Document:

EX-4.41

 

Exhibit 4.41

 

CAPITAL SECURITIES GUARANTEE AGREEMENT

Citigroup
Capital XXXII

Dated as of           , 20

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I DEFINITIONS AND INTERPRETATION
	 	 	 	 
	 
	SECTION 1.1 Definitions and Interpretation
	 	 	1	 
	 
	ARTICLE II TRUST INDENTURE ACT
	 	 	 	 
	 
	SECTION 2.1 Trust Indenture Act; Application
	 	 	4	 
	SECTION 2.2 Lists of Holders of Securities
	 	 	4	 
	SECTION 2.3 Reports by the Capital Guarantee Trustee
	 	 	4	 
	SECTION 2.4 Periodic Reports to Capital Guarantee Trustee
	 	 	5	 
	SECTION 2.5 Evidence of Compliance with Conditions Precedent
	 	 	5	 
	SECTION 2.6 Events of Default; Waiver
	 	 	5	 
	SECTION 2.7 Event of Default; Notice
	 	 	5	 
	SECTION 2.8 Conflicting Interests
	 	 	5	 
	 
	ARTICLE III POWERS, DUTIES AND RIGHTS OF CAPITAL GUARANTEE TRUSTEE
	 	 	 	 
	 
	SECTION 3.1 Powers and Duties of the Capital Guarantee Trustee
	 	 	6	 
	SECTION 3.2 Certain Rights of Capital Guarantee Trustee
	 	 	7	 
	SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee
	 	 	9	 
	 
	ARTICLE IV CAPITAL GUARANTEE TRUSTEE
	 	 	 	 
	 
	SECTION 4.1 Capital Guarantee Trustee; Eligibility
	 	 	9	 
	SECTION 4.2 Appointment, Removal and Resignation of Capital Guarantee Trustees
	 	 	10	 
	 
	ARTICLE V GUARANTEE
	 	 	 	 
	 
	SECTION 5.1 Guarantee
	 	 	11	 
	SECTION 5.2 Waiver of Notice and Demand
	 	 	11	 
	SECTION 5.3 Obligations Not Affected
	 	 	11	 
	SECTION 5.4 Rights of Holders
	 	 	12	 
	SECTION 5.5 Guarantee of Payment
	 	 	12	 
	SECTION 5.6 Subrogation
	 	 	13	 
	SECTION 5.7 Independent Obligations
	 	 	13	 
	 
	ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION
	 	 	 	 
	 
	SECTION 6.1 Limitation of Transactions
	 	 	13	 

 

 

	 	 	 	 	 
	 	 	Page	 
	SECTION 6.2 Subordination
	 	 	13	 
	SECTION 6.3 Pari Passu Guarantees
	 	 	14	 
	 
	ARTICLE VII TERMINATION
	 	 	 	 
	 
	SECTION 7.1 Termination
	 	 	14	 
	 
	ARTICLE VIII INDEMNIFICATION
	 	 	 	 
	 
	SECTION 8.1 Exculpation
	 	 	14	 
	SECTION 8.2 Indemnification
	 	 	15	 
	 
	ARTICLE IX MISCELLANEOUS
	 	 	 	 
	 
	SECTION 9.1 Successors and Assigns
	 	 	15	 
	SECTION 9.2 Amendments
	 	 	15	 
	SECTION 9.3 Notices
	 	 	15	 
	SECTION 9.4 Benefit
	 	 	16	 
	SECTION 9.5 Governing Law
	 	 	16	 

 

 

CAPITAL SECURITIES GUARANTEE AGREEMENT

          This GUARANTEE AGREEMENT (the “Capital Securities Guarantee”), dated as of           
        , 20      , is executed and delivered by Citigroup Inc., a Delaware corporation (the “Guarantor”), and
The Bank of New York, as trustee (the “Capital Guarantee Trustee”), for the benefit of the Holders
(as defined herein) from time to time of the Capital Securities (as defined herein) of Citigroup
Capital XXXII, a Delaware statutory trust (the “Issuer”).

          WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the “Declaration”), dated
as of          , 20      , among the trustees of the Issuer named therein, the Guarantor, as
sponsor, and the holders from time to time of undivided beneficial interests in the assets of the
Issuer, the Issuer is issuing on the date hereof            capital securities, having an
aggregate liquidation amount of $            and may issue up to an additional
capital securities, having an aggregate liquidation amount of $           in
connection with an over-allotment option, collectively designated the      % Capital Securities
(the “Capital Securities”);

          WHEREAS, as incentive for the Holders to purchase the Capital Securities, the Guarantor
desires irrevocably and unconditionally to agree, to the extent set forth in this Capital
Securities Guarantee, to pay to the Holders the Guarantee Payments (as defined herein) and to make
certain other payments on the terms and conditions set forth herein.

          NOW, THEREFORE, in consideration of the purchase by each Holder of Capital Securities, which
purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and
delivers this Capital Securities Guarantee for the benefit of the Holders.

ARTICLE I

DEFINITIONS AND INTERPRETATION

               SECTION 1.1 Definitions and Interpretation

          In this Capital Securities Guarantee, unless the context otherwise requires:

          (a) Capitalized terms used in this Capital Securities Guarantee but not defined in the
preamble above have the respective meanings assigned to them in this Section 1.1;

          (b) a term defined anywhere in this Capital Securities Guarantee has the same meaning
throughout;

          (c) all references to “the Capital Securities Guarantee” or “this Capital Securities
Guarantee” are to this Capital Securities Guarantee as modified, supplemented or amended from time
to time;

          (d) all references in this Capital Securities Guarantee to Articles and Sections are to
Articles and Sections of this Capital Securities Guarantee, unless otherwise specified;

 

 

          (e) a term defined in the Trust Indenture Act has the same meaning when used in this Capital
Securities Guarantee, unless otherwise defined in this Capital Securities Guarantee or unless the
context otherwise requires; and

          (f) a reference to the singular includes the plural and vice versa.

