EXHIBIT 10(26)

STATEMENT OF TERMS AND CONDITIONS OF EMPLOYMENT

For

RICHARD BATTEY

     
Employer:
  VAZON ENERGY LIMITED a company incorporated and existing under the laws of
Guernsey with registered number 32244 (the “Company”)
 
   
Employee:
  RICHARD BATTEY (the “Employee”) of Woodgrange, Fort Road, Guernsey GY1 1ZW.

     
Starting Date of Employment:
  6th May 2005
 
   
Starting Date of Continuous Employment:
  6th May 2005

     
1
  Job Title/Job Description
 
   
1.1
  The Employee is employed by the Company on a full time permanent basis to
fulfil the position of Chief Financial Officer to CanArgo Energy Corporation
(“CanArgo”) reporting to the Chief Executive Officer of CanArgo. The Company
provides management services to CanArgo pursuant to the terms of the Agreement
for the Provision of Management Services dated 18th February 2004 (“MSA”), as
such agreement is amended or varied from time to time.
 
   
1.2
  The Employee’s principal duties as Chief Financial Officer shall be the
management and development of the central finance function within the CanArgo
group as set out in Appendix A hereto. Notwithstanding the foregoing, the
Employee accepts that he may be required to perform other duties and tasks
outwith the scope of his normal duties.
 
   
1.3
  Whilst employed by the Company the Employee must:-
 
   

  during his hours of work devote the whole of his time, attention and abilities
to the business of the Company and carry out his duties with due care and
attention;
 
   

  not, without the Company’s prior written consent, be in any way directly or
indirectly engaged or concerned with any other business or employment whether
during or outside his hours of work for the Company;
 
   

  use his best efforts to promote and protect the interests of the Company and
observe the utmost good faith towards the Company; and
 
   

  comply with all the Company’s rules, regulations and policies from time to
time in force and any rules which the Company’s clients may require him to
observe whilst working on their premises.
 
   
2
  Place of Work
 
   

  The Employee’s place of work will be at Suite 9/10, Borough House, Rue du Pre,
St Peter Port, Guernsey, Channel Islands or such other location within Guernsey
as shall be notified by the Company to the Employee from time to time. The
Employee may be required to travel and work at any of the premises of the
Company or CanArgo as may be required for the proper fulfilment of the
Employee’s duties, including in particular within the former Soviet Union.
Wherever possible, the Employee will be given reasonable notice of any change in
his place of work.

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3
  Pay
 
   
3.1
  The Employee’s base salary shall be £120,000 per annum payable monthly by bank
transfer on or around the 15th day of each calendar month into the bank account
notified in writing by the Employee to the Company.
 
   
3.2
  The Employee’s base salary shall be subject to review annually at the
discretion of the Compensation Committee of CanArgo. The Company is not obliged
to increase the Employee’s base salary at such review.
 
   
4
  Hours of Employment
 
   

  The Employee agrees that he shall work such hours as are necessary for the
proper performance of his duties. The Employee shall work a minimum of 140 hours
per month based upon an 8 hour day Monday to Friday (inclusive) between the
hours of 8am and 6.00pm, with a break of one hour for lunch each day.
 
   
5
  Overtime
 
   

  The Employee will not receive additional remuneration for any hours worked
over and above the normal hours of work narrated in Clause 4.
 
   
6
  Holidays
 
   
6.1
  The holiday year runs from 1st January until 31st December the same year.
Holidays can be taken only with the advance permission of the Chief Executive
Officer of CanArgo from time to time.
 
   
6.2
  In addition to public and bank holidays, the Employee is entitled to a maximum
of 25 working days holiday every calendar year. Such days holiday are accrued
pro rata throughout the calendar year, depending on the Employee’s length of
service within that year. Holiday entitlement will accrue per each month worked
and will be rounded up to the nearest whole day.
 
   
6.3
  There is no facility to carry holidays forward from one year to the next.
However, except in exceptional circumstances, holidays not taken in one calendar
year may be carried forward to the following calendar year provided they are
taken within the first quarter and with the advance permission of the Chief
Executive Officer.
 
   
6.4
  On leaving, holiday pay will be paid for all entitlement accrued in the
current holiday year but not taken at the time of termination of employment. In
the event of holidays being taken but not earned, appropriate holiday pay will
be deducted by the Company from the Employee’s final payment, the Company’s
authority to do so being evidenced by the Employee’s signature to this
Statement.
 
