EXHIBIT 10.06
CONSULTANCY AGREEMENT
This Consultancy Agreement (the "Agreement") is made, this the 8th day of
January 2004 by and between:
1. CanArgo Energy Corporation ("CanArgo") a corporation established and
existing under the legislation of the State of Delaware, USA, and;
2. Europa Oil Services Limited ("Europa"), a company established and
existing under the legislation of British Virgin Islands and having its
registered office at Palm Grove House, PO Box 438, Road Town, Tortola,
British Virgin Islands.
WHEREAS:
A. Europa are a consultancy company involved in the international oil and
gas business, and;
B. CanArgo wish to participate in the Samgori (Block XIB) Production
Sharing Contract ("PSC") in the Republic of Georgia, and;
C. Europa can assist CanArgo in negotiating an acceptable participation in
the PSC, and;
D. Europa are aware that Georgian Oil Samgori Ltd ("GOSL"), a company
owned by Joint Stock Company National Oil Company Georgian Oil
("Georgian Oil") has acquired 100% of the Contractor Interest in the
PSC through the acquisition of National Petroleum Limited ("NPL")`s
interest in the PSC through the Assignment Agreement between NPL and
GOSL dated December 16, 2003 (the "Assignment"), and are also aware
that GOSL is seeking a partner in the PSC.
NOW THEREFORE IT IS HEARBY AGREED AS FOLLOWS:
1. Europa shall assist CanArgo in negotiation with GOSL of a binding
Farm-In Agreement (to be agreed within three months of the date of this
Agreement) whereby CanArgo (or its nominee) shall gain the following:-
1.1 A fifty per cent (50%) interest in the Contractor's share (as
defined in the PSC) in the PSC (that is 50% of GOSL's share).
1.2 A fifty per cent (50%) controlling interest in Ioris Valley
Oil and Gas Ltd ("IVOG"), the operating company under the PSC,
and currently owned 50% by GOSL and 50% by Georgian Oil, or,
in the event that a new operating company has been appointed
pursuant to the PSC, CanArgo shall acquire a fifty per cent
(50%) controlling interest in such an operating company on the
same terms as CanArgo would have acquired its interest in
IVOG.
1.3 Sole-risk rights whereby the rights of CanArgo (or its
nominee) under the PSC and under the Assignment shall not be
jeopardised in the event of GOSL not wishing to fund its share
of any work programme.
2. CanArgo shall negotiate in good faith with GOSL, on the basis of the
draft Farm-In Agreement (which Europa acknowledge sight of), to
conclude such negotiations within three months of the date of this
Agreement.
3. CanArgo accepts that under the terms of the proposed Farm-In Agreement
it (or its nominee) will have certain obligations to fund the Work
Programme specified under the Assignment as follows:
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3.1 To fund one hundred percent of the horizontal section of the
first well under the Project (as specified in the Option
Agreement)
3.2 Based on the results of the first well under the Project to
fund fifty per cent (50%) of the horizontal section of the
second well determined by the Project;
3.3 To fund fifty per cent (50%) of the remainder of the Work
Programme.
