HYPOTHETICAL SCENARIOS OF JOINT EXECUTION OF PROJECTS IN NIGERIA BY ASSOCIATED GAS

AND OIL COMPANY LIMITED AND STRATA SYSTEMS INC

There are basically two possible was of executing contracts in Nigeria with Strata Systems Inc

1. A joint venture through the use of a special purpose vehicle (SPV)

2. ASSOGAS gets the contract and has a back to back agreement with STRATA

This document outlines hypothetical ways both parties could relate in the following instances:

i) How contracts will be sourced and won

ii) How the contracts will be executed.

iii) How payments will be received from clients (predominantly governments at different levels)

iv) How both parties shall be paid.

Joint Venture
 For the purpose of joint operations in Nigeria, both parties shall create a special purpose
vehicle (an SPV) of which both parties shall own in proportions to be agreed
 Contracts are to be bidded, won and executed in the name of the SPV
 AssoGas Nigeria will lead in the marketing and business development initiatives in Nigeria
while Strata provides support in the technical presentations and contents in the marketing
initiatives
 When jobs/contracts are won, Strata shall provide the technical products, equipment and
skills at a discounted rate for the successful execution of the contracts working with AssoGas
to manage the projects

How Payments Will Be Received And How Both Parties Will Be Paid

Conceptually, it is expected that the clients will provide mobilization payments before work begins.
Orders for products from Strata will be from these mobilization amounts.

It is also expected that further payments will be received on milestone completions. We therefore
expect (which are points for us to insist on while agreeing contracts with clients) that payments will
be received in advance before work moves to the next stage.

Strata will therefore be paid in advance for good to be released for projects such that exposures will
be limited only to profits and not for cost of goods.

At the end of the project, profits shall be determined after deduction of all expenses including cost
of materials, labour and overheads including relevant taxes and will be shared in accordance with
the holding proportions of the SPV.
ASSOGAS as the contracting vehicle
Both parties (AssoGas and Strata) could still operate a joint venture as described above but using
AssoGas as the legal entity and the contracting vehicle for marketing, contracting and execution of
contracts.

All other points as state above subsist.

Alternatively, while having a signed agreement spelling their operation relations and modus
operandi for execution of contracts, both parties could:

 Use AssoGas as the legal entity in Nigeria for prospecting, bidding and execution of contracts
 As in the Joint venture arrangement, AssoGas Nigeria will lead in marketing and business
development initiatives in Nigeria, while Strata provides support in the technical
presentations and contents in the marketing initiatives, but using AssoGas the legal and
contracting entity
 When jobs/contracts are won, Strata shall provide the technical products, equipment and
skills by selling these to the contract for the successful execution.
 AssoGas remains the owner and the lead on contract executions while Strata provides
services and are paid for the materials and expertise supplied at their usual rates and prices
 Strata therefore are suppliers and subcontractors to AssoGas for project executions
 Strata will thereafter not be entitled to profit shares as they are purely sellers and suppliers
and are paid fully for their products and services.

How Payments Will Be Received And How Both Parties Will Be Paid

Again, it will be expected that the clients will provide mobilization payments before work begins.
AssoGas will pay Strata in full for products using documented letters of credit before products are
shipped to Nigeria.

Strata will therefore be paid in advance for good to be released for projects and will have no
exposures.

At the end of the project, profits shall exclusively belong to AssoGas as Strata would have been paid
in full on the go as they made deliveries and supplies for the projects.