Document:

Unassociated Document

    PROMISSORY
      NOTE

    

      
        	
                $150,000.00

              	
                Dallas,
                  Texas

              	
                August
                  24, 2007

              

      

    

    

    FOR
      VALUE
      RECEIVED, the undersigned ("Borrower"), promises to pay to the order of CTI
      Petroleum, Inc., (together with its successors and assigns, the "Lender"),
      the
      principal sum of $150,000.00, plus interest at the rate provided for herein
      on
      the unpaid balance of this promissory note (“Note”) outstanding from time to
      time hereunder until the same is paid in full. The maturity date (“Maturity
      Date”) of this Note shall be October 24, 2007, at which time all principal and
      accrued interest is due.

    

    Lender
      will disburse $60,000.00 of the principal balance of this Note on the date
      hereof, and $90,000.00 upon written request by Borrower on or after August
      31,
      2007.

    

    Interest
      shall be payable on this Note on the first day of each month prior to the
      Maturity Date, beginning October 1, 2007.

    

    The
      unpaid principal amount of this Note shall bear interest (i) until maturity
      (whether by acceleration or otherwise) at all times during which there has
      not
      occurred or then exists an Event of Default, at a rate per annum equal to the
      lesser of (a) the Applicable Rate or (b) the Legal Rate (as hereinafter defend);
      and (ii) after the Maturity Date, as well as at all times during which there
      has
      occurred or then exists an Event of Default, at a rate per annum equal to the
      lesser of (a) ten percent (10.00%) per annum above the Applicable Rate (the
      "Default Rate") or (b) the Legal Rate (the Applicable Rate and the Default
      Rate,
      whichever is in effect at any particular time, being hereinafter referred to
      as
      the "Contract Rate"). The term "Applicable Rate" shall mean seven percent (7%)
      per annum, compounded semi-annually.

    

    Borrower
      may prepay this Note at any time, in whole, but not in part, without prepayment
      penalty or fee.

    

    The
      Borrower shall make each payment due hereunder not later than 2:00 p.m. (Central
      Standard Time) on the day when due, in lawful money of the United States of
      America (in freely transferable U. S. dollars and in immediately available
      funds), at such place or places identified by Lender by ACH Transfer. BY WRITTEN
      NOTICE TO THE BORROWER, THE LENDER MAY REQUEST BORROWER TO MAKE SUCH PAYMENTS
      AT
      OTHER PLACES AND BY OTHER METHODS AND BORROWER SHALL THEREAFTER MAKE SUCH
      PAYMENTS IN ACCORDANCE WITH SUCH WRITTEN NOTICE FROM LENDER.

    

    
      
        
          Exhibit
            10.1

        

      

      
        Page
          1 of 4

        
          

        

      

      
        
        

      

       

    

    If,
      at
      any time during the term of this Note the Lender has not received payment on
      or
      before five (5) days after such payment is due, the Borrower shall pay to the
      Lender, promptly on demand, as liquidated damages, a late payment charge of
      $75.00.

    

    The
      following shall be Events of Default under this Note: the failure to make an
      installment of principal or interest due hereunder on or before five (5) days
      after such payment is due.

    

    If
      an
      Event of Default occurs and is not cured within any applicable cure period,
      or
      the undersigned or any indorser, guarantor or accommodation party (or any of
      them) fails to pay this Note when due (by demand, upon maturity, upon
      acceleration or otherwise), Lender may at its option and without prior notice
      to
      the undersigned or any indorser, guarantor or accommodation party (or any of
      them) (i) exercise any one or more of the rights and remedies granted by this
      Note, or given to a creditor under applicable law, including, without
      limitation, the right to accelerate this Note; and (ii) declare a default under
      any other note, agreement or instrument, whether now existing or hereafter
      entered into, with the Lender or any Affiliate of the Lender. The Borrower
      agrees that upon the occurrence of an Event of Default, the Borrower shall
      pay
      all costs and expenses actually incurred by Lender (including, without
      limitation, reasonable attorneys' fees and disbursements) incident to the
      enforcement, collection, protection or preservation of any right or claim of
      the
      Lender under the Note, including any such fees or costs incurred in connection
      with any bankruptcy or insolvency proceeding of Borrower. 

    

    If
      at any
      time the relevant Contract Rate exceeds the Legal Rate, the interest payable
      hereunder shall be computed upon the basis of the Legal Rate, but any subsequent
      reduction in the relevant Contract Rate shall not reduce the applicable interest
      rate hereunder below the Legal Rate until the aggregate amount of interest
      accrued and payable hereunder equals the total amount of interest which would
      have accrued hereunder if the applicable interest rate hereunder had been at
      all
      times computed solely on the basis of the relevant Contract Rate.

