PROMISSORY NOTE
$1,500,000
September 23, 2005
FOR VALUE
RECEIVED, CONSOLIDATED ENERGY, INC., a Wyoming corporation
("Maker"), promises to pay to the order of
Cordillera Fund L.P., a Texas limited
partnership ("Payee"), pursuant to the terms and
conditions contained
in this
promissory note (this "Note") the
principal sum of One Million, Five Hundred
Thousand and No/100 Dollars ($1,500,000.00), or such lesser amount as is
advanced and outstanding under this Note, together with interest on the
unpaid
principal balance from the date hereof
until paid in full,
at the rate and on
the terms provided herein.
1. Disbursements.
Within three (3)
Business Days (as hereinafter defined)
following delivery of Maker's written request, Payee shall advance to Maker
under this Note an amount up to the principal sum of $1,500,000; provided,
however, Payee is not required to advance any amount
under this Note,
or may
advance an amount that is less than Maker
requests, if, at the time an advance
is requested by Maker, Payee has determined in its sole
discretion that (a) any
contingency described in Paragraph 2 has
not been or is not reasonably likely to
be satisfied, (b) the financial circumstances of
Maker are such that the timely
repayment of such advance is uncertain, (c)
such other circumstance exists or is
reasonably anticipated, that makes the timely repayment of such advance
uncertain, or (d) an Event of Default (as
hereinafter defined)
has occurred or
Payee reasonably determines that an Event
of Default is going to occur.
2. Contingency.
In addition to the limitations set forth in Paragraphs 1(b)
and (c), Payee is not obligated to advance amounts under this Note if at the
time an advance is requested (a) the September 23, 2005 Consent and Waiver (a
copy of which is attached as Exhibit "A" to
this Note) has not been executed and
delivered to Payee by each and every
person or entity
shown as a signatory
to
such document, (b) the September 23, 2005
Bridge Forbearance (a copy of which is
attached as Exhibit "B" to this Note) has
not been executed
and delivered to
Payee by each and every person or entity
shown as a signatory to such document,
(c) the Additional Financing Forbearance Agreement has not been executed
and
delivered to Payee by each and every
person or entity
shown as a signatory
to
such document.
3. Term and Payment.
Principal and interest of this Note shall be
payable
as follows:
(a) The entire unpaid principal balance of this Note shall be due
and
payable in full,
in cash, upon the earliest to occur of (i) December
16,
2005, (ii) the first Business Day
following Maker's
receipt of $2,500,000
or more in
proceeds from its issuance or sale of any promissory note,
capital stock or
other security of any
nature, or (iii) the
occurrence of
an Event of
Default (the earliest
of (i), (ii) and (iii) is referred to as
the "Maturity
Date").
(b) Interest shall be computed on the unpaid principal balance of
this
Note as if the
highest amount of
principal actually
advanced under this
Note was advanced in full on the date of this Note,
irrespective
of the
date it is
actually advanced. Thus, for example, if an aggregate of
$600,000
is actually
advanced under this Note in three
installments
of
September 23,
October 1 and October 15, interest shall be calculated as
if
$600,000 was
advanced in its entirety on September 23.
<PAGE>
(c) Interest
shall be due and
payable by Maker to Payee in cash or
Stock (as
hereinafter defined), at Payee's election as follows:
(i) if Payee elects to
have Maker pay the
accrued but unpaid
interest in cash, then the accrued and unpaid interest payable on
this
Note shall be calculated in accordance with Paragraphs 3(b) and 4,
and
must be paid in full within seven Business Days following the date
Payee delivers
notice to Maker of its
desire to have
Maker pay the
interest in cash. Such
notice shall be delivered by Payee to Maker on
or anytime after the Maturity Date; or
(ii) if, Payee
elects to have Maker
pay the accrued but
unpaid
interest in Stock,
then the accrued and
unpaid interest
payable on
this Note shall be calculated in accordance with Paragraph 3(b) and
considered paid, in
full, upon Maker's issuance and delivery of eight
hundred eighty-two
thousand, three hundred fifty-three (882,353)
shares of Maker's
common capital stock
(the "Stock"),
pro rated if
less than the entire
$1,500,000 principal
amount is advanced
under
this Note, based upon the amount actually advanced. The Stock shall
be
(A) considered Registrable Securities, Common Stock, as defined in
and
governed by the
February 24, 2005 Registration Rights Agreement
executed by, among others, Maker and Payee (the "Registration
Rights
Agreement"), and thus
included in any registration statement that is
filed by Maker
to satisfy the terms of the Registration Rights
Agreement, and (B)
delivered within seven Business Days following the
date Payee
delivers notice to Maker of its desire to
have Maker pay
the interest in Stock. Such notice shall be delivered by Payee to
Maker on or anytime after the Maturity Date. If, for any reason, the
shares of Stock delivered to Payee hereunder cannot be included in
the
registration statement
filed by Maker
pursuant to the
Registration
Rights Agreement, then
Payee may (Y) demand such shares be registered
upon terms materially
the same as the
Registration Rights
Agreement
and Maker will
cause a registration statement for the Stock to be
filed with the Securities and Exchange Commission within thirty (30)
days thereafter,
and will use its best efforts to cause such
registration statement to become effective, and (Z) exchange the
Stock
at any time with Maker for shares of registered common capital
stock.
(d) If a payment of interest or principal is due on a day that is
not
a Business Day, such payment shall be made on the first
Business Day
following
such payment
date. For purposes of this Note,
"Business Day"
means
any day other than Saturday, Sunday or any other day on which
national banking
associations in the State of Kentucky generally are closed
for commercial
banking business. Both principal, and interest if payable in
cash,
are payable as
provided in this Note
in lawful money of the
United
States of
America.
2
<PAGE>
4. Interest
Rate. If interest under this Note is payable in cash, then the
principal amount outstanding under this Note (as calculated in
the manner set
forth in Paragraph 3(b)) shall bear interest at a per annum rate equal to
fifteen percent (15%), compounded annually. Notwithstanding the foregoing,
following the occurrence of an Event of
Default and continuing
until such Event
of Default shall have been cured, principal outstanding under this Note (as
calculated in the manner set forth in
Paragraph 3(b)) shall
bear interest at a
per annum rate equal to eighteen percent
(18%), compounded annually.
5. Event of
Default.
(a) For purposes of this Note, the following events shall constitute
an "Event of
Default:"
(i) the default by Maker in any required payment of principal of
or interest
on this Note, and the failure to make such required
payment within thirty (30) days of the required payment date;
or
(ii) the Maker breaches or otherwise fails to perform or observe
any covenant or agreement that is set forth in this Note
which is not
cured by Maker or
waived in writing
by Payee within 30 days after
notice to Maker by Payee, including, for example, Maker's failure to
include the Stock in a
registration
statement in accordance with
Paragraph 3(c)(ii); or
(iii) the entry of a decree or order for relief by a court
having
jurisdiction in
respect of Maker in an involun
