EXHIBIT 10.1



 





Exhibit 10.1


AGREEMENT ON CRUDE OIL SALES

DATED 04 FEBRUARY 2005 (THE “AGREEMENT”)




CONCLUDED BETWEEN NINOTSMINDA OIL COMPANY LIMITED AND PRIMROSE FINANCIAL GROUP AS FOLLOWS:



1.     SELLER:

NINOTSMINDA OIL COMPANY LIMITED

22, STASICRATOUS

OLGA COURT

P.O.BOX 48

NICOSIA, CYPRUS



2.     BUYER:

PRIMROSE FINANCIAL GROUP

OMAR HODGE BUILDING, WICKHAMS CAY, ROAD TOWN

TORTOLA

BRITISH VIRGIN ISLANDS



3.     CONTRACT PERIOD:



THIS AGREEMENT COMMENCES ON 01 FEBRUARY 2005 AND SHALL CONTINUE FOR A PERIOD OF THREE YEARS
FOLLOWING COMPLETION OF DELIVERY OF THE MINIMUM CONTRACT QUANTITY (AS DEFINED BELOW) STIPULATED

HEREIN (“CONTRACT PERIOD”).



4.     QUANTITY:

THE SELLER SHALL MAKE AVAILABLE TO THE BUYER THE SELLER’S ENTIRE SHARE OF CRUDE OIL PRODUCED FROM
THE NINOTSMINDA FIELD (“CONTRACT QUANTITY”). THE CONTRACT QUANTITY SHALL INCLUDE A MINIMUM
CONTRACT QUANTITY IN THE TOTAL AMOUNT OF 68,555 (SIXTYEIGHT THOUSAND FIVE HUNDRED FIFTY FIVE)
METRIC TONNES TO BE DELIVERED UNDER THIS AGREEMENT (“MINIMUM
CONTRACT QUANTITY”). IN THE EVENT
THAT THE SELLER FAILS TO PRODUCE THE MINIMUM CONTRACT QUANTITY THE SELLER SHALL HAVE NO LIABILITY
TO THE BUYER AS A RESULT OF THAT FAILURE.



5.     QUALITY:

OIL MADE AVAILABLE UNDER THIS AGREEMENT SHALL BE NINOTSMINDA CRUDE OIL OF NORMAL EXPORT QUALITY
WITH THE FOLLOWING GUARANTEED SPECIFICATION (“OIL”):



	 	 	 
	
- DENSITY AT 200 C

	 	820 – 840 KG/CSM
	- SULPHUR

	 	MAX 0,2 WT PCT
	- WATER

	 	MAX 1.0 PCT






QUALITY OF OIL SHOULD COINCIDE WITH THE EXISTING NORMS. SELLER AND BUYER SHALL MEET TO AGREE THE
APPOINTMENT OF AN INDEPENDENT EXPERT LABORATORY, TO WHOM ANY DISPUTES CONCERNING THE QUALITY OF THE
OIL OR THE METHOD OF TESTING THEREOF SHALL BE REFERRED AND BOTH PARTIES MUST ACCEPT THE DECISION OF
THE EXPERT.



6.     DELIVERY:

ON A MONTHLY BASIS ON A DATE TO BE AGREED BETWEEN BUYER AND SELLER. SELLER SHALL MAKE OIL AVAILABLE
TO THE BUYER AT GEORGIAN OIL’S STORAGE RESERVOIRS AT SAMGORI (NGDU) IN CAR TANKS PROVIDED BY THE
BUYER (“DELIVERY POINT”). OIL SHALL BE CONSIDERED DELIVERED AS THE OIL PASSES THE FILLING HOSE TO
THE CAR TANKS. THE SELLER, BUYER AND THE OPERATOR OF THE OIL STORAGE AND LOADING FACILITY WILL SIGN
THE RELATED DELIVERY ACT. IN THE CASE OF OIL PURCHASED FOR EXPORT THE SELLER WILL USE ITS
REASONABLE ENDEAVOURS TO ASSIST THE BUYER WITH THE DELIVERY OF OIL TO THE RAIL LOADING TERMINAL AT
VAZIANI AND WITH ALL RELATED CUSTOMS DECLARATIONS AND RAILWAY DOCUMENTS. FOR THE AVOIDANCE OF DOUBT
THE BUYER WILL BE RESPONSIBLE FOR THE PROVISION OF CAR TANKS AND ALL COSTS ASSOCIATED WITH THE
DELIVERY OF OIL FROM THE DELIVERY POINT INCLUDING ANY COSTS INCURRED BY THE SELLER.



