Exhibit
10.1


 


	
  

  



 


STOCK
SALE AGREEMENT


 


	
  Date:

  	
  February 9, 2005

  
	
   

  	
   

  
	
  Sellers:

  	
  KOVALSKY VLADIMIR VASYLEVICH

  
	
   

  	
  Address: (TBD)

  
	
   

  	
   

  
	
   

  	
  VASILUK YURY NIKOLAEVICH

  
	
   

  	
  Address: (TBD)

  
	
   

  	
   

  
	
   

  	
  IVARS HOVALKO

  
	
   

  	
  Address: (TBD)

  
	
   

  	
   

  
	
   

  	
  KRISHNA PEMSING

  
	
   

  	
  Address: (TBD)

  
	
   

  	
   

  
	
  Sellers’ Representative:

  	
  VLADIMIR KOVALSKI

  
	
   

  	
  Baltoil-Group

  
	
   

  	
  130, Dzerginskogo str., Kaliningrad, Russia

  
	
   

  	
   

  
	
  Buyer:

  	
  APOLLO RESOURCES INTERNATIONAL, INC.

  
	
   

  	
  3001 Knox St., Suite 403

  
	
   

  	
  Dallas, TX 75205

  
	
   

  	
   

  
	
  Company:

  	
  KALININGRADNEFT

  
	
   

  	
   

  
	
  Address of Company:

  	
  ul. Portovaya 32a, 236039

  
	
   

  	
  Kaliningrad, Russia

  
	
   

  	
   

  
	
  Company Stock:

  	
  90% of the shares of the stock of Company, equal to

  
	
   

  	
  90% of the total equity ownership of Company.

  
	
   

  	
   

  
	
  Consideration:

  	
  One year, 6% Convertible Debenture in the amount
  subject to final negotiation.  Principal
  and interest will be convertible into Buyer’s Common Stock at the option of
  either Buyer or Sellers, with a minimum floor price of US$2.00 per share.

  
			



 


Recitals


 


A.           The Company owns oil production operations in the Kaliningrad Oblast
region of Russia.


 


B.             Buyer wishes to pay Sellers the Consideration
for the purchase of 90% of the Company Stock.


 


C.             Sellers wish to sell the Company Stock to
Buyer upon the terms and subject to the conditions set forth in this Agreement.


 


Agreement


 


NOW, THEREFORE, in consideration of the foregoing
premises and the representations, warranties, and covenants hereinafter set
forth, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:


 


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1.                                       Sale and Purchase.  Subject to the terms and conditions herein
set forth, and in reliance upon the representations, warranties and covenants
contained herein, Buyer agrees to purchase the Company Stock from Sellers, and
Sellers agree to sell the Company Stock to Buyer.


 


2.                                       Purchase Price.  The
purchase price for the Company Stock shall be the issuance to Sellers of the
Consideration, as those terms are defined above.


 


3.                                       Closing.  Closing
of the transaction contemplated herein (the “Closing”) shall take place on or about March 18, 2005, at a
time and place to be mutually decided by the parties.  (The date on which the Closing is held shall
be referred to in this Agreement as the “Closing Date.”)  At the Closing,
Sellers shall deliver to Buyer the Company Stock, and Buyer shall deliver the
Consideration.


 


4.                                       Representations and
Warranties of Seller.  Sellers hereby represent and warrant to Buyer
that as of the date hereof and as of the Closing:


 


a.               Sellers own ninety percent (90%) of the
issued and outstanding equity ownership interests in the Company, the “Company
Stock”.


 


b.              Sellers will, at Closing, be the sole legal
and beneficial owners of the Company Stock, free and clear of any and all
liens, claims, and encumbrances, with full power to transfer the same as
contemplated herein.


 


c.               The Estimated Financial Condition of the
Company, attached hereto as Exhibit “A”, represents an accurate good faith
estimate of the Company’s current financial condition.  Specifically, there are no liens, debts or
claims against any of the properties and assets of the Company besides those
listed in Exhibit “A”.


 


d.              Sellers are not party to or bound by any
contract, promissory note, agreement, commitment, or obligation, creating or
securing indebtedness, obligations, or liabilities, a breach or default of
which would be triggered by Sellers’ execution and delivery of this Agreement.


 


e.               The Company is a lawful open joint stock
company, duly organized, validly existing and in good standing under the laws
of the Kaliningrad Oblast, Russia, and the Russian Federation.  To the Seller’s knowledge, there are no
pending actions or proceedings (i) to limit or impair the Company’s power to
engage in business or (ii) to dissolve the Company.


 


f.                 The Company will not enter into any new
contracts or agreements between the date of this Agreement and the Closing,
except in the ordinary course of business.


 


g.              Sellers represent and warrant that the
Kaliningrad Oblast is a “Special Economic Zone” regulated by special Russian
Federal Laws, which includes the law that no import or export duties or taxes
will be accessed against any products or equipment imported or exported to or
from Kaliningrad.


 


5.                                       Representations, Warranties and Covenants of Buyer.  Buyer hereby represents and warrants to
Sellers that as of the date hereof and as of the Closing:


 


a.               Buyer
is a company duly organized, validly existing and in good standing under the
laws of the state of Utah and the United States, and has all requisite power
and authority to enter into, perform and carry out all of its duties and
obligations in the transaction contemplated by this Agreement.