          “Authorized Officer” of a Person means any Person that is authorized to bind such
Person.

          “Affiliate” has the same meaning as given to that term in Rule 405 of the Securities
Act of 1933, as amended, or any successor rule thereunder.

          “Business Day” means any day other than a Saturday, Sunday or a day on which banking
institutions in the City of New York, New York are permitted or required by any applicable law to
close.

          “Capital Guarantee Trustee” means The Bank of New York, until a Successor Capital
Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of
this Capital Securities Guarantee, and thereafter means each such Successor Capital Guarantee
Trustee.

          “Common Securities” means the securities representing common undivided beneficial
interests in the assets of the Issuer.

          “Corporate Trust Office” means the office of the Capital Guarantee Trustee at which
the corporate trust business of the Capital Guarantee Trustee shall, at any particular time, be
principally administered, which office at the date of execution of this Agreement is located at 101
Barclay Street-8W, New York, New York 10286.

          “Covered Person” means any Holder or beneficial owner of Capital Securities.

          “Debentures” means the series of junior subordinated debt securities of the Guarantor
designated the      % Junior
Subordinated Deferrable Interest Debentures due      , 20   held by the Institutional Trustee (as defined in the Declaration) of the Issuer.

          “Event of Default” means a default by the Guarantor on any of its payment or other
obligations under this Capital Securities Guarantee.

          “Guarantee Payments” means the following payments or distributions, without
duplication, with respect to the Capital Securities, to the extent not paid or made by the Issuer:
(i) any accrued and unpaid Distributions (as defined in Annex I to the Declaration) that are
required to be paid on the Capital Securities, to the extent the Issuer has funds available
therefor, (ii) the redemption price of $  per Capital Security, plus all accrued and unpaid
Distributions to the date of redemption (the “Redemption Price”), to the extent that the Issuer has
funds available therefor, with respect to any Capital Securities called for redemption by the
Issuer and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the
Issuer (other than in connection with the distribution of Debentures to the Holders in exchange for
Capital Securities as provided in the Declaration or the redemption of all of the Capital
Securities upon the maturity

2

 

or redemption of all of the Debentures as provided in the Declaration)
the lesser of (a) the aggregate of the liquidation amount of $  per Capital Security and all
accrued and unpaid Distributions on the Capital Securities to the date of payment, or (b) the
amount of assets of the
Issuer remaining for distribution to Holders in liquidation of the Issuer (in either case, the
“Liquidation Distribution”).

          “Holder” shall mean any holder, as registered on the books and records of the Issuer,
of any Capital Securities; provided, however, that, in determining whether the holders of the
requisite percentage of Capital Securities have given any request, notice, consent or waiver
hereunder, “Holder” shall not include the Guarantor or any Affiliate of the Guarantor.

          “Indemnified Person” means the Capital Guarantee Trustee, any Affiliate of the Capital
Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees,
representatives, nominees, custodians or agents of the Capital Guarantee Trustee.

          “Indenture” means the Indenture dated as of          , 20      , among the
Guarantor and The Bank of New York, as trustee, and any indenture supplemental thereto, pursuant to
which the Debentures are to be issued to the Institutional Trustee as defined in the Declaration.

          “Majority in liquidation amount of the Securities” means, except as provided by the
Trust Indenture Act, a vote by Holder(s), voting separately as a class, holding Capital Securities
representing more than 50% of the aggregate liquidation amount (including the stated amount that
would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the
date upon which the voting percentages are determined) of all Capital Securities.

          “Officers’ Certificate” means, with respect to any Person, a certificate signed by two
Authorized Officers of such Person. Any Officers’ Certificate delivered with respect to compliance
with a condition or covenant provided for in this Capital Securities Guarantee shall include:

          (a) a statement that each officer signing the Officers’ Certificate has read the covenant or
condition and the definitions relating thereto;

          (b) a brief statement of the nature and scope of the examination or investigation undertaken
by each officer in rendering the Officers’ Certificate;

          (c) a statement that each such officer has made such examination or investigation as, in such
officer’s opinion, is necessary to enable such officer to express an informed opinion as to whether
or not such covenant or condition has been complied with; and

          (d) a statement as to whether, in the opinion of each such officer, such condition or covenant
has been complied with.

          “Person” means a legal person, including any individual, corporation, estate,
partnership, joint venture, association, joint stock company, limited liability company, trust,

3

 

unincorporated association, or government or any agency or political subdivision thereof, or any
other entity of whatever nature.

          “Responsible Officer” means, with respect to the Capital Guarantee Trustee, any
officer within the Corporate Trust Office of the Capital Guarantee Trustee with direct
responsibility for the administration of this Capital Securities Guarantee and also means, with
respect to a particular corporate trust matter, any other officer to whom such matter is referred
because of that officer’s knowledge of and familiarity with the particular subject.

          “Successor Capital Guarantee Trustee” means a successor Capital Guarantee Trustee
possessing the qualifications to act as Capital Guarantee Trustee under Section 4.1.

          “Trust Indenture Act” means the Trust Indenture Act of 1939, as amended.

          “Underwriting Agreement” has the meaning set forth in the Indenture.

ARTICLE II

TRUST INDENTURE ACT

               SECTION 2.1 Trust Indenture Act; Application

          (a) This Capital Securities Guarantee is subject to the provisions of the Trust Indenture Act
that are required to be part of this Capital Securities Guarantee and shall, to the extent
applicable, be governed by such provisions; and

          (b) if and to the extent that any provision of this Capital Securities Guarantee limits,
qualifies or conflicts with the duties imposed by Section 310 to 317, inclusive, of the Trust
Indenture Act, such imposed duties shall control.