    

    No
      agreements, conditions, provisions or stipulations contained in this Note,
      or
      the default of the undersigned, or the exercise by the holder hereof of the
      right to accelerate the payment or the maturity of principal and interest,
      or to
      exercise any option whatsoever contained herein, or in any other agreements
      between the undersigned and Lender, or the arising of any contingency
      whatsoever, shall entitle the holder of this Note to collect, in any event,
      interest exceeding the maximum rate of nonusurious interest allowed from time
      to
      time by applicable state or federal law as now or as may hereinafter be in
      effect, including, as to article 5069-1.04 Vernon's Texas Civil Statutes (and
      as
      the same may be incorporated by reference in other Texas statutes), but
      otherwise without limitation, that rate based upon the "indicated rate ceiling"
      (the "Legal Rate") and in no event shall the undersigned be obligated to pay
      interest exceeding such Legal Rate; and all agreements, conditions or
      stipulations, if any, which may in any event or contingency whatsoever operate
      to bind, obligate or compel the undersigned to pay a rate of interest exceeding
      the legal Rate shall be without binding force or effect, at law or in equity,
      to
      the extent only of the excess of interest over such Legal Rate. In the event
      any
      interest is charged in excess of the Legal Rate (the "Excess"), the undersigned
      acknowledges and stipulates that any such charge shall be the result of an
      accidental and bona fide error, and such excess shall be first applied to reduce
      the principal then unpaid hereunder; second, applied to reduce any obligation
      for other indebtedness of the undersigned to Lender; and third, returned to
      the
      undersigned, it being the intention of the parties hereto not to enter at any
      time into an usurious or other illegal relationship. The undersigned recognizes
      that such an unintentional result could inadvertently occur. By execution of
      this Note, the undersigned covenants that (i) the credit or return of any Excess
      shall constitute the acceptance by the undersigned of such Excess, and (ii)
      the
      undersigned shall not seek or pursue any other remedy, legal or equitable,
      against Lender or any holder hereof based, in whole or in part, upon the
      charging or receiving of any interest in excess of the Legal Rate. For the
      purpose of determining whether or not any Excess has been contracted for,
      charged or received by Lender or any holder hereof, all interest at any time
      contracted for, charged or received by Lender or any holder hereof, in
      connection with this Note, shall be amortized, prorated, allocated and spread
      in
      equal parts during the entire term of the Note.

    

    
      
        
          Exhibit
            10.1

        

      

      
        Page
          2 of 4

        
          

        

      

      
        
        

      

       

    

    All
      notices required or permitted under this Note shall be in writing and shall
      be
      deemed to have been delivered upon actual delivery at the addresses provided
      below, or by confirmed facsimile at the facsimile number provided below. Either
      party may change its address or facsimile number upon five (5) days written
      notice to the other party.

    

      
        	 	
                If
                  to Lender:

              	
                CTI
                  Petroleum, Inc.

              
	 	 	
                700
                  Technology Drive

              
	 	 	
                Pittsburgh,
                  Pennsylvania 15219

              
	 	 	 
	 	
                If
                  to Borrower:

              	
                Consolidated
                  Oil and Gas, Inc.

              
	 	 	
                316
                  Main Street, Suite L

              
	 	
                 

              	
                Humble
                  TX 77338

              

      

    

    

    All
      computations by Lender of the principal balance of this Note or the interest
      due
      hereunder are conclusive absent manifest error on the part of
      Lender.

    

    This
      Note
      represents the final understanding of the Borrower and Lender with respect
      to
      the subject matter contained herein. No provision of this Note may be amended
      or
      waived except in a written agreement signed by the Borrower and the Lender.
      No
      waiver of any provision of this Note shall constitute a waiver or consent to
      any
      similar or other breach by Borrower of this Note.

    

    THE
      UNDERSIGNED AND ALL ACCOMMODATION PARTIES, GUARANTORS AND ENDORSERS, IF ANY,
      (i)
      WAIVE DEMAND AND NOTICE OF DEMAND, (ii) WAIVE PRESENTMENT, NOTICE OF INTENTION
      TO DEMAND, PROTEST AND NOTICE OF PROTEST, NOTICE OF DISHONOR, NOTICE OF
      INTENTION TO ACCELERATE, NOTICE OF ACCELERATION, AND ALL OTHER NOTICES OTHER
      THAN AS EXPRESSLY PROVIDED, (iii) AGREE THAT NO EXTENSION OR INDULGENCE TO
      THE
      UNDERSIGNED OR RELEASE OR NON-ENFORCEMENT OF ANY SECURITY, WHETHER WITH OR
      WITHOUT NOTICE, SHALL AFFECT THE OBLIGATIONS OF ANY ACCOMMODATION PARTY,
      GUARANTOR OR ENDORSER, AND (iv) AGREE TO REIMBURSE THE HOLDER OF THIS NOTE
      FOR
      ANY AND ALL COSTS AND EXPENSES INCURRED IN COLLECTING OR ATTEMPTING TO COLLECT
      ANY AND ALL PRINCIPAL AND INTEREST UNDER THIS NOTE (INCLUDING, BUT NOT LIMITED
      TO, COURT COSTS AND REASONABLE ATTORNEYS' FEES, WHETHER IN-HOUSE OR OUTSIDE
      COUNSEL IS USED AND WHETHER SUCH COSTS AND EXPENSES ARE INCURRED IN FORMAL
      OR
      INFORMAL COLLECTION ACTIONS, FEDERAL BANKRUPTCY PROCEEDINGS, APPELLATE
      PROCEEDINGS, PROBATE PROCEEDINGS, OR OTHERWISE).

