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OILSANDS QUEST INC.
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CALGARY, ALBERTA T2P 0M9
November 12, 2004
CanWest Petroleum Corporation
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Attention: ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Dear Sirs:
RE: OILSANDS QUEST INC. OFFER TO PURCHASE ALL OF THE SHARES OF WESTERN
CANADIAN MINT INC. AND, INDIRECTLY, ALL OF THE SHARES OF AMERICAN OILSANDS
COMPANY INC. FROM CANWEST PETROLEUM CORPORATION
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The purpose of this letter agreement is to set forth the terms and conditions
upon which Oilsands Quest Inc. (the "Purchaser") is prepared to purchase all of
the issued and outstanding shares (the "Shares") of Western Canadian Mint Inc.
("WCM"), a company that owns all of the shares of American Oilsands Company Inc.
("AOC"), which shares are all owned by CanWest Petroleum Corporation (the
"Vendor").
If the following represents your understanding of our agreement in respect of
the acquisition of the Shares, please acknowledge the same by signing below and
returning this letter agreement to the Purchaser, which is intended to be, and
upon execution will be, a binding agreement.
Unless otherwise noted all figures used herein are denominated in Canadian
dollars.
The material terms relating to the acquisition of the Shares are as follows:
1. It is acknowledged that the Vendor has entered into a Purchase and Sale
Agreement dated November 8, 2004 (the "Initial Acquisition Agreement"),
pursuant to which the Vendor will acquire all of the Shares.
2. The closing of the acquisition of the Shares contemplated hereby shall
occur immediately following the Vendor's acquisition of the Shares
pursuant to the Initial Acquisition Agreement and any amendments thereto
that have been mutually agreed upon by all parties. In the event that the
Initial Acquisition Agreement is terminated for any reason whatsoever,
this letter agreement shall immediately terminate.
3. The Shares shall be purchased by the Purchaser for aggregate consideration
in the amount of $1,500,000 (the "Purchase Price").
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4. The Purchase Price payable to the Vendor will be satisfied by (i) cash in
the amount of $1,200,000, and (ii) the issuance of a convertible debenture
in the amount of $300,000 (the "Debenture"). The cash amount will be
payable to the Vendor consistent with the payment terms of the Initial
Acquisition Agreement or any amendments thereto.
5. The material terms and conditions of the Debenture will be as follows:
(a) the Debenture shall bear interest at a rate of 3% per annum;
(b) the Debenture shall mature four years from the date of issuance (the
"Maturity Date");
(c) the Debenture may be converted into common shares of the Purchaser
at a rate of $1.30 per share at any time and from time to time while
the Debenture is outstanding; and
(d) the principal amount and any accrued interest shall not be due and
payable until the Maturity Date, provided that the Purchaser may
prepay the entire principal amount (no partial amounts) and any
accrued interest, at any time following 26 months from date of
issue, without penalty. Should the Purchaser elect to prepay all of
the principal amount, the Purchaser will provide the Vendor with a
10 business day payment notice ("Conversion Notice"). During the
period of the Conversion Notice, the Vendor shall have the right to
convert any portion or all of the outstanding Debenture into common
shares of the Purchaser according to the terms of the Debenture. Any
accrued interest may also be converted at a rate equal to the
subscription price per common share of the Purchaser's last
completed private equity or private equity based financing.
6. At the closing of the acquisition of the Shares contemplated hereby, each
party shall deliver an officer's certificate to the other party which
shall provide for those representations and warranties that are usual in
cases where shares of a company are being acquired. For greater certainty,
such representations and warranties shall be similar in nature to those
representations and warranties contained in the Initial Acquisition
Agreement.
7. The Purchaser's obligation to complete the purchase of the Shares
described herein, shall be conditional upon a number of conditions which
shall be for the sole benefit of the Purchaser and shall include, without
limitation, the following:
(a) each party shall deliver an officer certificate as contemplated by
paragraph 6 hereof;
(b) the Purchaser has an opportunity to inspect all of the books and
records of WCM and AOC and be satisfied, at its sole discretion,
with the results of such investigations;
(c) at closing there shall have been no material adverse change in the
business, affairs, or financial status of WCM or AOC or its business
or assets;
(d) the parties shall have obtained all necessary corporate and
regulatory approvals to the entering into and consummation of the
transactions contemplated hereby;
(e) the Purchaser shall have completed its initial financing in order to
raise the necessary capital to make the payment contemplated by
paragraph 4 hereof; and
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(f) the board of directors of the Purchaser shall have approved this
letter agreement and the transactions contemplated hereby.
8. The Vendor and the Purchaser shall be responsible for their own fees and
expenses associated with this transaction including, without restriction,
their legal fees.
9. This letter agreement shall be governed by the laws of the Province of
Alberta.
10. 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.
11. All press releases or other similar public written communications of any
sort relating to this letter agreement and the business of Oilsands Quest
Inc. and transactions contemplated hereby and the method of release for
publication thereof, will be subject to the approval of all parties
hereto. Such approval will be provided within 48 hours of notification by
either party, unless required otherwise under law and approval will not to
be unreasonably withheld by all parties hereto.
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: __________________________