               SECTION 2.2 Lists of Holders of Securities

          (a) The Guarantor shall provide the Capital Guarantee Trustee with a list, in such form as the
Capital Guarantee Trustee may reasonably require, of the names and addresses of the Holders (“List
of Holders”) as of such date, (i) within one Business Day after January 1 and June 30 of each year,
and (ii) at any other time within 30 days of receipt by the Guarantor of a written request for a
List of Holders as of a date no more than 14 days before such List of Holders is given to the
Capital Guarantee Trustee; provided, that the Guarantor shall not be obligated to provide such List
of Holders at any time the List of Holders does not differ from the most recent List of Holders
given to the Capital Guarantee Trustee by the Guarantor. The Capital Guarantee Trustee may destroy
any List of Holders previously given to it on receipt of a new List of Holders.

          (b) The Capital Guarantee Trustee shall comply with its obligations under Sections 311(a),
311(b) and 312(b) of the Trust Indenture Act.

               SECTION 2.3 Reports by the Capital Guarantee Trustee

4

 

          Within 60 days after May 15 of each year, the Capital Guarantee Trustee shall provide to the
Holders such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form
and in the manner provided by Section 313 of the Trust Indenture Act. The Capital Guarantee
Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act.

               SECTION 2.4 Periodic Reports to Capital Guarantee Trustee

          The Guarantor shall provide to the Capital Guarantee Trustee such documents, reports and
information as required by Section 314 (if any) and the compliance certificate required by Section
314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314
of the Trust Indenture Act.

               SECTION 2.5 Evidence of Compliance with Conditions Precedent

          The Guarantor shall provide to the Capital Guarantee Trustee such evidence of compliance with
any conditions precedent, if any, provided for in this Capital Securities Guarantee that relate to
any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or
opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form
of an Officers’ Certificate.

               SECTION 2.6 Events of Default; Waiver

          The Holders of a Majority in liquidation amount of Capital Securities may, by vote, on behalf
of the Holders of all of the Capital Securities, waive any past Event of Default and its
consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose of this Capital
Securities Guarantee, but no such waiver shall extend to any subsequent or other default or Event
of Default or impair any right consequent thereon.

               SECTION 2.7 Event of Default; Notice

          (a) The Capital Guarantee Trustee shall, within 90 days after the occurrence of an Event of
Default, transmit by mail, first class postage prepaid, to the Holders, notices of all Events of
Default actually known to a Responsible Officer of the Capital Guarantee Trustee, unless such
defaults have been cured before the giving of such notice; provided, that the Capital Guarantee
Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of
the Capital Guarantee Trustee in good faith determines that the withholding of such notice is in
the interests of the Holders.

          (b) The Capital Guarantee Trustee shall not be deemed to have knowledge of any Event of
Default unless either the Capital Guarantee Trustee shall have received written notice, or a
Responsible Officer of the Capital Guarantee Trustee charged with the administration of the
Declaration shall have obtained actual knowledge.

               SECTION 2.8 Conflicting Interests

5

 

          The Declaration shall be deemed to be specifically described in this Capital Securities
Guarantee for the purposes of clause (i) of the first proviso contained in Section 310(b) of the
Trust Indenture Act.

ARTICLE III

POWERS, DUTIES AND RIGHTS OF

CAPITAL GUARANTEE TRUSTEE

               SECTION 3.1 Powers and Duties of the Capital Guarantee Trustee

          (a) This Capital Securities Guarantee shall be held by the Capital Guarantee Trustee for the
benefit of the Holders, and the Capital Guarantee Trustee shall not transfer its right, title and
interest in this Capital Securities Guarantee to any Person except a Holder exercising his or her
rights pursuant to Section 5.4(b) or to a Successor Capital Guarantee Trustee on acceptance by such
Successor Capital Guarantee Trustee of its appointment to act as Successor Capital Guarantee
Trustee. The right, title and interest of the Capital Guarantee Trustee shall automatically vest
in any Successor Capital Guarantee Trustee, and such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Capital Guarantee Trustee.

          (b) If an Event of Default actually known to a Responsible Officer of the Capital Guarantee
Trustee has occurred and is continuing, the Capital Guarantee Trustee shall enforce this Capital
Securities Guarantee for the benefit of the Holders of the Capital Securities.

          (c) The Capital Guarantee Trustee, before the occurrence of any Event of Default and after the
curing of all Events of Default that may have occurred, shall undertake to perform only such duties
as are specifically set forth in this Capital Securities Guarantee, and no implied covenants shall
be read into this Capital Securities Guarantee against the Capital Guarantee Trustee. In case an
Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is
actually known to a Responsible Officer of the Capital Guarantee Trustee, the Capital Guarantee
Trustee shall exercise such of the rights and powers vested in it by this Capital Securities
Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person
would exercise or use under the circumstances in the conduct of his or her own affairs.

          (d) No provision of this Capital Securities Guarantee shall be construed to relieve the
Capital Guarantee Trustee from liability for its own negligent action, its own negligent failure to
act or its own willful misconduct, except that:

     (i) Prior to the occurrence of any Event of Default and after the curing or
waiving of all such Events of Default that may have occurred:

     (A) the duties and obligations of the Capital Guarantee Trustee
shall be determined solely by the express provisions of this Capital
Securities Guarantee, and the Capital Guarantee Trustee shall not be
liable except for the performance of such duties and obligations as
are specifically set forth in this Capital Securities

6

 

Guarantee, and
no implied covenants or obligations shall be read into this Capital
Securities Guarantee against the Capital Guarantee Trustee; and

     (B) in the absence of bad faith on the part of the Capital
Guarantee Trustee, the Capital Guarantee Trustee may conclusively
rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates
or opinions furnished to the Capital Guarantee Trustee and
conforming to the requirements of this Capital Securities Guarantee;
but in the case of any such certificates or opinions that by any
provision hereof are specifically required to be furnished to the
Capital Guarantee Trustee, the Capital Guarantee Trustee shall be
under a duty to examine the same to determine whether or not they
conform to the requirements of this Capital Securities Guarantee;

     (ii) the Capital Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Capital Guarantee
Trustee, unless it shall be proved that the Capital Guarantee Trustee was negligent
in ascertaining the pertinent facts upon which such judgment was made;

     (iii) the Capital Guarantee Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of not less than a Majority in liquidation amount of the
Capital Securities relating to the time, method and place of conducting any
proceeding for any remedy available to the Capital Guarantee Trustee, or exercising
any trust or power conferred upon the Capital Guarantee Trustee under this Capital
Securities Guarantee; and

     (iv) no provision of this Capital Securities Guarantee shall require the
Capital Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if the Capital Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds or liability is
not reasonably assured to it under the terms of this Capital Securities Guarantee or
indemnity, reasonably satisfactory to the Capital Guarantee Trustee, against such
risk or liability is not reasonably assured to it.

