Document:

Exhibit 10.3

 

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (“Agreement”) is made and entered into effective as of this 3rd day of March 2009 by and between TriCord Hurricane Holdings, Inc., a Nevada Corporation, hereafter (the “Company”), and Richard A. Smith, hereafter (the “Executive”).  The Company and Executive shall each be referred to individually as a “Party” and collectively as the “Parties”).

RECITALS

WHEREAS, the Company elected Richard A. Smith (“Smith”) as its COO upon execution of the merger agreement (“Merger Agreement”) between Aria International Incorporated and TriCord Hurricane Holdings, Inc. (“TriCord”); and 

WHEREAS, Board of Directors of the Company (the “Board”) recognizes that the contributions made by Executive in Aria International Incorporated upon its inception have been substantial; and

WHEREAS, the Board now desires to enter into this Agreement upon completion of the merger with TriCord to ensure the continued growth and success of the Company and to assure itself for the continued employment of the Executive and to provide in the Executive’s employment arrangement with the Company which the Board has determined will reinforce and encourage the continued attention and dedication to the Company of the Executive as a member of the Company’s management, as is deemed to be in the best interest of the Company and its members; and  

WHEREAS, the Executive is willing to commit himself to serve the Company, on the terms and conditions herein provided; and

WHEREAS, in order to effect the foregoing the Company and the Executive wish to enter into this Agreement on the terms and conditions set forth below.  Accordingly, in consideration of the promises and the respective covenants and conditions of the parties herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:

AGREEMENT

1.         Employment.  The Company hereby agrees to employ the Executive, and the Executive hereby agrees to serve the Company, commencing on March 3rd, 2009.

2.         Position and Duties.  The Executive shall serve as Chief Operating Officer (“COO”) of the Company and shall have such responsibilities and authority as the Chief Executive Officer and/or the Board of Directors may assign to the Executive from time to time. The Executive shall devote substantially all his working time and efforts to the business and affairs of the Company. 

3.         Place of Performance.  In connection with the Executive’s employment with the Company, Executive shall be allowed to work from the corporate offices in San Diego, California, as necessary and any other required travel on the Company’s business to an extent substantially consistent with present business travel obligations.  The Company may from time to 

 

Executive Employment Agreement – Richard A. Smith

 

time require Executive to travel temporarily to other locations in connection with the Company's business.  Upon approval, Company shall reimburse Executive for any reasonable expenses related to such home and/or outside offices.

	
            4.
 	
            Compensation and Related Matters.
 

4.1       Base Salary.  The Company shall pay to the Executive an annual base salary of two hundred fifty thousand dollars ($250,000.00) per year divided into twenty-six pay bi-weekly periods of nine thousand six hundred fifteen dollars and thirty-eight cents ($9,615.38) per paid period (“Base Salary”).  Executive acknowledges and understands that the Company is in a developmental stage and currently does not have sufficient funds necessary to pay all of Executive’s salary.  Therefore, Executive agrees to defer payment as necessary until such time as the Company has sufficient capital to pay any and all accrued salary.

4.2       Other Compensation. Compensation of the Executive by base salary payments shall not be deemed exclusive and shall not prevent the Executive from participating in any other compensation or benefit plan of the Company. The salary payments (including any increased salary payments) hereunder shall not in any way limit or reduce any other obligation of the Company hereunder, and no other compensation, benefit or payment hereunder shall in any way limit or reduce the obligation of the Company to pay the Executive’s base salary hereunder.  

4.3       Milestone Equity Incentive.  The Company has agreed to issue to Executive warrants to purchase common stock in the Company upon the successful achievement of certain revenue milestones in accordance with the Merger Agreement.  In accordance with the terms of the Merger Agreement, if the gross revenue booked by TriCord within the first 12 months of the closing of the Merger is equal to or greater than $20,000,000 but less than $30,000,000, TriCord shall issue Executive employees warrants to purchase an additional 7,601,258 shares of its common stock at the purchase price of ten cents ($0.10) per share (the “Milestone 1 Warrant Shares”).  Further, if the gross revenue booked by TriCord within the first 18 months of the closing of the Merger is equal to or greater than $30,000,000, TriCord
shall issue Executive a warrant to purchase an additional 7,601,258 shares for a combined total of 15,202,516 Shares of its common stock at the purchase price of ten cents ($0.10) per share (the “Milestone 2 Warrant Shares”).

