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
00, XXXXXXXXXXXX
XXXX XXXXX
X.X.XXX 00
XXXXXXX, XXXXXX

2.     BUYER:
PRIMROSE FINANCIAL GROUP
XXXX XXXXX 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 XXXXX 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 XXXXX (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
		XX XXX 000, XX XXXXX XXXX
		XXXXXXXX XX0 0XX
		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
		0 XXXXXXX XXXXX XXXXX, XXXXXXX XXXXXX
		XXX XXXX, XX 00000
		A/C NO.: 04082437
		SPECIAL INSTRUCTIONS: XXXXXX00

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:
XX XXXXXX XXXXXX President		XXXXXXX XXXXXXXXXXXX Director

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