    

    
      
        
          Exhibit
            10.1

        

      

      
        Page
          3 of 4

        
          

        

      

      
        
        

      

       

    

    THIS
      NOTE
      SHALL BE CONSTRUED UNDER AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND
      APPLICABLE FEDERAL LAW.

    

    This
      Note
      shall bind the undersigned and the undersigned's respective successors and
      assigns.

    

    IN
      WITNESS WHEREOF, the undersigned has executed this Note as of the date first
      above written.

     

    
      	 	 	 
	 	BORROWER:
	 	 
	 	CONSOLIDATED OIL AND GAS, INC.
	 
 	 
 	 
 
	 	By:  	 
	 	Name: 	
              
 
	 	Title:	
              
 
	 	
              

            
	 	 

    

     

    
      
        
          Exhibit
            10.1

        

      

      
        Page
          4 of 4Unassociated Document

    Option
      Agreement

    

    This
      Agreement (“Agreement”) is made and entered into this 24th
      day of
      August, 2007 by and between Consolidated Oil and Gas, Inc., a Nevada corporation
      (“Consolidated”) and CTI Petroleum, Inc., a Texas corporation
      (“CTI”).

    

    Recitals:

    

    
      	 	
              A.

            	
              CTI
                has advanced, or agreed to advance, $150,000.00 to Consolidated
                contemporaneously with this
                Agreement.

            

    

    

    
      	 	
              B.

            	
              As
                a partial condition to such advance, Consolidated has agreed to grant
                CTI
                the option to purchase Consolidated common shares set forth
                herein.

            

    

    

    Now,
      Therefore, for good and valuable consideration, the sufficiency of which is
      hereby expressed, the parties hereto agree as follows:

    

    1. Option.
      During
      the Exercise Period (as hereafter defined), CTI shall have the option, with
      five
      (5) days written notice to Consolidated, in one or more transactions, to
      purchase common shares of Consolidated in an aggregate amount not exceeding
      the
      Ownership Cap. The Ownership Cap shall mean ninety percent (90%) of the fully
      diluted outstanding common shares of Consolidated, immediately after giving
      effect to the final purchase of common shares by CTI which equals the Ownership
      Cap.

    

    2. Option
      Price.
      The
      price per common share purchased pursuant to this Agreement shall, prior to
      any
      purchase made hereunder, be equal to the quotient of (a) $2,222,222 divided
      by
      (b) the product of (i) common shares of Consolidated outstanding, multiplied
      by
      (ii) 11.111.

    

    3. Exercise
      Period.
      The
      Exercise Period shall begin on the date that Consolidated obtains shareholder
      consent to increase its number of authorized shares outstanding to an amount
      sufficient to issue to CTI the common shares up to the Ownership Cap, and shall
      terminate sixty (60) days after such date. Consolidated agrees to promptly
      take
      all steps necessary, and use its best efforts to increase its authorized shares
      in order to accomplish the purposes of this Agreement.

    

    4. Employment
      Contracts.
      If CTI
      exercises its option to acquire common shares pursuant to this Agreement, and
      thereby acquires sufficient control of Consolidated to influence management,
      Consolidated shall enter into two (2) year management contracts with the
      following Consolidated officers at compensation levels as hereafter specified,
      although managerial duties and responsibilities may be reassigned: Carl Yeatman;
      Carl Glenn; Douglas Newman. The aggregate compensation for all such contracts
      is
      $900,000.00, payable $300,000.00 upon execution of the contracts, with the
      remainder payable on a mutually agreeable schedule over the remaining 24 months.
      In addition, upon acquisition of control of Consolidated, CTI will make
      available to Consolidated CTI’s intellectual property regarding crude oil
      upgrading in order for Consolidated to make use of such technology.

    

    
      
        
          Exhibit
            10.2

        

      

      
        Page
          1 of 3

        
          

        

      

      
        
        

      

    

     

    5. Representation
      of Consolidated.
      Consolidated represents, warrants and covenants to CTI the
      following:

    

    
      	 	
              (a)

            	
              Consolidated
                has full power and authority to enter into this Agreement, and when
                executed, will constitute the legal and binding obligation of
                Consolidated.