4.4       Changes to Compensation.  Executive's compensation may be changed only by mutual agreement of Executive and the Board of Directors of the Company.  Any such agreement shall be evidenced by a written amendment of this Agreement, which, among other things, shall specify with particularity any change in Executive's compensation and the date or dates when each such change shall become effective.  Executive's performance shall be reviewed by the Board of Directors of the Company on a periodic basis (but not less than once in each fiscal year during the term of this Agreement) and the Board of Directors may award such bonuses to Executive as the Board of Directors determines in its sole discretion may be appropriate or desirable based on Executive's performance.  In addition, Executive shall be eligible
to receive options in any Company approved equity compensation plan and as may be recommended, from time to time, by the Company’s Board of Director’s.  All such options, if any, shall automatically vest in the event the Company terminates the employment of Executive other than for cause (as defined in Section 6.3 below).

 

Executive Employment Agreement – Richard A. Smith

 

4.5       Expenses. In addition to Section 4.1, During the term of the Executive’s employment hereunder, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in performing services hereunder, including, but not limited to, all expenses of travel and living expenses while away from home on business or at the request of and in the service of the Company, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company and that a copy of all receipts are provided to the Company. 

4.6       Vacation Benefits. Executive shall be entitled to 15 workdays of paid vacation days per year during the term of the Agreement.  No more that 10 adjoining workdays of vacation may be taken in any one calendar month or consecutive period.  It is understood that all vacations shall be taken during the year earned, or may be accrued and taken during the next successive year.  Accumulation of unused vacation days shall not exceed more than 10 additional workdays in addition to Executives normal vacation accrual in any given year.  Executive agrees that such vacation shall be taken only at such times as the Company shall from time to time determine.  Executive shall be entitled to a reasonable time off, also at full salary, for sickness or matters of personal emergency in accordance with the
Company’s benefit plans.  

4.7       Other Benefits.  Executive shall be entitled to all health benefits, insurance, and other similar benefits in accordance with the Company’s benefit plans. The Executive shall be entitled to participate in or receive benefits under any employee benefit plan or arrangement made available by the Company in the future to its officers and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements.  Nothing paid to the Executive under any plan or arrangement presently in effect or made available in the future shall be deemed to be in lieu of the salary payable to the Executive pursuant to Section 4.1.  

	
            5.
 	
            Term.  
 

5.1       Initial Term.  The employment of the Executive by the Company as provided in paragraph 1 above will commence on the date thereof and end after two (2) years from the Effective Date, unless sooner terminated as hereinafter provided in paragraph 6 or unless renewed as provided in paragraph 5.2 herein.

5.2       Renewal of Term of Agreement.  At the end of this Agreement, this Agreement shall be automatically renewed for an additional one (1) year terms, unless the Company notifies the Executive of its intent not to renew the Agreement, such written notice to be delivered at least ninety (90) days prior to the end of the Agreement.  Upon notice of non-renewal, the Executive shall be entitled to the protection of this Agreement for the remaining term of the Agreement, subject to all other provisions of this Agreement.

	
            6.
 	
            Termination.
 

6.1       Death. The Executive’s employment hereunder shall terminate upon the fifth (5th) anniversary of this Agreement or upon his death.

6.2       Disability. If, as a result of the Executive’s incapacity Executive becomes physically or mentally incapacitated and is therefore unable for a period of three (3) consecutive 

 

Executive Employment Agreement – Richard A. Smith

 

months or for an aggregate of four (4) months in any twelve (12) consecutive month period to perform Executive’s duties (such incapacity is hereinafter referred to as “Disability”). Any question as to the existence of the Disability of Executive as to which Executive and the Company cannot agree shall be determined in writing by a qualified, independent physician mutually acceptable to Executive and the Company.  If Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and Executive shall be final and conclusive for all purposes of the Agreement.

6.3       Termination for Cause. This Agreement shall immediately be terminated and neither party shall have any obligation hereunder if the Executive’s employment is terminated for cause. Termination for cause shall arise where termination results from:

	
             
 	
            (a)
 	
            theft or dishonesty in the conduct of the Company’s business;
 

	
             
 	
            (b)
 	
            commission of an act involving moral turpitude;
 

	
             
 	
            (c)
 	
            any act of gross negligence, corporate waste, disloyalty or unfaithfulness by Executive to the Company
 

	
             
 	
            (d)
 	
            deliberate and continual refusal to perform employment duties on substantially a full-time basis; or
 

	
             
 	
            (e)
 	
            breach of any of the fiduciary duties owed to the Company by Executive.
 