7.     PRICE:

THE PRICE IN US DOLLARS PER NET US BARREL AT THE DELIVERY POINT FOR OIL DELIVERED DURING EACH MONTH
SHALL BE EQUAL TO THE AVERAGE OF THE MEAN OF THREE QUOTATIONS IN THE PLATTS CRUDE OIL MARKETWIRE
FOR BRENT DATED QUOTATIONS MINUS A DISCOUNT IN US DOLLARS PER NET US BARREL ESTABLISHED IN
ACCORDANCE WITH THE FOLLOWING CRITERIA:



(A)    FOR OIL COMPRISING THE MINIMUM CONTRACT QUANTITY THE FOLLOWING DISCOUNT SHALL APPLY:



	 	 	 
	DATED BRENT (US$/BBL)	 	DISCOUNT (US$/BBL)
	LESS THAN 15.00
	 	6.00
	15.01 – 20.00
	 	6.50
	20.01 – 25.00
	 	7.00
	GREATER THAN 25.01
	 	7.50






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	(B) 	  	FOR ANY OIL OTHER THAN THE MINIMUM CONTRACT QUANTITY MADE AVAILABLE TO THE BUYER THE DISCOUNT
SHALL BE THE COMMERCIAL DISCOUNT IN GEORGIA FOR OIL OF SIMILAR QUALITY MADE AVAILABLE AT THE
DELIVERY POINT (“COMMERCIAL DISCOUNT”) LESS US$0.10 PER BARREL:.
	 
	 	   	NO LATER THAN THE LAST DAY OF THE MONTH PRIOR TO THE MONTH IN WHICH THE OIL SHALL BE MADE
AVAILABLE FOR DELIVERY, THE SELLER SHALL NOTIFY THE BUYER OF THE COMMERCIAL DISCOUNT. THE
SELLER MUST PROVIDE DOCUMENTARY EVIDENCE SUCH AS A WRITTEN OFFER FROM AN INDEPENDENT THIRD
PARTY TO SUPPORT THE COMMERCIAL DISCOUNT. THE BUYER SHALL THEN HAVE A PERIOD OF SEVEN
CALENDAR DAYS IN WHICH TO AGREE TO UNDERCUT THE COMMERCIAL DISCOUNT BY US$0.10 PER BARREL.
IN THE EVENT THE BUYER IS UNWILLING OR UNABLE FOR WHATEVER REASON TO PURCHASE OIL IN ANY
MONTH, THE BUYER SHALL NOTIFY THE SELLER BY THE 8TH DAY OF THE MONTH IN WHICH THE
OIL IS AVALIABLE FOR SALE (“ELECTION DATE”) OF SUCH INABILITY TO PERFORM. IN ANY EVENT IF
THE BUYER HAS NOT ELECTED TO PURCHASE OIL BY THE ELECTION DATE THE SELLER SHALL BE ENTITLED
TO SELL THE OIL AT ITS DISCRETION.
	 
	 	   	IF THE SELLER DOES NOT PROVIDE THE BUYER WITH THE COMMERCIAL DISCOUNT BY THE DUE DATE THE
FOLLOWING DISCOUNT SHALL APPLY:





	 	1.  	IN THE CASE OF OIL PURCHASED FOR EXPORT THE DISCOUNT SHALL BE
US$6.00 PER BARREL, AND
	 
	 	2.  	IN THE CASE OF OIL PURCHASED UNDER A LOCAL SALES CONTRACT THE
DISCOUNT SHALL BE US$5.50 PER BARREL.




IN THE CASE OF EXPORT SALES THE APPLICABLE QUOTATIONS SHALL BE THE THREE PUBLISHED RELEVANT
QUOTATIONS FOR THE THREE CONSECUTIVE TRADING DAYS TO BE AGREED AT THE TIME THE BUYER HAS GIVEN
NOTICE OF ITS INTENTION TO PURCHASE OIL OR IF THE OIL IS TO BE PURCHASED BY A THIRD PARTY NOMINATED
BY THE BUYER IN ACCORDANCE WITH THE PROVISIONS OF ARTICLE 12 AND THE APPLICABLE QUOTATIONS MUST BE
ON OR BEFORE THE FIFTEENTH DAY FOLLOWING COMPLETION OF DELIVERY OF OIL.