            

    

    

    
      	 	
              (b)

            	
              Consolidated
                has only one class of common shares outstanding, and no options,
                warrants
                or other securities convertible into common shares
                outstanding.

            

    

    

    
      	 	
              (c)

            	
              Consolidated
                agrees to provide reasonable cooperation with CTI’s financial and
                operational due diligence activities in determining whether to exercise
                CTI’s option provided herein.

            

    

    

    
      	 	
              (d)

            	
              During
                the period beginning on the date hereof and ending on the last day
                of the
                Exercise Period, Consolidated will not issue any shares of common
                stock
                (except to CTI pursuant to this Agreement), pay dividends in cash,
                stock
                or otherwise, engage in any financing activities, sell or exchange
                any
                assets outside the ordinary course of business or otherwise enter
                into any
                business transaction outside the ordinary course of its
                business.

            

    

    

    6. No
      Rights As a Stockholder.
      This
      Agreement does not entitle CTI to any voting rights or other rights as a
      stockholder of Consolidated, prior to the purchase of common
      shares.

    

    7. Additional
      Covenants of Consolidated.
      Consolidated shall not, by amendment of its Article of Incorporation or through
      any reorganization, transfer of assets, consolidation, merger, dissolution,
      issue or sale of securities, or any other voluntary action, avoid or seek to
      avoid the observance or performance of any of the terms of this Agreement.
      Without limiting the generality of the foregoing, Consolidated (a) will take
      all
      steps necessary to reserve and keep available, solely for issuance and delivery
      upon exercise of the option contained in this Agreement, shares of common stock
      issuable from time to time upon exercise of this option (b) will take all such
      actions as may be necessary or appropriate in order that Consolidated may
      validly and legally issue fully paid and nonassessable stock.

     

    8. Successors
      and Assigns.
      This
      Agreement may be assigned by CTI with prior notice to Consolidated and shall
      be
      binding upon and inure to the benefit of Consolidated, CTI, their respective
      successors and permitted assigns.

     

    9. Notices.
      All
      notices, requests, demands, and other communications required or permitted
      to be
      given or made hereunder by any party hereto shall be in writing and shall be
      deemed to have been duly given or made if (i) delivered personally, (ii) sent
      by
      prepaid overnight courier service, or (iii) sent by telecopy or facsimile
      transmission, answer back requested, to the parties at the following addresses
      (or at such other address as shall be specified by the parties by like
      notice):

    
      

      
        
          
            Exhibit
              10.2

          

        

        
          Page
            2 of 3

          
            

          

        

        
          
          

        

         

      

    

    
      if
        to
        CTI:

    

    

    CTI
      Petroleum, Inc.

    700
      Technology Drive

    Pittsburgh,
      Pennsylvania 15219

    

    and,
      if
      to Consolidated:

    

    Consolidated
      Oil and Gas, Inc.

    316
      Main
      Street, Suite L

    Humble
      TX
      77338

    

    Such
      notices, requests, demands, and other communications shall be effective (i)
      if
      delivered personally or sent by courier service, upon actual receipt by the
      intended recipient, or (ii) if sent by telecopy or facsimile transmission,
      when
      the answer back is received.

    

    10. Severability.
      Every
      provision of this Agreement is intended to be severable. If any term or
      provision hereof is illegal or invalid for any whatsoever, such illegality
      or
      invalidity shall not affect the remainder of this Agreement.

     

    11. Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Texas without giving effect to the principles of choice of laws
      thereof.

     

    12. Attorneys'
      Fees.
      In any
      action or proceeding brought to enforce any provision of this Agreement, the
      prevailing party shall be entitled to recover reasonable attorneys' fees in
      addition to its costs and expenses and any other available remedy.

     

    13. Entire
      Agreement.
      This
      Agreement constitutes the entire understanding between Consolidated and CTI
      with
      respect to the subject matter hereof, and supersedes all prior negotiations,
      discussions, agreements and understandings relating to such subject
      matter.

     

    IN
      WITNESS WHEREOF, CTI and Consolidated have caused this Agreement to be executed
      by its duly authorized officer as of the date first set forth
      above.

    
      
        
          	 	 	 
	 	CTI
                  PETROLEUM,
                  INC.
	 	 
	 	By:  	 
	 	Name: 	
                  
 
	 	Title:	
                  
 
	 	
                  

                
	 	 

        

      

      
        	 	 	 
	 	CONSOLIDATED OIL AND GAS, INC.
	 
 	 
 	 
 
	 	By:  	 
	 	Name: 	
                
 
	 	Title:	
                
 
	 	
                

              
	 	 

      

    

    
      

      
        
          
            Exhibit
              10.2

          

        

        
          Page
            3 of 3

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