(f)        deliberate and continual refusal to act in accordance with any specific written instructions of a majority of the Board of Directors of the Company, (unless such specific instructions are illegal, violate any federal or state statute or fail to conform to accepted professional standards of conduct).

6.4       Termination Without Cause.  Upon termination, all of the parties’ respective rights and obligations hereunder shall immediately terminate, except that (i) Employee’s obligations and the Company’s rights under Sections 6, 7, and 13 of this Agreement shall survive such termination; and (ii) if for any reason, the effective date of termination is prior to the end of the Term, the Company shall pay to Employee an amount equal to Employee’s then-current Salary for the remainder of the Term in accordance with the Company’s normal payroll procedures and policies (the “Severance Amount”).

6.5       Termination by the Executive. The Executive may terminate his employment hereunder for (i) Good Reason, as defined in (a), (b), or (c) below or (ii) by resignation.  For the purposes of this Agreement, “Good Reason” shall mean:

(a)       Executive’s base salary falls below its level in effect on the date hereof, without the Executive’s consent, (as previously noted in Section 4.1 Executive has agreed and consented to defer from time-to-time his base salary) provided, however, nothing herein shall be construed to guarantee the Executive’s compensation if performance is below target, or 

 

Executive Employment Agreement – Richard A. Smith

 

(b)       a material reduction in the importance of the Executive’s job responsibilities without the Executive’s consent or, 

(c)       a geographical relocation of the Executive of more than two hundred fifty (250) miles from the place of current employment without his consent.

6.6       Material Breach.  Either party shall also have the right to terminate this Agreement if the other party fails to comply with any material provision (“Material Breach”) of this Agreement and such Material Breach has not been cured within thirty (30) days written notice of such Material Breach was issued by the complaining party to the other party.  A Material Breach shall include Executive’s failure to receive his base salary; except as described in Section 4.1 of the Agreement.

6.7       Notice of Termination. Any termination of the Executive’s employment by the Company other than by reason of death or by the Executive shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.  Any purported termination of the Executive’s employment shall not be effective, unless the provisions of this Section 6.7 have been satisfied.

	
             
 	
            6.8
 	
            Date of Termination. “Date of Termination” shall mean:
 

(a)       if the Executive’s employment is terminated by death, the date of death;

(b)       if the Executive’s employment is terminated pursuant to Section 6.2 above, after the date the Notice of Termination is given;

(c)       if the Executive’s employment is terminated pursuant to Section 6.3 above, the date specified in the Notice of Termination; and

(d)       if the Executive’s employment is terminated for any other reason, the date on which a Notice of Termination is given.

	
            7.
 	
            Compensation upon Termination or During Disability.
 

7.1       During any period that the Executive fails to perform duties hereunder as a result of incapacity due to physical or mental illness (“Disability Period”), the Executive shall continue to receive full salary at the rate then in effect for such period until employment is terminated pursuant to Section 6.2 above, provided that payments so made to the Executive during the disability period shall be reduced by the sum of the amounts, if any, payable to the Executive at or prior to the time of any such payment under disability benefit plans of the Company and which were not previously applied to reduce any such payment.  Any additional compensation awarded by the board of directors, shall be paid in a pro rata amount to compensate the Executive proportionately for days worked prior to the beginning of his disability period.  Upon such
payments, the Company shall have no further obligations to the Executive under this Agreement.

 

Executive Employment Agreement – Richard A. Smith

 

7.2       If the Executive’s employment is terminated by death, the Company shall pay to the Executive’s spouse, or if Executive leaves no spouse, to Executive’s estate, his full salary through the date of death at the rate in effect at the time of death, and the Company shall have no further obligations to the Executive under this Agreement.

7.3       If the Executive’s employment shall be terminated for Cause, the Company shall pay the Executive his full salary through the date of delivery to Executive of a Notice of Termination at the rate in effect at the time Notice of Termination is given, and the Company shall have no further obligations to the Executive under this Agreement.

7.4       If the Executive shall terminate his employment under Section 6.5 above, the Company shall pay the Executive his full salary through the Date of Termination at the rate in effect at the time Notice of Termination is given.