IN THE CASE OF LOCAL SALES WITHIN GEORGIA, THE APPLICABLE QUOTATIONS SHALL BE THE THREE RELEVANT
QUOTATIONS FOR THE THIRD, FOURTH AND FIFTH DAYS FOLLOWING THE DATE THE BUYER HAS GIVEN NOTICE OF
ITS INTENTION TO PURCHASE OIL OR AT THE TIME THE CONTRACT IS SIGNED IF OIL IS TO BE PURCHASED BY A
THIRD PARTY NOMINATED BY THE BUYER IN ACCORDANCE WITH THE PROVISIONS OF ARTICLE 12.



FOR THE PURPOSES OF THIS ARTICLE 7(B) IF ANY OF THE QUOTATION DAYS FALLS ON A SATURDAY OR SUNDAY OR
OTHER NON-TRADING DAY, THE NEAREST EARLIER QUOTATIONS SHALL APPLY.



THE PRICE HAS BEEN CALCULATED EXCLUSIVE OF VAT, HOWEVER IF VAT IS PAYABLE ON SALES UNDER THE
AGREEMENT THIS WILL BE LEVIED AT THE EFFECTIVE RATE CURRENT IN THE TERRITORY OF GEORGIA AT THE
TIME AND SHALL BE PAYABLE BY THE BUYER TO THE SELLER.



8.     PAYMENT:

THE BUYER SHALL PAY OR CAUSE TO BE PAID INTO SELLER’S NOMINATED BANK ACCOUNT:




	1. 	 	IN THE CASE OF LOCAL SALES, VALUE IN FULL PRIOR TO COMMENCEMENT OF DELIVERY OF OIL CALCULATED
IN ACCORDANCE WITH THE PROVISIONS OF ARTICLE 7 ABOVE IN US DOLLARS NET CASH, WITHOUT WITHOLD,
OFFSET, COUNTERCLAIM OR DEDUCTION WHATSOEVER;




OR




	2. 	 	IN THE CASE OF EXPORT SALES, A PROVISIONAL PAYMENT PRIOR TO COMMENCEMENT OF DELIVERY OF OIL
BASED ON THE RELEVANT MARKER PRICE IN ACCORDANCE WITH THE PROVISIONS OF ARTICLE 7 LESS THE
DISCOUNT IN US DOLLARS NET CASH, WITHOUT WITHOLD, OFFSET, COUNTERCLAIM OR DEDUCTION
WHATSOEVER. THE FINAL PRICE SHALL BE ESTABLISHED IN ACCORDANCE WITH THE PROVISIONS OF ARTICLE
7 ABOVE AND ANY UNDER PAYMENTS OR OVER PAYMENTS AS APPROPRIATE IN US DOLLARS NET CASH, WITHOUT
WITHOLD, OFFSET, COUNTERCLAIM OR DEDUCTION WHATSOEVER SHALL BE PAID BY THE BUYER OR THE SELLER
AS APPROPRIATE.




9.     RISKS AND PROPERTY:

NOTWITHSTANDING ANYTHING HEREIN EXPRESSLY OR BY IMPLICATION TO THE CONTRARY, THE RISK AND PROPERTY
IN THE OIL DELIVERED HEREUNDER SHALL PASS TO THE BUYER AT THE DELIVERY POINT.



10.     LAW AND JURISDICTION:

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH ENGLISH LAW AND THE PARTIES
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE LONDON HIGH COURT WITHOUT RECOURSE TO ARBITRATION.



11.     FORCE MAJEURE:

IF EITHER PARTY IS RENDERED UNABLE TO PERFORM FULLY OR IN PART ANY OBLIGATION UNDER THIS AGREEMENT,
EXCEPT IN RELATION TO OBLIGATIONS TO MAKE PAYMENTS DUE UNDER THIS AGREEMENT, THEN TO THE EXTENT
THAT SUCH INABILITY ARISES FROM A CAUSE OR CAUSES BEYOND THAT PARTY’S CONTROL AND UPON SUCH PARTY
PROMPTLY GIVING WRITTEN NOTICE TO THE OTHER PARTY OF SUCH CAUSE(S), NEITHER PARTY SHALL BE LIABLE
TO THE OTHER IN DAMAGES OR OTHERWISE AND THE TIME FOR PERFORMANCE OF THE AFFECTED OBLIGATION SHALL
BE EXTENDED DURING AND FOR THE PERIOD OF INABILITY SO CAUSED, UP TO A MAXIMUM OF THIRTY (30)
CALENDAR DAYS.



