<PAGE>EXHIBIT 10.3

                             CANCELLATION AGREEMENT

     THIS  AGREEMENT  is  made  on  July 31, 2002 (the "Effective Date"), by and
among  FLAG  Financial Corporation, a Georgia corporation ("FLAG"); FLAG Bank, a
bank subsidiary of FLAG (the "Bank") (collectively, the "Employer"), and CHARLES
O.  HINELY,  a  resident  of  the  State  of  Georgia  (the  "Employee").

                                R E C I T A L S:
                                ---------------

     The  Employer  and  the  Employee  entered  into  that  certain  employment
agreement  dated  as  of  February  20,  2002  (the  "Employment  Agreement").

     The  parties  wish  to  cancel  the  provisions of the Employment Agreement
except for the restrictive covenants and the enforcement provisions thereof, the
provisions  related  to  notice  and  attorneys'  fees,  and  the  definitional
provisions.

     In  consideration  of  the  above  premises  and  the  mutual  agreements
hereinafter  set  forth,  the  parties  hereto  agree  as  follows:

1.     Cancellation  of the Employment Agreement.  The Employer and the Employee
       -----------------------------------------
agree  to  cancel  all  provisions  of  the Employment Agreement, except for the
Surviving  Provisions (as defined in Section 7 of this Agreement).  The Employee
will  tender  his  resignation  as  Executive Vice President and Chief Financial
Officer  of  FLAG  and the Bank, as Secretary of the Boards of Directors of FLAG
and  the  Bank, and as a member of the Board of Directors of the Bank, with such
resignations  to  be  effective  no  later  than  the  Effective  Date.

     2.     Consideration.  In  full  and  complete  settlement  of  any and all
            -------------
obligations  of the Employer to the Employee under the Employment Agreement, the
Employer  shall  pay  to the Employee a lump-sum cash payment equal to $785,000,
which  amount  shall  be payable on the Effective Date or as soon as practicable
thereafter.

     Notwithstanding  any  other provision of this Agreement to the contrary, if
the  aggregate  of  the  payments  provided  for in this Agreement and the other
payments  and  benefits  that  the  Employee  has  the right to receive from the
Employer  (the  "Total  Payments")  would  constitute  a "parachute payment," as
defined  in  Section  280G of the Internal Revenue Code of 1986, as amended (the
"Code"),  the Employee shall receive the Total Payments unless (a) the after-tax
amount  that  would  be  retained by the Employee (after taking into account all
federal,  state and local income taxes payable by the Employee and the amount of
any  excise  taxes  payable  by the Employee under Section 4999 of the Code (the
"Excise Taxes")) if the Employee were to receive the Total Payments has a lesser
aggregate  value  than  (b)  the  after-tax amount that would be retained by the
Employee  (after  taking  into account all federal, state and local income taxes
payable  by  the  Employee)  if  the Employee were to receive the Total Payments
reduced  to  the  largest  amount  as  would  result  in no portion of the Total
Payments  being  subject to Excise Taxes (the "Reduced Payments"), in which case
the  Employee  shall  only  be  entitled  to  the  Reduced

<PAGE>
Payments. If the Employee is to receive the Reduced Payments, the Employee shall
be  entitled  to determine which of the Total Payments, and the relative potions
of  each,  are  to  be  reduced.

     3.     Continued  Employment.  The  Employee will continue in the employ of
            ---------------------
the Bank for the period beginning August 1, 2002 and ending on December 31, 2003
or  any  earlier  date  of  termination  of this Agreement pursuant to Section 4
hereof (the "Term").  The Employee will be employed as a Project Coordinator and
will  be  subject  to the direction of the President of FLAG or his designee(s).
The  Employee  shall  perform  and  discharge well and faithfully the authority,
duties  and  responsibilities which may be assigned to the Employee from time to
time by the President of FLAG or his designee(s). The Employee shall receive the
following  salary  and  benefits  during  the  Term:

          (a)  Base  Salary. The Employee shall be compensated at a base rate of
               ------------
     Twenty-Five  Thousand  Dollars ($25,000) per year ("Base Salary"). The Base
     Salary  shall  be  payable  in  accordance  with  the Bank's normal payroll
     practices.

          (b)  Incentive  Compensation. The Employee shall be eligible for bonus
               -----------------------
     compensation  in an amount determined by the Board of Directors of the Bank
     in  its sole discretion based on the Employee's performance as evaluated by
     the  Board  of  Directors  of  the  Bank.