7.5       If the Executive’s employment shall be terminated other than for Cause, Death or Disability, the Company shall pay the Executive his full salary at the rate in effect at the time Notice of Termination is given for a period of 6 months following the Date of Termination, and the Company shall have no further obligations to the Executive under this Agreement.

	
            8.
 	
            Counsel Fees and Indemnification.
 

8.1       Except for breach of any of the fiduciary duties owed to the Company, criminal or fraudulent acts by Executive as determined by the board of directors, the Company shall indemnify and hold Executive harmless to the maximum extent permitted by law against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys’ fees incurred by Executive, in connection with the defense of, or as a result of any action or proceeding (or any appeal from any action or proceeding) in which Executive is made or is threatened to be made a party by reason of the fact that he is or was an officer of the Company, other than any action by or in the right of the Company.

The undertaking of Section 8.1 above is independent of, and shall not be limited or prejudiced by the undertaking of Section 8.2.

8.2       To the best of Company’s knowledge and belief, and to the best of Executive’s knowledge and belief, no suit, action, arbitration, or legal, administrative, or other proceeding, governmental investigation, or contract renegotiation is pending nor, to the best of the Company’s belief, any basis therefore or any threat thereof against or affecting the Company or any of businesses, assets, or financial condition, or which questions the validity of this Agreement.

8.3       The Company hereby warrants and represents that the undertakings of payment, and the indemnification set out in Section 8.1 is not in conflict with the articles of organization or operating agreement of the Company or with any validly existing agreement or other proper corporate action of the Company.

 

Executive Employment Agreement – Richard A. Smith

 

	
            9.
 	
            Confidential Information.  
 

9.1       The Executive acknowledges that, in and as a result of his employment and as a material inducement to the Company to enter into this Agreement, and to pay to the Executive the compensation referred to in this Agreement hereunder, Executive will be making use of, acquiring and/or adding to confidential information of special and unique nature and value relating to such matters as the Company.  Such confidential information shall include trade secrets, systems, methods, procedures, manuals, confidential reports and lists of clients, including, without limitation, any trade secret, patent, patent pending, information, process, technique, algorithm, computer program (source and object code), design, drawing, formula or test data relating to any research project, tax process, work in process, future development, engineering, marketing, servicing,
financing or personnel matter of the Company, its present or future products, sales, suppliers, clients, customers, employees, investors or business, and/or other services rendered by the Company, whether in oral, written, graphic or electronic form  (“Confidential Information”).  Executive covenants and agrees not to at any time during or following the term of his employment hereunder, directly or indirectly, divulge or disclose, for any purpose whatsoever, any of such Confidential Information which has been obtained by or disclosed to him as a result of his employment by the Company.  In the event of a breach or threatened breach by the Executive of any of the provisions of this Section 9, the Company, in addition to and not in limitation of any other rights, remedies or damages available to the Company at law or in equity, shall be entitled to a permanent injunction order to prevent or to restrain any such breach by Executive, or by Executive’s partners, agents,
representatives, servants, employers, employees and/or any and all persons directly or indirectly acting for or with him.

9.2       If the Executive’s employment is terminated for any reason by either the Company or Executive, Executive thereafter, shall not, without the prior written approval of the board of directors of the Company, disclose Company Confidential Information and shall not directly or indirectly divert, take away, or solicit or attempt to divert, take away or solicit any existing or new customers or clients of the Company.  Confidential Information does not include information, which is now, or hereafter becomes, through no act or failure to act on the part of the Executive, generally known or available.

10.       Non-Compete. During the term hereof or upon termination of this Agreement for any reason whatsoever and for a period of two (2) years thereafter, Executive agrees not to compete with Company, either directly or indirectly by way of stock interest or otherwise, or engage in any way similar to the services provided by Company, nor the methods thereof, except for the purpose of complying with the terms of this Agreement.  Executive further agrees not to utilize any promotional and marketing techniques, methods or data obtained, learned or used by Company as a result of Executive’s employment with the Company or as a result of rendering any performance hereunder. In the event it shall be determined by a court of competent jurisdiction that this Section or any portion thereof is
unenforceable under the laws of a state other than the state in which the Company is located, nonetheless, this Section shall be valid and fully enforceable in the state in which the Company is located 

11.       Specific Performance.  Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Section 9 and 10 would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a 

 

Executive Employment Agreement – Richard A. Smith

 

breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and to obtain equitable relief in the form of specific performance, ex parte injunction, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.

