AGREEMENT ON CRUDE OIL SALES DATED 04 FEBRUARY 2005 (THE AGREEMENT)

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”):

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:

1

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:

OR

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.

2

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:

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.

3