November 23, 2005
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Oilsands Quest, Inc. CanWest Petroleum Corporation
Financing Agreement
This agreement describes the terms upon which CanWest Petroleum Corporation
("CWPC") has agreed to provide certain financing to Oilsands Quest Inc. (the
"Corporation"). All funds in Canadian dollars unless otherwise stated.
The Financing: CWPC agrees to purchase and the Corporation agrees to
issue $15 million of units ("Units") of the
Corporation, including Units issued upon the
conversion of any amounts advanced pursuant to the
Demand Funding Commitment described below and subject
to a reduction of Units as a result of the concurrent
exercise of warrants, as described below. Each Unit
is to consist of one common share and one-half of one
non-transferable common share purchase warrant, each
whole warrant entitling the holder thereof to
purchase one common share at a price of $10.00 for a
period of 9 months from the date of issue.
At CWPC's election, CWPC may satisfy a portion of its
$15 million subscription obligation by the exercise
of any warrants held by CWPC at the time of such
exercise, in which case the number of Units
subscribed for and issued to CWPC shall be reduced by
the dollar value paid through the exercise price of
the warrants.
Price: $6.00 per Unit.
Demand Funding CWPC hereby commits to provide the Corporation with
Commitment: up to $2,500,000 million of the $15 million prior to
the Closing Date (as defined below) for certain third
party costs to be incurred for the phase two
exploration program and out-of-pocket-costs related
to this transaction, on the basis of the budget
attached hereto (the "Budget") and provided that
assumptions underlying the Budget remain valid (the
"Demand Funding Commitment").
The Corporation may draw upon such Demand Funding
Commitment by providing written notice to CWPC of the
funding amount required, on the following basis: (a)
up to $160,000 shall be payable upon written notice
delivered anytime following signing of this Financing
Agreement; (b) up to an additional $720,000 shall be
payable upon written notice delivered anytime on or
after December 1, 2005; (c) up to an additional
$1,415,000 shall be payable upon written notice
delivered anytime on or after January 1, 2006; and
(d) up to $205,000 shall be payable upon written
notice delivered anytime after January 1, 2006. Upon
receipt of such notice, CWPC shall provide the
funding within three business days (in Vancouver and
Calgary), such investment to be released to the
Corporation in exchange for certificates representing
the common shares and warrants comprising the Units,
all in form and substance satisfactory to the parties
and their respective counsel. All written notices to
CWPC hereunder shall be delivered to the attention of
Xxxxxx Xxx at CWPC by fax and email to (000) 000-0000
and xxxxxx@xxxxxxxxxxxxxxxxx.xxx, with a copy to the
attention of Xxxxx Xxxxxxx at Xxxxxxx Xxxxx LLP at
(000) 000-0000 and xxxxx.xxxxxxx@xxxxxxxxxxxx.xxx.
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Use of Proceeds: The net proceeds from the financing will be used to
carry out the phase two exploration and evaluation
program on the Corporation's lands and for general
corporate purposes in accordance with the Budget. The
final Budget for the phase two exploration program
will be approved by the board of directors of the
Corporation prior to the Closing Date.
Closing Date: On or before January 31, 2006 (the "Closing Date").
Agent & Legal Counsel: No agent has been appointed for this financing. Each
of the parties hereto hereby represents and warrants
to the other that such party has not incurred any
obligation for any broker's or finder's fee or
commission payable as a result of the transactions
contemplated hereby.
Xxxxxx Xxxxxxx LLP will act as the Corporation's
counsel and Xxxxxxx Xxxxx llp will act as CWPC's
counsel.
ROFO and Standstill: The parties acknowledge and agree that this financing
does not trigger any obligations under the Right of
First Offer Letter Agreement dated November 12, 2004
between CWPC and the Corporation ("ROFO Agreement")
and the transactions contemplated hereby do not
constitute a "Subsequent Financing", as defined under
the ROFO Agreement.
Until the Closing Date, the Corporation shall not
commence any other financing activity and shall not,
directly or indirectly, through any director,
officer, employee, lawyer, agent, representative or
otherwise, solicit or entertain offers from,
negotiate with or in any manner encourage, discuss or
accept any proposal of any other person or entity
relating to the acquisition of the Corporation, or
any of its shares, assets or business, or any other
transaction which would result in the issuance of
shares of the Corporation or a change of control or
ownership of the Corporation. The Corporation agrees
to (i) immediately notify CWPC if the Corporation any
of its directors, officers, employees, lawyers,
agents, representatives or otherwise receives any
indications of interest, requests for information or
offers in respect of any such proposal; and (ii)
provide full details to CWPC of the terms of any such
indication, request or proposal
Termination: This agreement may be terminated: (i) by mutual
written consent of the parties; or (ii) by either
party upon a breach of any material provision hereof
by the other party, provided, however, that the
termination of this agreement shall not affect the
liability of any party for breach by such party of
any of the provisions prior to such termination. Upon
such termination, none of the provisions of this
agreement shall survive, except the provisions set
forth under "Disclosure" and "Subsequent Financing",
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which shall survive such termination as binding
obligations of all parties hereto. For greater
certainty, failure by CWPC to fund in accordance with
the terms of the Demand Funding Commitment shall be
considered a material breach of this agreement, but
failure by CWPC to fund the full $15 million on the
Closing Date shall not be considered to be a breach
of this Agreement. The commitment of CWPC to fund any
amounts in excess of the Demand Funding Commitment is
conditional on the extent to which CWPC has arranged
sufficient financing to support all or part of this
commitment and the Corporation shall accept at
Closing the subscription by CWPC for amounts up to
and including $15 million (including the Demand
Funding Commitment).