	
            12.
 	
            Successors; Binding Agreement.
 

12.1     Binding Effect.  This Agreement shall be binding upon and inure to the benefit of the successors, assigns, and personal representatives or heirs of the respective parties.

12.2     This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, or other designee or, if there be no such designee, to the Executive’s estate.

	
            13.
 	
            Miscellaneous
 

13.1     Assignment.  This Agreement shall not be assignable by Executive. This Agreement may be assigned by the Company to any affiliate or company, which is a successor in interest to substantially all of the business operations of the Company. Such assignment shall become effective when the Company notifies the Executive of such assignment or at such later date as may be specified in such notice. Upon such assignment, the rights and obligations of the Company hereunder shall become the rights and obligations of such successor company; provided that any assignee expressly assumes the obligations, rights and privileges of this Agreement.

13.2     Attorneys Fees.  Should either Party pursue any dispute covered by this Agreement by any method, the other Party shall be entitled to recover from the non-complying Party all damages, costs, expenses and attorneys’ fees incurred as a result of such action.

13.3     Validity.  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

13.4     Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

13.5     Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada, without regard to conflicts of laws principles thereof.

13.6     Notice.  For the purposes of this Agreement, notices, demands and all other communications provided for in the Agreement shall be in writing and shall be deemed to have 

 

Executive Employment Agreement – Richard A. Smith

 

been duly given when delivered or (unless otherwise specified) mailed by United States registered mail, return receipt requested, postage prepaid, addressed as follows:

	
             
 	
            If to the Executive:
 	
            Richard A. Smith
 

4150 Palisades Road

 San Diego, CA 92116

 

	
             
 	
            If to the Company:  
 	
            TriCord Hurricane Holdings, Inc.
 

4821 29th Street North

Arlington, VA 22207

 

or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

13.7     Prior Agreements. This Agreement supercedes all prior agreements and understandings (including verbal agreements) between Executive and the Company regarding the terms and conditions of Executive’s employment with the Company.

13.8     Entire Agreement/Amendments.  This Agreement contains the entire under-standing of the parties with respect to the employment of Executive by the Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not be altered, modified, amended or any rights waived except by written instrument signed by the parties hereto.

13.9     No Waiver.  The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights on any other occasion or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

13.10   Severability.  Subject to the provisions of this Agreement, in the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.

13.11   Survival.  The provisions of Sections 6, 7, 8, 11, 12, and 13 shall survive the termination of this Agreement.  Section 9 shall survive for a period of three (3) years and section 10 shall survive the termination of this Agreement for a period of two (2) years.

 

Executive Employment Agreement – Richard A. Smith

 

IN WITNESS WHEREOF, the parties hereby execute this Agreement effective as of the date first written above.

	
            TriCord Hurricane Holdings, Inc.

 
 	
            Executive

 
 
	
             

 

/s/ Michael A. Crosby                                                                                           

Michael A. Crosby, President & CEO
 	
             

 

/s/ Richard A. Smith                                                       

Richard A. SmithEX-10.1

Exhibit 10.1

Agreement on Sales of Associated Gas

			
	 	 	 
	Tbilisi
	 	30 April 2009

	1.	 	Parties to the Agreement
	 
	 	 	Ninotsminda Oil Company Limited a company registered in Cyprus with its registered office at 22
Stascicratous, Olga Court, PO Box 48, Nicosia, Cyprus (registered number 74623) represented by
the company Representative in Georgia Mr Zaza Gorgadze (hereinafter referred to as the “Seller”)
from one side, and Energy Trading Company Limited a company registered in Georgia with its registered office at 56
Burdzgla Street, Tbilisi (registered number 205271711) represented by its Director Mr Avtandil
Shavishvili (hereinafter referred to as the “Buyer”) from another side.
	 
	 	 	WHEREAS
	 
	1)	 	SELLER and Georgian Oil Gas Corporation (GOGC) have rights to carry out petroleum operations
under a Production Sharing Contract dated 15 February 1996 covering the Ninotsminda, West Rustavi
and Manavi licence area in Georgia (the “PSC”) and, as a consequence of such operations, will
have available for sale supplies of Associated Gas;
	 
	2)	 	The Seller and GOGC agree to take and sell separately their pro rata share of gas produced in
accordance with the relevant allocation provisions contained in the PSC complying with the
Agreement on Sales of Associated Natural Gas dated 30 April 2009 attached hereto as Appendix 1;
	 
	3)	 	Buyer has interest in rational utilization of the associated gas resources and in order to
develop local infrastructure within Georgia wishes to purchase Associated Gas from Seller.
	 