               SECTION 3.2 Certain Rights of Capital Guarantee Trustee

          (a) Subject to the provisions of Section 3.1:

     (i) The Capital Guarantee Trustee may conclusively rely, and shall be fully
protected in acting or refraining from acting upon, any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or document

7

 

believed by it to be genuine and to have been signed, sent or presented by the
proper party or parties.

     (ii) Any direction or act of the Guarantor contemplated by this Capital
Securities Guarantee shall be sufficiently evidenced by an Officers’ Certificate.

     (iii) Whenever, in the administration of this Capital Securities Guarantee, the
Capital Guarantee Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action hereunder,
the Capital Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and conclusively
rely upon an Officers’ Certificate which, upon receipt of such request, shall be
promptly delivered by the Guarantor.

     (iv) The Capital Guarantee Trustee shall have no duty to see to any recording,
filing or registration of any instrument (or any rerecording, refiling or
registration thereof).

     (v) The Capital Guarantee Trustee may consult with counsel, and the written
advice or opinion of such counsel with respect to legal matters shall be full and
complete authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance with such advice or opinion.
Such counsel may be counsel to the Guarantor or any of its Affiliates and may
include any of its employees. The Capital Guarantee Trustee shall have the right at
any time to seek instructions concerning the administration of this Capital
Securities Guarantee from any court of competent jurisdiction.

     (vi) The Capital Guarantee Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Capital Securities Guarantee at the
request or direction of any Holder, unless such Holder shall have provided to the
Capital Guarantee Trustee such security and indemnity, reasonably satisfactory to
the Capital Guarantee Trustee, against the costs, expenses (including attorneys’
fees and expenses and the expenses of the Capital Guarantee Trustee’s agents,
nominees or custodians) and liabilities that might be incurred by it in complying
with such request or direction, including such reasonable advances as may be
requested by the Capital Guarantee Trustee; provided that, nothing contained in this
Section 3.2(a)(vi) shall be taken to relieve the Capital Guarantee Trustee, upon the
occurrence of an Event of Default, of its obligation to exercise the rights and
powers vested in it by this Capital Securities Guarantee.

     (vii) The Capital Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or document,
but the Capital Guarantee Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit.

8

 

     (viii) The Capital Guarantee Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through agents,
nominees, custodians or attorneys, and the Capital Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.

     (ix) Any action taken by the Capital Guarantee Trustee or its agents hereunder
shall bind the Holders of the Capital Securities, and the signature of the Capital
Guarantee Trustee or its agents alone shall be sufficient and effective to
perform any such action. No third party shall be required to inquire as to the
authority of the Capital Guarantee Trustee to so act or as to its compliance with
any of the terms and provisions of this Capital Securities Guarantee, both of which
shall be conclusively evidenced by the Capital Guarantee Trustee’s or its agent’s
taking such action.

     (x) Whenever in the administration of this Capital Securities Guarantee the
Capital Guarantee Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action hereunder, the
Capital Guarantee Trustee (i) may request instructions from the Holders of a
Majority in liquidation amount of the Capital Securities, (ii) may refrain from
enforcing such remedy or right or taking such other action until such instructions
are received, and (iii) shall be protected in conclusively relying on or acting in
accordance with such instructions.

          (b) No provision of this Capital Securities Guarantee shall be deemed to impose any duty or
obligation on the Capital Guarantee Trustee to perform any act or acts or exercise any right,
power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be
illegal, or in which the Capital Guarantee Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts or to exercise any such right,
power, duty or obligation. No permissive power or authority available to the Capital Guarantee
Trustee shall be construed to be a duty.

               SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee

          The recitals contained in this Guarantee shall be taken as the statements of the Guarantor,
and the Capital Guarantee Trustee does not assume any responsibility for their correctness. The
Capital Guarantee Trustee makes no representation as to the validity or sufficiency of this Capital
Securities Guarantee.

ARTICLE IV

CAPITAL GUARANTEE TRUSTEE

               SECTION 4.1 Capital Guarantee Trustee; Eligibility

          (a) There shall at all times be a Capital Guarantee Trustee which shall:

     (i) not be an Affiliate of the Guarantor; and

9

 

     (ii) be a corporation organized and doing business under the laws of the United
States of America or any State or Territory thereof or of the District of Columbia,
or a corporation or Person permitted by the Securities and Exchange Commission to
act as an institutional trustee under the Trust Indenture Act, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus of at
least 50 million U.S. dollars ($50,000,000), and subject to supervision or
examination by Federal, State, Territorial or District of Columbia authority. If
such corporation publishes reports of condition at least annually, pursuant to law
or to the requirements of the supervising or examining authority
referred to above, then, for the purposes of this Section 4.1(a)(ii), the
combined capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.

          (b) If at any time the Capital Guarantee Trustee shall cease to be eligible to so act under
Section 4.1(a), the Capital Guarantee Trustee shall immediately resign in the manner and with the
effect set out in Section 4.2(c).

          (c) If the Capital Guarantee Trustee has or shall acquire any “conflicting interest” within
the meaning of Section 310(b) of the Trust Indenture Act, the Capital Guarantee Trustee and
Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.

