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OILSANDS QUEST INC.
0000, 000 - 0XX XXXXXX X.X.
CALGARY, ALBERTA T2P 0M9
November ___, 2004
CanwWest Petroleum Corporation
Suite 000 - 000 Xxxx Xxxxxx
Xxxxxxxxx, XX X0X 0X0
Attention: Xx. Xxxxxxxx Xxxxxxxxx
Dear Sirs:
RE: OILSANDS QUEST INC.
RIGHT OF FIRST OFFER
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The purpose of this letter agreement is to set forth the terms and conditions
upon which Oilsands Quest Inc. ("OQI" or the "Corporation") is prepared to grant
a right of first offer (the "Right of First Offer") to CanWest Petroleum
Corporation ("CanWest").
If the following represents your understanding of our agreement in respect of
such Right of First Offer, please acknowledge same by signing below and
returning this letter agreement to OQI, which is intended to be, and upon
execution will be, a binding agreement.
The material terms relating to the Right of First Offer are as follows:
1. RIGHT OF FIRST OFFER. CanWest shall have a Right of First Offer to
purchase all or any part of any Subsequent Financing.
2. SUBSEQUENT FINANCING. For purposes hereof, "Subsequent Financing" shall
mean any financing completed by XXX; provided, however, that a Subsequent
Financing shall not include:
(a) common shares, options or other rights to purchase common shares
issued or granted to employees, officers, directors and consultants
of OQI pursuant to one or more employee stock plans or agreements
that have been approved by the shareholders of OQI;
(b) securities issued by OQI pursuant to strategic partnership, joint
venture or other similar arrangements approved by the OQI
shareholders where the primary purpose of the arrangement is not to
raise capital; or
(c) securities issued by OQI pursuant to an acquisition of another
corporation or other entity by OQI by merger, purchase of all or
substantially all of the capital stock or assets, or other
reorganization subject to OQI shareholder approval;
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3. PROCEDURE. OQI shall provide an initial notice (the "Initial Notice") to
CanWest of the terms and conditions of any such Subsequent Financing
following the approval of such financing by OQI's Board of Directors.
CanWest shall have fifteen (15) calendar days to respond in writing with
its indication to participate in such Subsequent Financing ("Intent"). If
no response is received within such period, CanWest shall be deemed to
have refused to participate in the Subsequent Financing. If CanWest
provides its Intent notification, CanWest shall have another fifteen (15)
calendar days (i.e. 30 calendar days from Initial Notice) to provide
confirmation of its participation in the Subsequent Financing (the
"Confirmation"). If CanWest provides the Confirmation notification,
closing shall occur within an additional thirty (30) calendar day period
(i.e. 60 calendar days from Initial Notice) if the Confirmation is for an
amount less than $5 million; or closing shall occur within an additional
sixty (60) calendar day period (i.e. 90 calendar days from Initial Notice)
if the Confirmation amount is for greater the $5 million ("Closing Date"),
on the same terms and conditions set forth in the Initial Notice from OQI.
If any material terms and conditions of the Subsequent Financing are
changed, it will be deemed to be a new Subsequent Financing for purposes
of this letter agreement unless otherwise mutually agreed to and CanWest
will be provided with notification in accordance with the terms of this
letter agreement. The above closing and notice periods may be waived or
extended by mutual consent obtained in writing. No commissions shall be
payable in connection with CanWest's exercise of its Right of First Offer
under any such Subsequent Financing to the benefit of CanWest but, with
the consent of OQI, certain third party consideration may be paid. To the
extent any third party consideration is payable as commissions, it will be
included in the amount of the Subsequent Financing.
If CanWest provides its Intent notification, the Corporation will provide
CanWest with all such marketing and investor related materials that are
reasonably requested by CanWest to assist CanWest in raising the necessary
funds.
4. CANWEST PARTICIPATION. For purposes hereof, "CanWest Participation" shall
mean that CanWest's participation in any Subsequent Financing will not be
less than 33?% of the gross proceeds of such Subsequent Financing in order
to be deemed to have participated in such Subsequent Financing.
5. RELINQUISHMENT AND ASSIGNMENT. The Right of First Offer granted hereunder
shall be relinquished if CanWest Participation shall have been refused or
be deemed to have been refused in any three (3) consecutive Subsequent
Financings or if CanWest fails to provide a minimum of 80% of the amount
of funding indicated on its Confirmation notification at the Closing Date.
The Right of First Offer is non-assignable except to affiliates and
successors of CanWest.
6. OQI RIGHT TO TERMINATE SUBSEQUENT FINANCING. Notwithstanding the
foregoing, OQI may in its sole discretion terminate any Subsequent
Financing in respect of which OQI has provided Initial Notice at any time
prior to having received the Intent notification. Thereafter, termination
can only occur upon mutual agreement of both parties.
7. GRACE PERIOD. CanWest may request a 10-day extension of the Closing Date
provided that CanWest provides written notification in advance of such
Closing Date. OQI consent to such request will not be unreasonably
withheld if closing is imminent.
8. EFFECTIVE DATE. CanWest's Right of First Offer will be effective after the
completion of the Initial Financing. For purposes hereof, "Initial
Financing" shall mean the raising of the capital required to undertake
all, or a portion of the Corporation's first winter's exploration program
(budgeted for $5 million) and the payment of the principal amount of $1.2
million due on the closing of the purchase of all of the shares of Western
Canadian Mint Inc. and, indirectly, all of the shares of American Oilsands
Company Inc. from CanWest in accordance with the terms of the letter
agreement dated November 12, 2004.
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9. CanWest, acting reasonably, acknowledges that it will vote its ownership
interest in favor of XXX becoming a publicly listed company if, in its
opinion and,at its sole discretion, , this will enhance shareholder value
and liquidity.
This letter agreement shall be governed by the laws of the Province of Alberta.
The parties agree to make, execute and deliver any and all further assurances or
other documents or agreements necessary to give full force and effect to the
meaning and intent of this letter agreement.
All press releases or other similar public written communications of any sort
relating to this letter agreement and the transactions contemplated hereby and
the method of release for publication thereof, will be subject to the approval
of all parties hereto, acting reasonably.
If you are in agreement with foregoing, kindly indicate your acceptance by
signing this letter agreement where indicated below and return a copy to the
undersigned. This letter agreement may be signed by facsimile and in
counterpart, which together shall be deemed to constitute one valid letter
agreement.
Yours truly,
OILSANDS QUEST INC.
Per: _________________________
Accepted and agreed to this ____ day of ______________________, 2004.
CANWEST PETROLEUM CORPORATION
Per: __________________________