          (c)  Business  Expenses.  The  Bank  shall  reimburse the Employee for
               ------------------
     reasonable  business  expenses  (including travel expenses) incurred by the
     Employee  in  performance of the Employee's duties for the Bank, subject to
     the approval of the Board of Directors of the Bank; provided, however, that
     the  Employee,  shall, as a condition of reimbursement, submit verification
     of  the nature and amount of such expenses in accordance with reimbursement
     policies  as may be adopted from time to time by the Bank and in sufficient
     detail to comply with the rules and regulations promulgated by the Internal
     Revenue  Service.

          (d)  Benefits.  The Employee shall be entitled to such benefits as may
               --------
     be available from time to time for employees of the Bank similarly situated
     to  the  Employee.  All  such benefits shall be awarded and administered in
     accordance  with  the Bank's standard policies and practices. Such benefits
     may  include,  by  way of example only, profit sharing plans, retirement or
     investment  funds,  dental,  health,  disability  insurance  and such other
     benefits  as  the  Bank  deems  appropriate.

     4.     Termination  of  Employment.  During  the  Term,  the  Employee's
            ---------------------------
employment with the Bank under this Agreement may be terminated only as follows:

          (a) By the Bank for Cause (as defined in the Employment Agreement), in
     which  event  the  Bank  shall  have  no further obligation to the Employee
     except for the payment of any amounts earned and unpaid as of the effective
     date  of  termination;

          (b)  By  the Bank without Cause or by the Employee for Cause, in which
     event  the  Bank  shall  pay  to the Employee a lump sum cash payment in an
     amount  equal  to  the

                                        2
<PAGE>
     product  of  the  Employee's  Base  Salary and a fraction, the numerator of
     which  is  the  number  of  months  remaining  from  the  effective date of
     termination  until  December  31,  2003  and  the  denominator  of which is
     seventeen  (17),  plus  the  payment  described  in  Section  5  hereof;

          (c)  By the Employee without Cause, in which event the Bank shall have
     no further obligation to the Employee except for the payment of any amounts
     earned  and unpaid as of the effective date of termination plus the payment
     described  in  Section  5  hereof;

          (d)  At  any  time  upon  mutual, written agreement of the parties, in
     which  event  the  Bank  shall  have  no further obligation to the Employee
     except for the payment of any amounts earned and unpaid as of the effective
     date  of  termination  plus  the  payment described in Section 5 hereof; or

          (e)  At  any  time  upon the death of the Employee, in which event the
     Bank  shall  have  no  further  obligation  to  the Employee except for the
     payment  of  any  amounts  earned  and  unpaid  as of the effective date of
     termination.

     5.     Additional Lump Sum Payment.  On the last day of the Term or as soon
            ---------------------------
as  practicable  thereafter,  the Bank shall pay to the Employee a lump sum cash
payment  equal  to  $21,888,  unless  the Employee is terminated by the Bank for
Cause  or  the  Agreement  terminates due to the death of the Employee, in which
event  the  Employee  shall  not  be  entitled  to the payment described in this
Section  5.

     6.     Assignment. No party hereto may assign or delegate this Agreement or
            ----------
any  of  its or his rights and obligations hereunder without the written consent
of  the  other  parties  hereto.

     7.     Entire  Agreement.  This  Agreement,  together  with  the  Surviving
            -----------------
Provisions,  embody  the  entire agreement of the parties hereto relating to the
subject  matter hereof and supersede any and all prior agreements.  No amendment
or  modification  of  this  Agreement shall be valid or binding upon the parties
unless  made  in  writing  and  signed  by the parties hereto.  The definitional
provisions  of the Employment Agreement corresponding to the defined terms used,
but  not otherwise defined, herein; and Sections 5, 6, 7, 8, 9, 12 and 16 of the
Employment  Agreement  are  referred  to  herein  as the "Surviving Provisions."
Sections  6, 7 and 8 of the Surviving Provisions shall be given effect only upon
the  Employee's  voluntary  resignation  as  an  employee  of  the  Bank.

     8.     Governing Law.  This Agreement shall be governed by and construed in
            -------------
accordance with any applicable federal law and the substantive laws of the State
of  Georgia,  without  reference  to  its  conflict  of  laws  provisions.

     9.     Survival.  The  obligations of the parties as expressly set forth in
            --------
Sections  2  and 5 hereof and the provisions described in Section 7 hereof shall
survive  the  termination  of  this  Agreement.

                                        3
<PAGE>
     IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year  set  forth  below.

                                     FLAG  FINANCIAL  CORPORATION

                                     By:     /s/  J.  Daniel  Speight
                                             -------------------------------

                                     Title:  President
                                             -------------------------------

                                     FLAG  BANK

                                     By:     /s/  Stephen  W.  Doughty
                                             -------------------------------

                                     Title:  EVP
                                             -------------------------------

                                     /s/  Charles  O.  Hinely
                                     ---------------------------------------
                                     CHARLES  O.  HINELY

                                        4
<PAGE>

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