MEMORANDUM OF
UNDERSTANDING
BETWEEN
Wescorp Energy Inc
Edmonton
CANADA
And
Ellycrack A/S
Florø
NORWAY
At 04.08.2004 a meeting between
Douglas Biles from Wescorp and Olav Ellingsen, Morten Borch and
Bengt A. Akselsen from Ellycrack was held at Bristol Hotel, Oslo,
Norway.
The objective with the meeting
was to draw up guidelines for the companies cooperation in
exploitation Ellycrack’s technologies in upgrading of heavy
oil.
Based upon the discussions and
the history of previous cooperation and agreements between the
parties, the following understating has now been established by the
parties:
1. JOINT VENTURE
The parties agree to investigate
to form a Joint Venture (JV) to be the vehicle for exploiting of
Ellycrack’s technologies.
1.1
The parties shall seek a name, which reflects the JV’s nature
of business.
1.2
The parties agree that the ownership of the JV shall by 50% by each
party.
When splitting the revenue, the
revenue shall split 50/50 between the parties taking into account
Wescorp’s share in Ellycrack and visa versa.
If there is a major change of
ownership in either of the parties, the opposite party shall then
automatically obtain 51% ownership in the JV and the corresponding
voting rights.
1.3
Ellycrack is obligated to let the JV exclusively use
Ellycrack’s technologies free of charge worldwide.
2
1.4
Wescorp has the obligation to fund the JV’s total operation
and functions until it is in profitable operational including
having Olav Ellingsen on full time pay roll.
The cost incurred by Wescorp is
regarded as sunk costs for Wescorp and shall not be
reimbursed.
1.5
The parties shall seek to obtain funds (grants) from Innovation
Norway AS and which Ellycrack shall draft.
1.6
By the formation of the JV, the option in purchasing a license of
the technologies for Canada, USA and Mexico shall be
void.
1.7
The JV will not carry any overhead costs from any of the parent
companies.
1.8
In the case of a major purchase of Ellycrack shares from an
external investor, Wescorp shall have the first right of refusal to
purchase these shares after Ellycrack’s shareholders. In the
event that Wescorp does not exercise this right, then Wescorp shall
be given 51% ownership in the JV.
2. OBLIGATIONS
The parties’ main
obligations are:
1.1
Ellycrack shall be the JV’s R&D organization and support
the JV in engineering and design of future plants.
1.2
Wescorp shall be responsible for funding of the JV and be its
marketing organisation and be responsible for detail engineering
and production as seems best fit from case to case.
3. SHARES IN ELLYCRACK
At present Wescorp holds about
13% of the shares in Ellycrack and has an option agreement to
increase its position to 25%. Wescorp has expressed that they might
want to incr