	4)	 	The Law of Georgia on Electric Energy and Natural Gas is not applicable to the relations between
Parties in the framework of this Agreement as to the use of natural gas producer and distribution
licensees;
	 
	 	 	It is hereby Agreed As Follows:
	 
	2.	 	Definitions
	 
	2.1	 	If not stated otherwise the following terms have their meanings as follows:
	 
	2.1.1	 	Natural Gas – hydrocarbons in gaseous state at 1.2 mPa pressure and 20CO temperature
satisfies the 5542-87 standard.
	 
	2.1.2	 	Delivery Point – as defined by Clause 6.
	 
	2.1.3	 	Force Majeure – state defined by Clause 12.
	 
	2.1.4	 	Party – the Seller and the Buyer separately.
	 
	2.1.5	 	Parties – the Seller and the Buyer individually or jointly.
	 
	2.1.6	 	Month – a calendar month starting at 10.00 AM of the first day of a calendar month and ending at
10.00 AM of the same calendar month during which gas is supplied or is to be supplied to the
Buyer.
	 
	2.1.7	 	Report Period – any period during a year starting at 10.00 AM of any day ending at 10.00 AM of
another day inclusively. This concept is used incase specification of a payment rule and is shown
in the Appendix 1.
	 
	2.1.8	 	Quantity of the Natural Gas is defined by the Clause 5.
	 
	2.1.9	 	Price is defined by the Clause 7.
	 
	2.1.10	 	Third Party – any person not participating in this Agreement.
	 
	2.1.11	 	Commercial Act — delivery acceptance act made in accordance with this Agreement.
	 
	3.	 	Subject of the Agreement
	 
	3.1	 	The Seller sells and the Buyer buys the Associated Gas according to the conditions herein.
	 
	3.2	 	The Buyer shall receive the Associated Gas and shall pay its value as set forth in this Agreement.
	 
	3.3	 	The Buyer acknowledges the fact that the quality and specification of the Associated Gas is not
in compliance with the 5542-87 standard.
	 
	3.4	 	Throughout the term of this Agreement, Associated Gas made available at the Delivery Point shall
be in accordance with the gas quality specification requirements as may be agreed between the
Sellers and the Buyer prior to the start date as the same may be amended, varied, modified or
supplemented from time to time. The gas quality specification shall reflect the principles set
out in Appendix 2.

1

 

	4.	 	Term of the Agreement
	 
	4.1	 	This agreement is valid from 01 May 2009 to 01 May 2011.
	 
	4.2	 	This Agreement can be extended upon consent of the Parties.
	 
	4.3	 	The Agreement can be terminated in accordance with the legislation.
	 
	5.	 	Quantity of Associated Gas
	 
	5.1	 	During this Agreement the Seller shall deliver to the Buyer its pro rata share of Associated Gas
which represents 65% of the total Associated Gas produced less any gas required for oil and gas
operations at the field. As of the date of this Agreement this quantity equals approximately
32,500 cubic meters daily. The Seller’s liability to make Associated Gas available to the Buyer
at the Delivery Point will be limited to the Seller’s pro rata share of the Associated Gas
produced.
	 
	6.	 	Delivery Point
	 
	6.1	 	Delivery Point for the gas Associated Gas is the point within the Seller’s territory at zero
point of the 325 mm gas pipeline with coordinates as follows: 8575631.64E– 4612318.06N (in GPS
standards).
	 
	6.2	 	The Buyer is liable to accept Associated Gas at the Delivery Point defined above.
	 
	6.3	 	Title and risk of loss or damage to the Associated Gas made available hereunder shall pass to the
Buyer at the Delivery Point.
	 
	6.4	 	As the existing gas pipeline from the measurement point at Patardzeuli village to Khashmi village
is owned by a third party and therefore all maintenance works are to be carried out by this third
party the Parties agree that the readings of the main meter shall be balanced by readings of the
meters no.2 and no.4 as shown on the Appendix 3 to control this way all possible technical losses
in the pipeline. In case such a balance is impossible the quantity shall be determined by the sum
of readings of the meters no.2 and no.4.
	 