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SHOULD SUCH PERIOD OF INABILITY CONTINUE IN EXCESS OF THIRTY (30) CALENDAR DAYS, EITHER PARTY SHALL
HAVE THE RIGHT TO TERMINATE THIS AGREEMENT BY WRITTEN NOTICE TO THE OTHER PARTY, IN WHICH CASE
NEITHER PARTY SHALL BE RESPONSIBLE FOR FURTHER PERFORMANCE NOR LIABLE IN ANY WAY TO EACH OTHER. THE
TERM CAUSE(S) BEYOND THAT PARTY’S CONTROL USED HEREIN SHALL INCLUDE (BUT WITHOUT LIMITING THE
GENERALITY OF SUCH TERM): AN ACT OF GOD, WAR (DECLARED OR UNDECLARED), MILITARY OPERATIONS,
BLOCKADE, REVOLUTION, DISTURBANCE, TRADE RESTRICTION, ACTION BY ANY GOVERNMENT OR GOVERNMENTAL OR
CIVIL OR MILITARY AUTHORITY, EMBARGO, STRIKE, LOCK-OUT OR LABOUR DISPUTE, FIRE, ICE CONDITIONS, OR
ANY OTHER CAUSE OF A SIMILAR NATURE AS DESCRIBED HEREIN BEYOND THAT PARTY’S CONTROL.



12.     OTHER TERMS:

ON THE BASIS OF THE BUYER’S WRITTEN REQUEST, THE SELLER WILL ASSIST THE BUYER TO SELL LOCALLY OR
EXPORT OIL THROUGH PROPERLY EXECUTED OIL SALES CONTRACTS WITH A THIRD PARTY ON THE SAME TERMS AS
STIPULATED IN THIS AGREEMENT PROVIDING THIS IS DONE IN ACCORDANCE WITH GEORGIAN LEGISLATION AND THE
BUYER INDEMNIFIES THE SELLER FROM AND AGAINST ANY AND ALL CLAIMS OF ANY KIND, LIABILITIES INCLUDING
BUT NOT LIMITED TO VAT PAYMENTS, AND EXPENSES WHICH MAY EMERGE AS A RESULT OF THE SELLER ENTERING
INTO SALES CONTRACTS WITH A THIRD PARTY AT THE REQUEST OF THE BUYER.



13.     ENTIRE AGREEMENT

THIS AGREEMENT CONTAINS THE ENTIRE AGREEMENT OF BOTH PARTIES AND IT CANNOT BE MODIFIED UNLESS IN
WRITING.



14.     BANK DETAILS:

US DOLLAR ACCOUNT:



	 	 	 
	BANK:

	 	HSBC BANK INTERNATIONAL LIMITED
	

	 	PO BOX 315, ST PETER PORT
	

	 	GUERNSEY GY1 3JQ
	

	 	CHANNEL ISLANDS
	SWIFT:

	 	MIDLJESH
	ACCOUNT CURRENCY

	 	US DOLLARS
	ACCOUNT NAME:

	 	NINOTSMINDA OIL COMPANY USD ACCOUNT
	ACCOUNT NO.:

	 	011 645496 361
	COVER THROUGH:

	 	BANKERS TRUST COMPANY
	

	 	1 BANKERS TRUST PLAZA, LIBERTY STREET
	

	 	NEW YORK, NY 10006
	

	 	A/C NO.: 04082437
	

	 	SPECIAL INSTRUCTIONS: BKTRUS33






15.     COUNTERPART

THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF COUNTERPARTS, ALL OF WHICH TOGETHER SHALL BE DEEMED
TO CONSTITUTE ONE AND THE SAME DOCUMENT.



IN WITNESS WHEREOF THE PARTIES HAVE CAUSED THIS AGREEMENT TO BE EXECUTED IN FOUR (4) COUNTERPARTS,
TWO (2) EACH IN GEORGIAN AND ENGLISH LANGUAGES OF WHICH ENGLISH VERSIONS SHALL HAVE PREVAILING
LEGAL FORCE.



SIGNED ON 04 FEBRUARY 2005.





			
	FOR AND ON BEHALF OF

NINOTSMINDA OIL COMPANY LIMITED:
	 	FOR AND ON BEHALF OF

PRIMROSE FINANCIAL GROUP:
	 	 	 
	 	 	 
	 	 	 
	 
	 	 
	DR DAVDID ROBSON

President
	 	ABRAHAM NANIKASHVILI

Director







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