   
6.5
  The Company may require the Employee to take accrued holidays during any
period of notice.
 
   
7
  Expenses
 
   

  The Employee will be reimbursed for any expenses properly incurred in
connection with his duties in accordance with the Company’s expenses policy as
amended from time to time.

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8
  Notice
 
   
8.1
  The Employment shall continue unless and until terminated at any time by:-
 
   
8.1.1
  the Company giving the Employee not less than 3 months’ previous notice in
writing to that effect; or
 
   
8.1.2
  the Employee giving to the Company not less than 3 months’ previous notice in
writing to that effect.
 
   
8.2
  The Company shall be entitled, at its sole discretion, to terminate the
Employment in writing either instead of, or at any time after, notice of
termination being given (by either the Company or the Employee) and in either
case to make a payment to the Employee in lieu of notice.
 
   
8.3
  Notwithstanding Clauses 8.1 and 8.2, if the Employee is dismissed for gross
misconduct, he will receive no notice and no payment in lieu of notice.
 
   
9
  Other Insurance & Benefits
 
   
9.1
  Life Assurance
 
   

  The Company (through CanArgo) will provide the Employee with the benefit of
death in service life assurance which, in the event of death itself will pay a
maximum amount of 4 times his annual salary, subject to the rules and conditions
of the policy.
 
   
9.2
  Health Care Scheme
 
   
9.2.1
  The Company (through CanArgo) shall provide the Employee with PPP Healthcare
cover at the expense of the Company, always subject to the terms and conditions
of the PPP Healthcare scheme.
 
   
9.2.2
  All payments under the PPP Healthcare scheme or the like will be subject to
any deductions required by law.
 
   
9.1.3
  The Company (through CanArgo) reserves the right at its absolute discretion to
terminate or amend at any time the PPP Healthcare scheme or the Employee’s
membership of any scheme. The Company (through CanArgo) will provide an
equivalent benefit unless, in the reasonable opinion of the Company (through
CanArgo), it is unable to secure membership for the Employee due to the medical
condition of the Employee.
 
   
9.3
  PHI
 
   

  The Employee shall be entitled to participate in a Permanent Health Insurance
(“PHI”) scheme (through CanArgo), always subject to the terms and conditions of
the PHI scheme.
 
   
9.3.1
  Payments
 
   

  All payments under the PHI scheme or the like will be subject to the
deductions required by law.
 
   

  Where payments are made under the PHI scheme all other benefits provided to or
in respect of the Employee will cease from the start of those payments (if they
have not done so already), unless the Company is fully reimbursed by the PHI
scheme for the cost of providing the benefit.

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9.4
  Right to terminate or amend
 
   

  The Company reserves the right at its absolute discretion to terminate or
amend at any time any Health Care Scheme or PHI scheme or the Employee’s
membership of any such scheme. The Company will provide an equivalent benefit
unless, in the reasonable opinion of the Chief Executive Officer, it is unable
to secure insurance at reasonable premiums due to the medical condition of the
Employee or his spouse or children.
 
   
10
  Pension
 
   

  The Company does not operate a company pension scheme. However, the Company
will pay a monthly contribution of 9% of the Employee’s base salary, as outlined
in Clause 3, to the Employee.
 
   
11
  Grievance Procedures
 
   

  If the Employee wishes to obtain redress of any grievance relating to the
Employment or is dissatisfied with any reprimand, suspension or other
disciplinary step taken by the Company, he shall apply in writing to the Chief
Executive Officer, setting out the nature and details of any such grievance or
dissatisfaction.
 
   
12
  Disciplinary Rules and Procedure
 
   

  Any disciplinary action taken in connection with the Employment will usually
be taken in accordance with the Company’s normal disciplinary procedure (which
are workplace rules and not contractually binding) a copy of which is available
from the Corporate Secretary of CanArgo.
 
   
13
  Health and Safety
 
   
13.1
  It is the Company’s policy to comply with all statutory requirements arising
from legislation applicable to Guernsey prevailing at the time.
 
   
13.2
  In addition, the Company may at its discretion impose even more stringent
health and safety standards if it is considered that these may increase the
safety and well being of its employees. Any such additional requirements will be
notified to the Employee.
 
   
14
  Sickness and Absence
 
   
14.1
  If the Employee is absent from work for any reason and the absence has not
previously been authorised by the Company, the Employee must notify a
representative of Company at his place of work by no later 10.00am on the first
day of absence, of the reason for the absence and the anticipated duration.
Failure to do so may lead to disciplinary action.
 