4. CanArgo shall remunerate Europa according to this Article 4
4.1 Remuneration shall be staged as follows.
a Upon the assignment of fifty per cent (50%) of the Contractor
Percentage Interest in the PSC to CanArgo (or its nominee),
following the receipt of consent from the State Agency and
from Georgian Oil to this assignment and the waiver of their
respective pre-emption rights under the PSC, CanArgo shall
issue to Europa (or its nominee) four million (4,000,000)
restricted shares of CanArgo common stock;
b In the event that production of oil from activities carried
out under the Work Programme exceed 300 barrels of oil per day
for a continuous period of thirty (30) days CanArgo shall
issue to Europa (or its nominee) a further four (4,000,000)
million restricted shares of CanArgo common stock;
c In the event that the average production of oil from the PSC
reaches a minimum of 2,000 barrels of oil per day, on the days
on which the field is open, during a period of six (6)
continuous months, CanArgo shall issue to Europa (or its
nominee) a further two (2,000,000) million restricted shares
of CanArgo common stock;
d In the event that the average production of oil from the PSC
reaches a minimum of 3,000 barrels of oil per day, on the days
on which the field is open, during a period of six (6)
continuous months, CanArgo shall issue to Europa (or its
nominee) a further two (2,000,000) million restricted shares
of CanArgo common stock, in addition to the common stock
previously issued pursuant to Articles 5.1(a) and 5.1(b);
e In the event that the average production of oil from the PSC
reaches a minimum of 4,000 barrels of oil per day, on the days
on which the field is open, during a period of six (6)
continuous months, CanArgo shall issue to Europa (or its
nominee) a further two (2,000,000) million restricted shares
of CanArgo common stock, in addition to the common stock
previously issued pursuant to Articles 5.1(a) to 5.1(c)
inclusive;
f In the event that the average production of oil from the PSC
reaches a minimum of 5,000 barrels of oil per day, on the days
on which the field is open, during a period of six (6)
continuous months, CanArgo shall issue to Europa (or its
nominee) a further two (2,000,000) million restricted shares
of CanArgo common stock, in addition to the common stock
previously issued pursuant to Articles 5.1(a) to (d)
inclusive.
4.2 Europa accepts that CanArgo does not have sufficient
authorised share capital to issue to Europa the full
16,000,000 common shares which may be required under the terms
of this Agreement. In the event that CanArgo is not able to
issue the shares as specified in Article 5.1 above when such
shares were otherwise due to be issued, then CanArgo shall pay
Europa, in cash, interest at a rate of LIBOR plus 3% ("Default
Interest") on the monetary equivalent of such due and
outstanding shares of CanArgo common stock until such time as
all of the outstanding shares have been issued. The monetary
equivalent of the shares which CanArgo
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is obligated to, but has not yet issued to Europa shall be
calculated as at the days on which the shares were due to be
issued. Such Default Interest shall accrue on a daily basis
and will be paid monthly by CanArgo to Europa. As soon as
CanArgo has available common shares to meet the shortfall,
these shall be issued to Europa and the Default Interest shall
immediately cease.
4.3 It is accepted that the shares of common stock which may be
issued as remuneration will be "restricted" under the terms of
the United States Securities Act of 1933, as amended (the
"Securities Act"), or any U. S. state securities laws and,
unless so registered, may not be offered or sold within the
United States to, or for the account or benefit of, U.S.
persons except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of
the Securities Act and applicable state securities laws.
However CanArgo undertake to register such shares in any
registration statement filed by CanArgo after the shares have
been issued.
5. This Agreement shall be governed and construed in accordance with the
laws of England. The parties hereto submit to the non-exclusive
jurisdiction of the English courts as regards any claim, dispute or
matter arising out of or relating to this Agreement and its
implementation or effect. This Agreement hereby supersedes any and all
other agreements, oral or written, between the Parties and constitutes
the entire agreement among the Parties hereto in respect of the subject
matter of this Agreement. This Agreement may only be amended by an
agreement in writing executed by all the Parties.
6. Except as otherwise specifically provided, all notices authorised or
required between the Parties by any of the provisions of this
Agreement, shall be in writing in English and delivered in person or by
registered mail or by courier service or by any electronic means of
transmitting written communications which provides confirmation of
complete transmission, and addressed to such Parties as designated
below. The addresses for service of notices on each of the parties is
as follows:
CEC :
XX Xxx 000
Xx Xxxxx Xxxx
Xxxxxxxx
XX0 0XX
Europa Oil Services Ltd :
Palm Grove House, PO Box 438
Road Town, Tortola
British Virgin Islands
IN WITNESS WHEREOF this Agreement has been duly executed on behalf of each of
the parties on the day and year first before written.
SIGNED by SIGNED by
On behalf of CanArgo Energy Corporation On behalf of Europa Oil Services Ltd
__________________________________ _______________________________
Name __________________________________ Name _______________________________
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