 


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b.              The
execution, delivery and performance of this Agreement and the consummation of
the transaction on the part of Buyer contemplated hereunder have been duly
authorized by all necessary corporate action on the part of Buyer.  This Agreement is (or will be when executed and
delivered pursuant hereto) the legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms.


 


c.               Neither
the execution and delivery of this Agreement by Buyer, nor Buyer’s compliance
with any of the terms and provisions of this Agreement, nor the consummation of
the transactions contemplated hereby, will conflict with or result in a
violation of, or constitute a material default under its Bylaws or any other
agreement, contract or commitment to which it is a party; nor will the
performance by Buyer of its obligations hereunder violate any judgment, order,
injunction, decree, regulation or ruling of any court or governmental authority
to which Buyer is subject.


 


6.                                       Attorney Fees.  If
any legal action or other proceeding is brought for the enforcement of this
Agreement or any other agreement, document, contract, instrument or other
writing entered into in connection herewith, because of an alleged dispute,
breach, default, or misrepresentation, in connection with any of the provisions
of this Agreement or such other writing, the successful or prevailing party
shall be entitled to recover its reasonable attorney fees, and other costs and
expenses, incurred in such action or proceeding, in addition to any other
relief to which it or they may be entitled, but in case to exceed the amount of
Consideration.


 


7.                                       Buyer’s Responsibilities.  Upon Closing, Buyer shall initiate a program
of capital investment into the Company, as outlined in Exhibit “B” and ensure
the appointment of Sellers’ Representative to its Board of Directors.


 


8.                                       Review Period  The
period of time between the date of this Agreement and the Closing Date is
herein referred to as the “Review Period”.


 


9.                                       Property Leases and Acquisitions
by Sellers  It is understood by the parties hereto that
Buyer intends to build a “Topper Plant” to produce diesel in Kaliningrad.  Sellers hereby agree to use all commercially
reasonable efforts to assist Buyer with either (a) the lease for the benefit of
Buyer, for a period of no less than 49 years, or (b) the purchase, of property currently
owned by the Russian Federation, for and upon which Buyer will construct and
operate said Topper Plant.  In addition,
Sellers will immediately begin negotiations with the appropriate third parties
to lease or acquire for the benefit of Buyer a terminal facility suitable for
the use of Buyer.


 


10.                                 GAAP Accounting. 
Within the time frame contemplated by the Bill of Sale (herein so
called) to be entered into by and among the parties hereto, Sellers will
provide complete financials of the Company to Buyer prepared according to and
in compliance with the American Generally Accepted Accounting Principles.


 


11.                                 Access. 
During the Review Period, Buyer will be given access to all applicable
documents in Sellers’ or Company’s possession pertaining to its assets,
liabilities, equity, and all expired, pending and current contracts (the “Due
Diligence Documents”), and full access to Company facilities and property, and
to all Company employees, agents, creditors, debtors, bankers and
representatives.


 


12.                                 Condition. 
Buyer’s decision to pay the Consideration and close this transaction is
contingent upon Buyer’s reasonable review, analysis, and acceptance, in its
sole discretion, of matters related to the physical, legal and economic
conditions and feasibilities of the Company, including, without limit, an
inspection of the properties of the Company.  Sellers’ decision to deliver the Shares and
close this transaction is contingent upon Buyer providing credit to finance the
program of capital investment into the Company, as outlined in Exhibit B within
the period contemplated therein.


 


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13.                                 Loss and Liens.  The
risk of any loss, condemnation, or destruction of all or any part of the
Company’s property prior to closing is upon the Sellers.  Sellers shall not place, permit, or cause to
be placed any liens or encumbrances on the title to the Company’s property or
the Company Stock from the date hereof through closing.


 


14.                                 No Marketing. 
Sellers nor the Company, nor any employee, agent or representative of
Sellers or the Company, may not market, nor consider offers for selling,
transferring, pledging or otherwise encumbering or alienating the Company
Stock, or the Company’s property, prior to Closing.


 


15.                                 Notices.  In
order to be effective all notices, consents, approvals and disapprovals (“Notice”) required by this Agreement
must be in writing, signed by an officer or lawful agent of the party giving
such Notice, and either (i) personally delivered; or (ii) deposited for
delivery by a recognized, private overnight courier for next business morning
delivery, properly addressed, and with the full waybill prepaid.  Notice shall be deemed received and effective
on the earlier of the date actually received, or, if applicable, three (3)
business days after being sent as specified in clause (ii) of this
paragraph.  Notices must be addressed to
the parties hereto at the addresses first stated above.


 


16.                                 Entire Agreement; Amendments.  Each
of the parties represents that no promise or agreement which is not expressed
in this Agreement, has been made to such party in executing this Agreement, and
neither of the parties is relying upon any statement or representation not
contained in this Agreement.  This
Agreement, including the Exhibit hereto, constitutes the entire understanding
between the parties hereto relative to the subject matter hereof, superseding
any and all prior agreements, arrangements, and understandings, written or
oral, between the parties.  This
Agreement may be amended only by a written instrument signed by the parties.