Subsequent Financing: Notwithstanding any other provisions herein, in the
event that this agreement is terminated by the
Corporation in accordance with the "Termination"
provisions above, or if CWPC is unable to finance the
full $15 million hereunder on or prior to the Closing
Date, in either event, the Corporation shall be
entitled to undertake a private placement to raise an
amount equal to the difference between $15 million
and the amount of funding provided hereunder by CWPC
calculated as of the date of Termination or the
Closing Date, as the case may be (the "Subsequent
Private Placement"). The Subsequent Private Placement
shall be conducted on such terms as the Corporation
sees fit (in the Corporation's sole discretion) and
the parties agree that the Subsequent Private
Placement shall not trigger any of the provisions of
the ROFO Agreement and the Corporation shall not be
required to comply with the provisions of the ROFO
Agreement in respect of such Subsequent Private
Placement. For greater certainty, the Corporation
will not be required to provide CWPC with notice of
the Subsequent Private Placement, CWPC will not be
deemed to have refused to participate in the
Subsequent Private Placement, and the ROFO Agreement
will remain in full force and effect.
Waiver and Governing Law: None of the terms and conditions herein may be waived
or amended except in writing signed by the party
against which such waiver or amendment is sought to
be enforced.
This agreement shall be governed by and construed in
accordance with the laws of the Province of Alberta,
without the application of its conflict of law rules
that would result in the application of the laws of
another jurisdiction.
Disclosure: Except as and to the extent required by law, existing
contractual obligations or the rules of any stock
exchange or similar trading market, without the prior
written consent of the other party hereto, no party
shall, directly or indirectly, make any public
statement or communication with respect to, or
otherwise disclose or permit the disclosure of the
existence of discussions, regarding, a possible
transaction between the parties, or any of the terms
or other aspects of the transactions proposed in this
agreement, and each party shall direct its
representatives not to do any of the foregoing
without such prior written consent.
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Binding Obligations: Each party hereto acknowledges and agrees that the
provisions hereof are intended to, and upon execution
will be deemed to, create legally binding obligations
between the parties hereto.
Please sign this agreement in the space provided below to confirm the mutual
agreements set forth in this agreement and return a signed copy to the
undersigned by November 25, 2005. If a fully-signed copy of this agreement is
not received by November 25, 2005, this agreement will be void in its entirety
and of no force or effect. This agreement may be executed in separate
counterparts, and the executed counterparts shall together constitute one
instrument and have the same force and effect as if all of the parties had
executed the same instrument.
Very truly yours,
CANWEST PETROLEUM CORPORATION
By:
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Xxxxxxxx Xxxxxxxxx, President
Acknowledged and agreed as of November __, 2005:
OILSANDS QUEST INC.
By:
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Xxxxxxxxxxx X. Xxxxxxx, President & CEO
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"BUDGET"
Total Exploration Budget for Phase Two: $15,000,000
-----------
Summary below is a funding requirement of the Program prior to Closing Date.
Oilsands Quest Inc.
Field Budget Winter Program & Transaction Costs
2005 2006
Field Budget November December January Totals
------------ -------- -------- ------- ------
Planning costs
--------------
Permits and Deposits, Well Licenses 25,000 5,000 5,000 35,000
Pioneer Land Services 15,000 15,000 10,000 40,000
Environmental support 25,000 10,000 5,000 40,000
Site Costs (incremental costs only) --
-----------------------------------
Fuel and Site preparation consumables -- 10,000 25,000 35,000
Line Cutting and Crews -- 15,000 50,000 65,000
Timberline Construction -- 150,000 250,000 400,000
Camp Costs (expansion and incr.) 15,000 45,000 70,000 130,000
Other Contractors (Water. Sewage, Waste removal) -- 50,000 75,000 125,000
Rig Commitments -- 50,000 500,000 550,000
New Camp Deposits -- 300,000 300,000 600,000
Contingency / Admin -- 50,000 50,000 100,000
Transaction Costs
-----------------
CIBC (work fee and Fairness Opinion) 50,000 -- -- 50,000
Legal (Circular and s/h meeting) est only) 30,000 20,000 -- 50,000
Administration 75,000 75,000
--------------------------------------------------------
Totals 160,000 720,000 1,415,000 2,295,000
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Cumulative 160,000 880,000 2,295,000
Note 1: This is detail previously included in the Needs Assessment and Summary
of Planned Expenditures distributed on Sept 8, 2005
Note 2: This expenditure profile does not include any G&A costs required beyond
January 2006.
Note 3: If contingency is not used it will be used to cover Admin for February
2006 for OQI