	7.	 	Price
	 
	7.1	 	Price for each one thousand cubic meters of Associated Gas delivered by the Seller to the Buyer
amounts during the period from 1 May 2009 to 31 December 2009 the equivalent in national currency
of 140 (one hundred and forty) US dollars net of VAT at the National Bank official exchange rate
at the payment day according to the delivery-acceptance act signed between parties or an
unilateral act issued by Seller (hereinafter the “Price”).
	 
	7.2	 	The Price may be adjusted upwards after the time period in Clause 7.1 upon agreement between the
Parties to reflect any price increase in other natural gas imported to Georgia.
	 
	8.	 	Measurement Procedures
	 
	8.1	 	Actual quantity of Associated Gas delivered by the Seller to the Buyer during the calendar month
to the Delivery Point as defined above by the Clause 6 shall be determined at 10.00 AM on the
first day of the next month.
	 
	8.2	 	The quantity of Associated Gas transferred by the Seller to the Buyer shall be determined using
the measurement device(s) installed at the Delivery Point that are certified by The Committee of
Standards, Technical Regulations and Metrology of Georgia.
	 
	8.3	 	In case of failure of the measurement tools at the Delivery Point the quantity delivered by the
Buyer to the Seller shall be determined as an average of 3 days prior and 3 days after failure of
such a device multiplied by the number of days this device was not working.
	 
	8.4	 	If it is impossible to determine the quantity of delivered gas for 3 days after failure of the
measurement device the quantity shall be determined only based on average of 3 days reading
before such failure.
	 
	8.5	 	The Buyer and the Seller shall sign a delivery-acceptance act on actual quantity of Associated
Gas delivered to the delivery point during a calendar month with corrected and non-corrected
volumes, temperature and pressure computer reprints (upon Seller’s request). A copy of the
delivery-acceptance act shall be handled to each Party.
	 
	8.6	 	Not later than 3rd day of each next month a commercial delivery-acceptance act shall
be signed between parties. This act is the final document necessary for settlement and based on
this document the Seller issues a commercial invoice.
	 
	8.7	 	If the Buyer refuses to sign the commercial delivery acceptance act or refuses to accept the
volume of Associated Gas delivered to the Delivery Point then the Seller shall produce 

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	 	 	an unilateral act that shall be the basis for primary settlement. In case the Buyer shall not
provide the claim in writing not later than next day after receipt of such an act this act shall
gain a legal force for the final settlement.
	 
	9.	 	Settlement
	 
	91	 	Settlement between the Seller and the Buyer shall be made through a bank transfer in accordance
with the delivery-acceptance act within no more than 5 (five) working days (upper bound for
payment). The payment of this amount or any other funds due under this Agreement shall be
considered as completed on the date the funds are received at the Seller’s bank account.
	 
	9.2	 	In case the liability to pay forfeit arises, the forfeit arisen under the agreement between
Seller and Buyer shall be paid first of all followed by the payment of the main portion of the
debt.
	 
	9.3	 	Any sum paid by Buyer to Seller’s bank account after the payment of the forfeit specified in
paragraph 9.2, shall, first of all, be governed to cover the main portion of the debt arisen
under previous and this gas sales agreements made between Seller and Buyer, so that the sum
occurred earlier is paid first of all by “first came – first left” principle.
	 
	10.	 	Rights and Obligations of the Parties
	 
	10.1	 	The Seller is obliged to:
	 
	10.1.1	 	Deliver to the Buyer the quantity of Associated Gas as required by the Clause 6 to the Delivery
Point defined by the Clause 5.
	 
	10.1.2	 	Notify other Party not less than 30 days prior to changing conditions, suspension or termination
of this Agreement except cases defined in this Agreement.
	 
	10.1.3	 	Notify the Buyer not les than 3 days prior to stop supply or re-new delivery unless there is
urgent necessity to do so.
	 
	10.2	 	The Seller has right to:
	 
	10.2.1	 	Stop supply of the Associated Gas with the notification of other Party (as described in the
Clause 4.1.2) in case of breach of this Agreement or gas supply legislation of Georgia.
	 
	10.2.2	 	Immediately without notice stop Associated Gas supply in case it becomes known about a breach of
the conditions that can be injurious to health or damage property.
	 