               SECTION 4.2 Appointment, Removal and Resignation of Capital Guarantee
Trustees

          (a) Subject to Section 4.2(b), the Capital Guarantee Trustee may be appointed or removed
without cause at any time by the Guarantor except if an Event of Default shall have occurred and be
continuing.

          (b) The Capital Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until
a Successor Capital Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Capital Guarantee Trustee and delivered to the
Guarantor.

          (c) The Capital Guarantee Trustee appointed to office shall hold office until a Successor
Capital Guarantee Trustee shall have been appointed or until its removal or resignation. The
Capital Guarantee Trustee may resign from office (without need for prior or subsequent accounting)
by an instrument in writing executed by the Capital Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Capital Guarantee Trustee has
been appointed and has accepted such appointment by instrument in writing executed by such
Successor Capital Guarantee Trustee and delivered to the Guarantor and the resigning Capital
Guarantee Trustee.

          (d) If no Successor Capital Guarantee Trustee shall have been appointed and accepted
appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantor of an
instrument of resignation, the resigning Capital Guarantee Trustee may petition any court of
competent jurisdiction for appointment of a Successor Capital Guarantee Trustee.

10

 

Such court may
thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor
Capital Guarantee Trustee.

          (e) No Capital Guarantee Trustee shall be liable for the acts or omissions to act of any
Successor Capital Guarantee Trustee.

          (f) Upon termination of this Capital Securities Guarantee or removal or resignation of the
Capital Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the Capital
Guarantee Trustee all amounts accrued and owing to such Capital Guarantee Trustee to the date of
such termination, removal or resignation.

ARTICLE V

GUARANTEE

               SECTION 5.1 Guarantee

          The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the
Guarantee Payments, as and when due, regardless of any defense, right of set-off or counterclaim
that the Issuer may have or assert. The Guarantor’s obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.

               SECTION 5.2 Waiver of Notice and Demand

          The Guarantor hereby waives notice of acceptance of this Capital Securities Guarantee and of
any liability to which it applies or may apply, presentment, demand for payment, any right to
require a proceeding first against the Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.

               SECTION 5.3 Obligations Not Affected

          The obligations, covenants, agreements and duties of the Guarantor under this Capital
Securities Guarantee shall in no way be affected or impaired by reason of the happening from time
to time of any of the following:

          (a) the release or waiver, by operation of law or otherwise, of the performance or observance
by the Issuer of any express or implied agreement, covenant, term or condition relating to the
Capital Securities to be performed or observed by the Issuer;

          (b) the extension of time for the payment by the Issuer of all or any portion of the
Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms
of the Capital Securities or the extension of time for the performance of any other obligation
under, arising out of, or in connection with, the Capital Securities;

          (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce,
assert or exercise any right, privilege, power or remedy conferred on the Holders

11

 

pursuant to the
terms of the Capital Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;

          (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the
Issuer or any of the assets of the Issuer;

          (e) any invalidity of, or defect or deficiency in, the Capital Securities;

          (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or

          (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable
discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations
of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances.

          There shall be no obligation of the Holders to give notice to, or obtain consent of, the
Guarantor with respect to the happening of any of the foregoing.

               SECTION 5.4 Rights of Holders

          (a) The Holders of a Majority in liquidation amount of the Capital Securities have the right
to direct the time, method and place of conducting any proceeding for any remedy available to the
Capital Guarantee Trustee in respect of this Capital Securities Guarantee or exercising any trust
or power conferred upon the Capital Guarantee Trustee under this Capital Securities Guarantee.

          (b) If the Capital Guarantee Trustee fails to enforce its rights under this Capital Securities
Guarantee, any Holder may directly institute a legal proceeding against the Guarantor to enforce
the Capital Guarantee Trustee’s rights under this Capital Securities Guarantee, without first
instituting a legal proceeding against the Issuer, the Capital Guarantee Trustee or any other
Person or entity.

          (c) A Holder of Capital Securities may also directly institute a legal proceeding against the
Guarantor to enforce such Holder’s right to receive payment under this Capital Securities Guarantee
without first (i) directing the Capital Guarantee Trustee to enforce the terms of this Capital
Securities Guarantee or (ii) instituting a legal proceeding directly against the Issuer or any
other Person or entity.

               SECTION 5.5 Guarantee of Payment

          This Capital Securities Guarantee creates a guarantee of payment and not of collection.

12

 

               SECTION 5.6 Subrogation

          The Guarantor shall be subrogated to all (if any) rights of the Holders of Capital Securities
against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this
Capital Securities Guarantee; provided, however, that the Guarantor shall not (except to the extent
required by mandatory provisions of law) be entitled to enforce or exercise any right that it may
acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a
result of payment under this Capital Securities Guarantee, if, at the time of any such payment, any
amounts are due and unpaid under this Capital Securities Guarantee. If any amount shall be paid to
the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in
trust for the Holders and to pay over such amount to the Holders.

               SECTION 5.7 Independent Obligations

          The Guarantor acknowledges that its obligations hereunder are independent of the obligations
of the Issuer with respect to the Capital Securities, and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Capital
Securities Guarantee notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.3 hereof.

ARTICLE VI

LIMITATION OF TRANSACTIONS; SUBORDINATION

               SECTION 6.1 Limitation of Transactions

          So long as any Capital Securities remain outstanding, if there shall have occurred any event
that would constitute an Event of Default or a Default under the Declaration, then (a) the
Guarantor shall not declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock
or make any guarantee payment with respect thereto (other than (i) repurchases, redemptions or
other acquisitions of shares of capital stock of the Guarantor in connection with any employment
contract, benefit plan or other similar arrangement with or for the benefit of employees, officers,
directors or consultants, (ii) repurchases of common stock of the Guarantor pursuant to a
contractually binding requirement to buy stock existing prior to the Event of Default or Default,
(iii) as a result of an exchange or conversion of any class or series of the Guarantor’s capital
stock for any other class or series of the Guarantor’s capital stock, (iv) the purchase of
fractional interests in shares of the Guarantor’s capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or exchanged) or (v)
purchase of the Guarantor’s capital stock in connection with the distribution thereof and (b) the
Guarantor shall not make any payment of interest on, or principal of (or premium, if any, on), or
repay, repurchase or redeem, any debt securities or guarantees issued by the Guarantor that rank
pari passu with or junior to the Debentures; provided, however, the Guarantor may declare and pay a
stock dividend where the dividend stock is the same stock as that on which the dividend is being
paid.

