EXHIBIT 10.3
 

 
 
TEXAS CITIZENS BANK, N.A.
 
LETTER OF CREDIT # 116
 
TO
 
NATIONAL AGENCY OF NATURAL RESOURCES
 
TIRANA
 
National Agency of Natural Resources
Mr. Besjan Pesha
Executive Director
Bulevardi “Bajram Cum”
Biloku “Vasil Shanto”
Tirana, Albania
 
We have been informed that Sky Petroleum, Inc. has entered into a Production
Sharing Contract for the Albania Blocks Four, Five and Dumre with the Ministry
of Economy, Trade and Energy of Albania effective January 3, 2011 (hereafter
“the PSC”) and understand that, according to the provisions of the PSC a
Performance Guarantee is required.
 
We have been further informed that pursuant to the terms of the PSC Sky
Petroleum, Inc. has undertaken during the First Exploration Period to carry out
a Work Program in the Contract Area (all as described in the PSC) and in so
doing to spend an amount of United States Dollars One Million, Five Hundred
Thousand (US$ 1,500,000.00).
 
At the request of Sky Petroleum, Inc., we, Texas Citizens Bank, N. A., 4949
Fairmont Parkway, Pasadena, TX., 77504, hereby guarantee and undertake to pay
you any amount or amounts not exceeding the sum of United States Dollars One
Million Five Hundred Thousand (US$ 1,500,000.00) as the case may be, upon
receipt by us of your first demand made in accordance with the claim procedures
detailed below.
 
Your demand must be submitted by letter, and must be accompanied by:
 
●
Your statement stating that the principal is in material breach of its
obligations under the underlying contract and the respect in which the Principal
is in material breach

 
●
A copy of your notice to Sky Petroleum, Inc. (dated at least thirty (30) days
prior to the date of your demand), informing Sky Petroleum, Inc. of a material
breach of its Work Program obligations under the PSC, the nature and quantum of
the material breach and of your intention to demand payment under this Guarantee
if the material breach is not remedied within fifteen (15) days from the date of
your notice; and

 
●
Your signed declaration stating that Sky Petroleum, Inc. has failed to remedy
the material breach detailed in your notice by the date specified.

 
Any demand hereunder and the documents specified above must be received by us at
our above address in accordance with the aforesaid claim procedure on or before
the date of expiry of the Guarantee as described below, after which date this
Guarantee will be of no effect whatsoever.
 
A demand submitted by facsimile transmission will not be accepted.
 
This guarantee shall enter into force on August 1, 2011 and shall remain valid
until the earlier of (a) August 1, 2012 or (b) the date when the total amount of
the Guarantee has been drawn or reduced as set out in the next following
paragraph.
 
The amount of this Guarantee shall be reduced every month or three months, as
agreed in between AKNB and Sky Petroleum, Inc. during the First Exploration
Period by an amount equal to the sum spent by Sky Petroleum, Inc. on its Work
Program obligations during such month or three months, such reductions to be
effected in accordance with monthly or quarterly written statements issued by
the National Agency of Natural Resources to Sky Petroleum, Inc., a copy of which
shall be forwarded to us and we shall accept same as conclusive evidence for
reductions of our engagement under this guarantee.
 
The Guarantee is personal to you and is not transferable or assignable (except
with our prior written consent which is not to be unreasonably withheld.)
 
This guarantee is subject to the Uniform Rules for Demand Guarantees, ICC
Publication No. 458, and to the extent not inconsistent therewith, shall be
governed by and construed in accordance with Swiss Law, place of Jurisdiction is
Zurich, Switzerland.
 
 
TEXAS CITIZENS BANK, N.A.
 
 
BY:   /s/ Tom
Watson                                                                              
TOM WATSON
REGIONAL PRESIDENT
 
 
 
 
 

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