   
14.2
  Should the absence extend beyond 7 days (including weekends) a doctor’s
certificate should be sent to the Company as soon as possible from the eighth
consecutive day of the absence. Thereafter medical certificates should be
provided to the Company to cover the full period of continuous absence. In these
circumstances, the Employee should not return to work until authorised by the
doctor.
 
   
14.3
  Immediately following the Employee’s return to work after any period of
absence the Employee shall be required to complete and submit and
self-certification form available from his place of work.

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14.4
  At its discretion, the Company may terminate the employment of the Employee,
after the agreed notice period, if it considers that the Employee’s sickness
record makes him unfit for regular full time work. The Company reserves the
right to require the Employee to undergo a medical examination conducted by a
doctor provided by the Company (at the Company’s expense).
 
   
14.5
  If the Employee’s absence is due to sickness or injury, the Company will pay
any Statutory Sick Pay (“SSP”) in accordance with any relevant statutory
provisions in Guernsey. For SSP purposes, qualifying days are Monday to Friday
(inclusive).
 
   
14.6
  In addition, in the event of the Employee being absent from work due to
sickness or injury, the Company will pay sick pay as follows:-

  (a)   During the first ten weeks of absence in any twelve month period, the
Employee shall be paid his base salary as outlined in Clause 3, less any SSP
paid to the Employee by the Company and less any other state sickness benefit
recoverable by the Employee;     (b)   For a further ten weeks of absence in the
same twelve month period, the Employee shall be paid one half of his base salary
as outlined in Clause 3, less any SSP paid to the Employee by the Company and
less any other state sickness benefit recoverable by the Employee;     (c)  
After a total of twenty weeks of absence in the same twelve month period, the
provisions of the sickness and disability insurance cover to be arranged by the
Company for the Employee shall apply.

     
15
  Confidentiality
 
   
15.1
  The Employee will during the employment and at all times keep secret all trade
secrets or other confidential technical or commercial information which the
Employee may obtain regarding the affairs of either the Company or CanArgo
including, in particular, names of its clients, trade information relating to
Company or CanArgo’s research and development, engineering data, seismic data,
surveys, specifications, process formulations, production operations or
techniques, planning, purchasing, accounting, finance, selling, marketing,
market research, promotional plans, customers, suppliers, and all other
information pertaining to the business of the Company or CanArgo which is not
publicly available. This restriction shall continue to apply after the
termination of the Employee’s employment without limit in point of time but
shall cease to apply to any such information which may come into the public
domain other than through unauthorised disclosure by the Employee.
 
   
15.2
  The Employee may not make, otherwise than for the benefit of the Company, any
notes or memoranda relating to any matter within the scope of the business of
the Company or CanArgo concerning any of its dealings or affairs nor shall the
Employee during the continuance of his employment or at any time after such
Employee has left the employment of the Company use or permit to be used any
such notes or memoranda. Any such documents made by the Employee shall be the
property of the Company or CanArgo and shall be left at its registered office
upon termination of the Employee’s employment with the Company and all copyright
in such notes or memoranda shall vest in the Company or CanArgo as appropriate.
 
   
16
  Data Protection

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  The Employee acknowledges and agrees that the Company is permitted to hold
personal information about the Employee as part of its personnel and other
business records and may use such information in the course of the Company’s
business. The Employee agrees that the Company may disclose such information to
third parties in the event that such disclosure is in the Company’s view
required for the proper conduct of the Company’s business or that of CanArgo or
any associated company. This clause applies to any information held, used or
disclosed in any medium.
 
   
17
  Company and client Property
 
   

  All equipment (including computer equipment), notes, memoranda, records, lists
of customers, suppliers and employees, correspondence, computer and other discs
or tapes, data listings, codes, keys and passwords, designs, drawings and other
documents or material whatsoever (whether made or created by you or otherwise
and in whatever medium or format) relating to the business of the Company or
CanArgo or any of their clients (and any copies of the same) shall:
 
   
17.1.1.1
  be and remain the property of the Company or CanArgo or the relevant client;
and
 
   
17.1.1.2
  be handed over by the Employee to the Company or CanArgo on demand and in any
event on the termination of his employment.
 
   
18
  Governing Law and Jurisdiction
 
   
18.1
  This statement shall be governed and construed in accordance with the law of
Guernsey.
 
   
18.2
  Each party hereby submits to the non-exclusive jurisdiction of the Guernsey
courts as regards any claim, dispute or matter arising out of or in connection
with this Agreement and its implementation and effect.