               SECTION 6.2 Subordination

13

 

          The obligations of the Guarantor under this Capital Securities Guarantee will constitute
unsecured obligations of the Guarantor and will rank subordinate and junior in right of payment to
all Senior Indebtedness (as defined in the Indenture) of the Guarantor to the extent and in the
manner set forth in the Indenture with respect to the Debentures, and the provisions of Article
Fourteen of the Indenture will apply, mutatis mutandis, to the obligations of the Guarantor
hereunder. The obligations of the Guarantor hereunder do not constitute Senior Indebtedness (as
defined in the Indenture) of the Guarantor.

               SECTION 6.3 Pari Passu Guarantees 

          The obligations of the Guarantor under this Capital Securities Guarantee shall rank pari passu
with the obligations of the Guarantor under (i) any similar guarantee agreements issued by the
Guarantor on behalf of the holders of preferred or capital securities issued by any Citigroup Trust
(as defined in the Indenture), (ii) the Indenture and the Securities (as defined therein) issued
thereunder, (iii) any expense agreements entered into by the Guarantor in connection with the
offering of preferred or capital securities by any Citigroup Trust (as defined in the Indenture),
and (iv) any other security, guarantee or other agreement or obligation that is by its terms pari
passu with the Securities (as defined in the Indenture) and, in the case of this clause (iv) only,
(x) is issued with the concurrence or approval of the staff of the Federal Reserve Bank of New York
or the staff of the Board of Governors of the Federal Reserve System or (y) does not at the time of
issuance prevent the Securities from qualifying for tier 1 capital treatment (irrespective of any
limits on the amount of the Company’s tier 1 capital) under the applicable capital adequacy
guidelines, regulations, policies or published interpretations of the Board of Governors of the
Federal Reserve System.

ARTICLE VII

TERMINATION

               SECTION 7.1 Termination

          This Capital Securities Guarantee shall terminate upon (i) full payment of the Redemption
Price of all Capital Securities, (ii) the distribution of the Debentures to the Holders of all of
the Capital Securities or (iii) full payment of the amounts payable in accordance with the
Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this Capital Securities
Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time
any Holder must restore payment of any sums paid under the Capital Securities or under this Capital
Securities Guarantee.

ARTICLE VIII

INDEMNIFICATION

               SECTION 8.1 Exculpation

          (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise
to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act
or omission performed or omitted by such Indemnified Person in good faith in accordance with this
Capital Securities Guarantee and in a manner that such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such

14

 

Indemnified Person by this Capital Securities Guarantee or by law, except that an Indemnified
Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified
Person’s negligence or willful misconduct with respect to such acts or omissions.

          (b) An Indemnified Person shall be fully protected in relying in good faith upon the records
of the Guarantor and upon such information, opinions, reports or statements presented to the
Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such
other Person’s professional or expert competence and who has been selected with reasonable care by
or on behalf of the Guarantor, including information, opinions, reports or statements as to the
value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the
existence and amount of assets from which Distributions to Holders might properly be paid.

               SECTION 8.2 Indemnification

          The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified
Person harmless against, any loss, liability or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or administration of the trust or
trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses)
of defending itself against, or investigating, any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as
set forth in this Section 8.2 shall survive the termination of this Capital Securities Guarantee.

ARTICLE IX

MISCELLANEOUS

               SECTION 9.1 Successors and Assigns

          All guarantees and agreements contained in this Capital Securities Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to
the benefit of the Holders of the Capital Securities then outstanding.

               SECTION 9.2 Amendments

          Except with respect to any changes that do not adversely affect the rights of Holders (in
which case no consent of Holders will be required), this Capital Securities Guarantee may be
amended only with the prior approval of the Holders of not less than a Majority in aggregate
liquidation amount (including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are
determined) of all the outstanding Capital Securities. The provisions of Section 12.2 of the
Declaration with respect to meetings of Holders apply to the giving of such approval.

               SECTION 9.3 Notices

15

 

          All notices provided for in this Capital Securities Guarantee shall be in writing, duly signed
by the party giving such notice, and shall be delivered, telecopied or mailed by registered or
certified mail, as follows:

          (a) If given to the Capital Guarantee Trustee, at the Capital Guarantee Trustee’s mailing
address set forth below (or such other address as the Capital Guarantee Trustee may give notice of
to the Holders):

The Bank of New York

101 Barclay Street-8W

New York, New York 10286

Attn: Global Trust Administration

          (b) If given to the Guarantor, at the Guarantor’s mailing address set forth below (or such
other address as the Guarantor may give notice of to the Holders):

Citigroup Inc.,

153 East 53rd Street

New York, NY 10043

Attention: Charles E. Wainhouse, Assistant Treasurer

          (c) If given to any Holder, at the address set forth on the books and records of the Issuer.

          All such notices shall be deemed to have been given when received in person, telecopied with
receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other
document is refused delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered on the date of such
refusal or inability to deliver.

               SECTION 9.4 Benefit

          This Capital Securities Guarantee is solely for the benefit of the Holders of the Capital
Securities and, subject to Section 3.1(a), is not separately transferable from the Capital
Securities.

               SECTION 9.5 Governing Law

          THIS CAPITAL SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED
BY SUCH LAWS WITHOUT REGARD FOR THE PRINCIPLES OF ITS CONFLICTS OF LAWS.

16

 

          THIS CAPITAL SECURITIES GUARANTEE is executed as of the day and year first above written.