 


17.                                 Binding Effect;
Permissibility of Assignment.  This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.


 


18.                                 Governing Law.  This
Agreement shall be governed by and construed in accordance with the laws of the
state of Texas, without reference to its conflict of laws rules.


 


19.                                 No Brokers.  Save
and except Sellers’ Representative, each party represents and warrants that it
has dealt with no broker or finder in connection with the transaction
contemplated by this Agreement, and that no broker or other person is entitled
to any commission or finder’s fee in connection with this transaction.  Each party agrees to indemnify, defend and
hold harmless the other party against any commission or finder’s fee alleged to
be payable because of any act, omission or statement of the indemnifying party.


 


20.                                 Sellers’ Representative. 
Sellers have fully authorized and empowered Sellers’ Representative by
and through a lawful Power of Attorney sufficient for Sellers’ Representative
to execute this Agreement on behalf of Sellers, and by such execution Sellers
agree to be lawfully and fully obligated and bound to the terms herein as if
Sellers, themselves had executed this Agreement directly.


 


21.                                 Severability.  If
any provision of this Agreement is held to be invalid or unenforceable by any
court of competent jurisdiction, it is the intent of all of the parties that
all other provisions of this Agreement be construed to remain fully valid,
enforceable and binding on the parties.


 


22.                                 Covenant of Good Faith and Fair
Dealing.  With regard to their respective obligations
and commitments under this Agreement, each of Buyer and Seller covenants that
it shall act in good faith and deal fairly with the other party.


 


23.                                 Reasonable Cooperation.  Each
party hereto agrees to execute and deliver such instruments and


 


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take such other action as
the other party may reasonably request in order to carry out the intent of this
Agreement.


 


 


IN
WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement.


 


	
  SELLERS:

  
	
   

  
	
  KOVALSKY VLADIMIR VASYLEVICH, VASILUK YURY
  NIKOLAEVICH, IVARS HOVALKO, and

  KRISHNA PEMSING

  
	
   

  
	
   

  
	
  /s/ VLADIMIR KOVALSKI

  	
   

  	
  2-9-05

  	
   

  
	
  VLADIMIR KOVALSKI 

  	
  Date

  
	
  Seller’s Representative,

  lawfully and fully signing on behalf of each Seller, and thus binding same.

  
	
   

  
	
  BUYER:

  
	
   

  
	
  APOLLO RESOURCES INTERNATIONAL, INC.

  
	
   

  
	
   

  
	
  /s/ Dennis G. McLaughlin, III 

  	
   

  	
  3-18-05

  	
   

  
	
  Dennis G. McLaughlin, III

  	
  Date

  
	
  Chief Executive Officer

  
						



 


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EXHIBIT “A”


 


KALININGRADNEFT


 


Estimated Financial Condition

As of December 31, 2003


 


	
   

  	
   

  	
  US$ 

  	
   

  
	
  Assets

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Contracted
  Revenue Receivable (12 months x $1,230,000) 

  	
   

  	
  14,760,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lease
  Licenses and all Oil Field Equipment

  	
   

  	
  1,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Rolling
  Stock

  	
   

  	
  240,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Field
  Facilities (under construction)

  	
   

  	
  300,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  16,800,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Liabilities
  : Trade Financing (short term, 1yr, 10%)

  	
   

  	
  3,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Equity

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Charter
  Capital (Paid in Capital)

  	
   

  	
  2,000,000

  	
   

  
	
  Retained
  Earnings

  	
   

  	
  $

  	
  11,800,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  16,800,000

  	
   

  



 


Other Estimated Financial Conditions:


 


1.                                       The Annual Net Profit to the Company is
approximately US$5,000,000.


 


2.                                       As there is no excise or export tax in
Kaliningrad, exports from there save approximately $10 to $11 per barrel sold.


 


3.                                       Current production from the existing 8 wells
is approximately 32,000 BBLs per month.


 


4.                                       Production from reserves of existing 8 wells,
through August, 2009, is approximately 950,000 BBLs


 


5.                                       The two additional wells discussed in Exhibit
“B” are estimated to produce through August, 2009, approximately 720,000.


 


6.                                       The current license (lease) (“Lease 1”)
covers approximately 300 sq. kilometers.


 


7.                                       Sellers are currently acquiring a new and
separate license (lease) (“Lease 2”) that is expected to be granted between February 12,
2005 and February 17, 2005, and will cover approximately 225 sq.
kilometers.


 


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EXHIBIT “B”


 


KALININGRADNEFT


 


Buyer’s Responsibilities


(for the initiation of a program
of capital investment)


 


1.                                       Buyer will provide all drilling rigs and
associated equipment for the development of new and existing fields of
Kaliningradneft under both Lease 1 and Lease 2 (as defined in Exhibit “A”);


 


2.                                       Buyer will perform rework as necessary on the
wells on Lease 1;


 


3.                                       Buyer will develop the new field under Lease
2; and


 


4.                                       Buyer will provide a “Topping Plant” to
process diesel for export.  (Sellers will
provide the land for the plant.)


 


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