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They are subscribed by the Company and signed for and on its behalf at

On the                              day of                              2005

                                                  Director

                                                  Director/Secretary

They are subscribed by the Employee in acknowledgement that he has received a
copy of this Statement and has read it or has had it explained by a member of
management and that he understands it.

At

On the                              day of                              2005

in the presence of

     
Signature of Witness
  Signature of Employee
 
   
 
   
 
   
Full Name
   
 

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Address
   
 
   

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Appendix A

     
(CARGO ENERGY CORPORATION LOGO) [u48739u4873977.gif]
  CanArgo Energy Corporation
Job Description
Chief Financial Officer (CFO)

     
Position:
  Location:
Chief Financial Officer
  Guernsey, with occasional travel to Georgia and elsewhere

Employed by:
Vazon Energy Limited, on behalf of
CanArgo Energy Corporation (the “Company”), as an
Officer of the Company

Reporting to:
Chief Executive Officer of CanArgo
Specific Responsibilities:
Overall management of the Finance function of the Company. Specific
responsibilities in the area of
financial and project accounting, management & control include:-

Accounting:

  1)   Assess overall accounting needs of the organization     2)   Provide
technical accounting services to the CanArgo group     3)   Monitor and ensure
corporate compliance with new accounting standards     4)   Manage monthly
payroll (all companies) and directors compensation

Finance:

  1)   Ensure that the company’s financial records are accurately maintained    
2)   Take responsibility for all financial functions including; A/P; A/R; Cash
Management; G/L; Reconciliations     3)   Supervise and review consolidated
financial statement preparation process     4)   Take responsibility for
quarterly and annual financial statements including management discussion and
analysis and notes thereto for inclusion in 10-Q and 10-K and filing of same    
5)   Chief liaison with auditors during review of 10-Q, 10-K and SOX 404    
6)   Coordinate prospectus and other filing documents including liaison with
legal counsel, auditors, etc.     7)   Ensure compliance with SEC and OSE
regulations including filing of S-8’s, 8-K’s     8)   Proposals on corporate
funding and assistance with fund raising     9)   Monitor and ensure compliance
with initial and subsequent disbursement conditions of debt or other loans    
10)   Liaise with legal counsel, corporate secretary to ensure that corporate
investments are adequately protected/registered     11)   Prepare and maintain
consolidated budget and present to Board of Directors     12)   Review quarterly
cost recovery submissions under each Production Sharing Contract

Treasury:

  1)   Monitor cash balances     2)   Monitor and Advise on term deposit
investment     3)   Liaise with bank(s)     4)   Prepare and monitor letter of
credit applications/status, escrow accounts, etc.     5)   Prepare vendor credit
applications

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  6)   Review and sign cheques/wires for all outgoing payments

Taxation:

  1)   Ensure compliance with applicable federal tax codes in US, Canada, UK,
Cyprus, Georgia and Kazakhstan     2)   Prepare or review annual corporate tax
filings in above jurisdictions     3)   Prepare annual franchise tax or other
corporate tax filings/questionnaires     4)   Defend, if necessary, the
corporation against unfair or frivolous tax claims or positions     5)   Develop
appropriate corporate tax planning strategies

Internal Controls:

  1)   Implement adequate internal controls and procedures to optimize
resources, safeguard assets, prevent and detect fraud and maintain reliable
control systems     2)   Update and maintain Accounting Policy and Procedures
Manual     3)   Ensure compliance with Sarbanes Oxley and other relevant
legislation

Insurance:

  1)   Ensure the Company maintains adequate insurance coverage for existing
group assets     2)   Assess or add coverage for new activities, assets     3)  
Review annual insurance and other corporate practice applications     4)  
Supervise preparation and follow-up of insurance claims

Job Description:
This position is responsible for the overall financial management of the Company
with the objectives of ensuring finance is available for agreed programmes,
maintaining tight financial control of the business and ensuring financial
reporting to the Company’s regulatory bodies is complied with in full. The
position is based in Guernsey, but will require some travel (particularly at the
beginning) to the Company’s operating areas and more generally. The main finance
function is based in Guernsey but as most expenditure and all income is
currently received from Georgia, this position will be responsible for the
overall finance function in Georgia, either directly, or indirectly through the
Company’s Georgian operating companies. As a senior officer of the Company this
position will work closely with the CEO, COO and Corporate Secretary, and will
be involved in discussions on overall corporate strategy, financing etc. The
position will be expected to present to the Board of Directors of the Company,
and to the Company’s Audit Committee.

Date: May 2005

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