	 	 	 	 	 
	 	CITIGROUP INC.,

as Guarantor

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	THE BANK OF NEW YORK,

as Capital Guarantee Trustee

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

17exv10w1

 

Exhibit 1.1

UNDERWRITING AGREEMENT

November 21, 2007

Oilsands Quest Inc.

205, 707 — 7th Avenue S.W.

Calgary, Alberta

T2P 3H6

	 	 	 
	Attention:

	 	Karim Hirji
	 

	 	Chief Financial Officer

Dear Sirs:

	 	 	 
	Re:

	 	Offering of Units and Flow-Through Shares

     TD Securities Inc., Genuity Capital Markets, CIBC World Markets Inc., Desjardins Securities
Inc., Lehman Brothers Canada Inc., Blackmont Capital Inc. and Canaccord Capital Corporation
(collectively, the “Underwriters”) understand that Oilsands Quest Inc. (the
“Corporation”) proposes to issue and sell:

	 	(a)	 	an aggregate of 11,000,000 Units (the “Prospectus Units”), each
consisting of one Common Share (the “Prospectus Shares”), and one-half of a
warrant to purchase one Common Share (the “Warrants”) at a price of US$5.00 per
Unit. Each Warrant will entitle the holder thereof to purchase one Common Share at a
price of US$6.75 per Common Share on or before the second anniversary of the Closing
Date. The Units will be separable into Common Shares and Warrants immediately after
issuance; and
	 
	 	(b)	 	2,600,000 Common Shares to be issued on a flow-through basis (the
“Flow-Through Common Shares”) at a price of Cdn$6.17 per Flow-Through Common
Share, and the Corporation will incur or be deemed to incur and thereafter renounce
Qualifying Expenditures to the original purchasers of such Flow-Through Common Shares.
Flow-Through Common Shares will not be offered for sale outside of Canada.

     Upon and subject to the terms and conditions contained in this agreement, the Underwriters
hereby severally, and not jointly, agree to purchase from the Corporation on the Closing Date, in
the respective percentages set forth in section 18, and the Corporation hereby agrees to sell to
the Underwriters, all but not less than all of the Prospectus Units, at the purchase price per
Prospectus Unit specified above, being an aggregate purchase price of US$55,000,000. The
Corporation hereby agrees to issue and sell to the Underwriters, subject to the provisions hereof,
on the Closing Date such Prospectus Units.

     Additionally, subject to the terms and conditions hereof, the Underwriters hereby agree to act
as, and the Corporation appoints the Underwriters as the sole and exclusive agents of the
Corporation to offer the Flow-Through Common Shares for sale on the Closing Date at the price per
Flow-Through Common Share specified above being an aggregate purchase price of Cdn$16,042,000
provided that if less than 2,600,000 Flow-Through Common Shares are sold by the Underwriters as
agents, the Underwriters hereby severally and not jointly, agree to purchase from the Corporation
on the Closing Date in the respective percentages set forth in section 18, that number of
Flow-Through Common Shares that, together with the Flow-Through Shares sold by the Underwriters as
agents, aggregate 2,600,000 Flow-

 

- 2 -

Through Common Shares. The Corporation hereby agrees to issue and sell to the Underwriters,
subject to the provisions hereof, on the Closing Date such Flow-Through Common Shares. Prospectus
Units and Flow-Through Common Shares are collectively referred to as “Prospectus
Securities”.

     The Corporation hereby grants to the Underwriters an option (the “Over-Allotment
Option”) to purchase from the Corporation, at the Underwriters’ election, up to an additional
1,650,000 Common Shares at U.S. $4.72 per share and up to an additional 825,000 Warrants at U.S.
$0.56 per Warrant, either separately or as units (each such unit consisting of the same securities
as a Prospectus Unit) at U.S. $5.00 per unit (the “Over-Allotment Option Units,” and
together with the Prospectus Units, the “Offered Units”). Common Shares and Warrants
purchased separately pursuant to the Over-Allotment Option are referred to as “Over-Allotment
Option Shares” and “Over-Allotment Option Warrants”, respectively, and Over-Allotment
Option Shares, Over-Allotment Option Warrants and Over-Allotment Option Units are collectively
referred to as “Over-Allotment Option Securities”. The Underwriters may exercise the
Over-Allotment Option, in whole or in part, at any time prior to 4:00 p.m. (Calgary time) on the
date that is 30 days after the Closing Date for the purpose of covering over-allotments, if any,
and for market stabilization purposes, by written notice to the Corporation setting forth the
number of Over-Allotment Option Securities to be purchased. In the event and to the extent that
the Underwriters exercise the Over-Allotment Option, subject to the terms and conditions hereof,
the Underwriters hereby severally, and not jointly, agree to purchase from the Corporation the
number of Over-Allotment Option Securities as to which the Over-Allotment Option shall have been
exercised in the respective percentages set forth in section 18 hereof, and the Corporation hereby
agrees to issue and sell such number of Over-Allotment Option Securities to the Underwriters at the
prices specified above.

     The Underwriters shall be entitled (but not obligated) in connection with the offering and
sale of the Offered Securities to retain as sub-agents other registered securities dealers and may
receive subscriptions for Offered Securities from subscribers from other registered dealers. The
fee payable to any such sub-agent shall be for the account of the Underwriters.

     The Underwriters will offer the Offered Securities initially at the offering prices specified
above. The Underwriters may subsequently reduce the price at which the Offered Securities (other
than the Flow-Through Common Shares) are offered. Any such reduction shall not reduce the proceeds
received by the Corporation.