	10.2.3	 	The Seller has no responsibility for the Buyer’s grid, gas meters as well as for the measurement
points defined compliance of the consumer hardware with standards and technical accuracy.
	 
	10.3	 	The Buyer is obliged to:
	 
	10.3.1	 	Have all rights to receive and supply Associated Gas in accordance with normative enactments
acting in Georgia.
	 
	10.3.2	 	Measure delivered Associated Gas (at delivery point) using standard (certified) metering tools.
	 
	10.3.3	 	Pay to the Seller value in accordance with the established rules and volumes and Seller’s invoice.
	 
	10.4	 	The Buyer has right to measure the Associated Gas quantity.
	 
	11.	 	Liability of the Parties
	 
	11.1	 	The Buyer carries full responsibility to receive the Associated Gas including responsibility
related to all necessary rights, permits and licenses anticipated by Georgian legislation.
	 
	11.2	 	Under the provisions of this Agreement non-payment of any amount within the time frame
established by the Claus 7.2 (i.e. before the upper bound) the Buyer shall be charged a penalty
amounting to 0.05% of the outstanding amount per each day delayed.
	 
	12.	 	Force Majeure
	 
	12.1	 	Force Majeure situation is defined as special and extreme circumstances making a Party to this
Agreement unable to fulfill its provisions and that are beyond the will or control of the Party
and prediction and/or avoidance of such circumstances is impossible based on existing knowledge
level of and technical development. Force Majeure is but not limited to the following events or
circumstances:
	 
	(a)    	 	War (declared or not) actions of an exterior enemy, revolution, coup d’etat, terrorist act,
blockade, military overturn, fire, civil disturbances and sabotage;
	 
	(b)    	 	Extremely sever environmental conditions that were reasonably unexpected in a specific

3

 

	 	 	location
at a specific time period (e.g. frost, flood, thunderstorm, earthquake, landslide, etc.)
	 
	(c)    	 	Explosions, fire or damage of gas production, processing and transportation means which
reasonable prevents gas delivery to the delivery point.
	 
	(d)    	 	Repairs of damages or any other unexpected trouble-shooting on gas pipelines.
	 
	12.2	 	A Party under the Force Majeure situation shall notify in writing another Party and provide
related evidence and motivation about beginning as well as ending of such a situation immediately
(or in any reasonable time frame, if this is impossible).
	 
	12.3	 	During the Force Majeure situation in case of existence of notification related evidences a
failure of fulfillment of obligations by a Party shall be considered as valid or shall be
postponed until the force majeure situation is over.
	 
	12.4	 	No financial default or changing commercial conditions shall be considered as force majeure,
	 
	12.5	 	In case duration of the Force Majeure situation of more than five (5) days after written notice
each Party has right to notify another on termination date of this Agreement. In case force
majeure continues infinitely the Agreement shall be considered as terminated. Termination of the
Agreement shall not release a Party from financial obligation arisen before Force Majeure.
	 
	13.	 	Additional Provisions
	 
	13.1	 	This Agreement is made in Georgian in three copies of equal legal force.
	 
	13.2	 	Any amendment to this Agreement shall gain legal force in case it is made in writing and endorsed
by rightful representatives of the Parties.
	 
	13.3	 	All disputes shall be settled through negotiations. In case no agreement is reached the case
shall be considered by the Georgian Court.
	 
	14.	 	Details of Parties

	 	 	 
	Seller

	 	Buyer
	Ninotsminda Oil Company Limited

	 	Energy Trading Company Limited
	22 Stasicratous, Olga Court, 1st Floor, Nicosia

	 	56 Burdzgla Street, Tbilisi, Georgia
	Cyprus, P.O.Box 20048

	 	Tel.: 439 444
	Reg.# 74623

	 	Id Code: 205271711
	HSBC

	 	Azerbaijan International Bank Georgia
	Acc.# 60304655 Sort Code 400515

	 	Bank code 220101912
	IBAN GB18MIDL40051560304655

	 	Acc #: 3603000003
	Ninotsminda Oil Company Limited
	 	 
	Bank ID BIC: MIDLGB22
	 	 
	 
	 	 
	 

	 	 
	Dr Zaza Gorgadze

	 	Avtandil Shavishvili
	NOCL Representative in Georgia

	 	Director

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