1. Definitions

     In this agreement:

	 	(a)	 	“Additional Closing Date” and “Additional Closing Time” have
the meanings ascribed thereto in subsection 13(b);
	 
	 	(b)	 	“agreement” means this agreement and not any particular article or
section or other portion except as may be specified, and words such as
“hereof”, “hereto”, “herein” and “hereby” refer to this
agreement as the context requires;
	 
	 	(c)	 	“Applicable Time” means 9:40 a.m. (Calgary time) on November 21, 2007;
	 
	 	(d)	 	“ASA” means the Securities Act (Alberta), RSA 2000 c.S-4, as amended,
including the regulations promulgated thereunder;
	 
	 	(e)	 	“ASC” means the Alberta Securities Commission;

 

- 3 -

	 	(f)	 	“affiliate” has the meaning ascribed thereto under the ASA;
	 
	 	(g)	 	“Business Day” means a day which is not Saturday or Sunday or a legal
holiday in Calgary, Alberta;
	 
	 	(h)	 	“Canadian Base Prospectus” means the (final) MJDS shelf prospectus of
the Corporation dated November 16, 2007 relating to the distribution of Common Shares,
warrants and/or units of the Corporation filed with the Securities Commissions;
	 
	 	(i)	 	“Canadian Exploration Expenses” or “CEE” means Canadian
exploration expense described in paragraph (a), (d) or (f) of the definition of
“Canadian exploration expense” in subsection 66.1(6) of the Tax Act or that would be
described in paragraph (h) of such definition if the reference therein to “paragraphs
(a) to (d) and (f) to (g.i)” were read as “paragraphs (a), (d) or (f)”, excluding any
amounts that are prescribed to constitute “Canadian exploration and development
overhead expense” under the Tax Act, the amount of any assistance received by the
Corporation described in paragraph 66(12.6)(a) of the Tax Act and any expense described
in paragraph 66(12.6)(b.1) of the Tax Act;
	 
	 	(j)	 	“Canadian Preliminary Prospectus Supplement” means the preliminary
prospectus supplement relating to the Offered Securities provided to the Underwriters
for purposes of marketing the Offered Securities in Canada and filed with the
Securities Commissions pursuant to the MJDS;
	 
	 	(k)	 	“Canadian Prospectus Supplement” means the prospectus supplement
relating to the Offered Securities to be filed with the Securities Commissions pursuant
to the MJDS in accordance with section 3(b) hereof;
	 
	 	(l)	 	“Canadian Prospectus” means the Canadian Base Prospectus as
supplemented by the Canadian Preliminary Prospectus Supplement until such time as the
Canadian Prospectus Supplement is filed with the Securities Commissions, after which
time “Canadian Prospectus” means the Canadian Base Prospectus as supplemented by the
Canadian Prospectus Supplement;
	 
	 	(m)	 	“Canadian Securities Laws” means, collectively, the applicable
securities laws of each of the Qualifying Provinces and the respective regulations,
rules, instruments, rulings and orders made thereunder and the applicable policy
statements issued by the Securities Commissions thereunder;
	 
	 	(n)	 	“Commitment Amount” means the amount equal to Cdn$6.17 multiplied by
the number of Flow-Through Common Shares subscribed and paid for pursuant to the
Flow-Through Subscription Agreements;
	 
	 	(o)	 	“Closing Date” means December 5, 2007 or such other date as the parties
hereto may agree, but in any event, not later than December 31, 2007;
	 
	 	(p)	 	“Closing Time” means 6:30 a.m. (Calgary time) or such other time, on
the Closing Date, as the Underwriters and the Corporation may agree;

 

- 4 -

	 	(q)	 	“Common Shares” means the common shares in the capital of the
Corporation, par value $.001 per share and, where appropriate in the context, includes
the Common Shares included in the Offered Securities;
	 
	 	(r)	 	“Corporation” means Oilsands Quest Inc.;
	 
	 	(s)	 	“Corporation’s auditors” means Pannell Kerr Forster, independent
registered public accounting firm, Vancouver, British Columbia, who were the auditors
of the Corporation up to November 13, 2007;
	 
	 	(t)	 	“Corporation’s Counsel” means Corporation’s Canadian counsel and
Corporation’s U.S. counsel;
	 
	 	(u)	 	“Corporation’s Canadian counsel” means Macleod Dixon LLP or such other
legal counsel as the Corporation, with the consent of the Underwriters, may appoint;
	 
	 	(v)	 	“Corporation’s U.S. counsel” means Burns, Figa & Will, P.C. or such
other legal counsel as the Corporation, with the consent of Underwriters, may appoint;
	 
	 	(w)	 	“distribution” means “distribution” or “distribution to the
public”, as the case may be, as defined under the applicable Securities Laws and
“distribute” has a corresponding meaning;
	 
	 	(x)	 	“Disclosure Package” means, as of the Applicable Time and all
considered together:

	 	(i)	 	the U.S. Base Prospectus;
	 
	 	(ii)	 	the U.S. Preliminary Prospectus Supplement;
	 
	 	(iii)	 	the Issuer Free Writing Prospectuses, if any, identified in
Schedule “A” hereto; and
	 
	 	(iv)	 	any other Free Writing Prospectus that the parties hereto shall
expressly agree in writing to treat as part of the Disclosure Package

	 	(y)	 	“Documents” means, collectively, the documents incorporated by
reference in the Prospectuses and any Supplementary Material including:

	 	(i)	 	the Form 10-KSB;
	 
	 	(ii)	 	the Form 10-Q;
	 
	 	(iii)	 	the Forms 8-K; and
	 
	 	(iv)	 	the Corporation’s registration statement on Form 10-SB filed
October 14, 1999, as amended by Forms 8-A filed on March 13, 2006 and August
23, 2006.

	 	(z)	 	“Effective Date” means November 7, 2007, the date upon which the
Registration Statement became effective;

 

- 5 -

	 	(aa)	 	“Exchange” means the American Stock Exchange;
	 
	 	(bb)	 	“Expenditure Period” means the period commencing on the date of
acceptance of the Flow-Through Subscription Agreements and ending on the earlier of:

	 	(i)	 	the date on which the Commitment Amount has been fully expended
in accordance with the terms of the Flow-Through Subscription Agreements; and
	 
	 	(ii)	 	December 31, 2008;

	 	(cc)	 	“ Financial Statements”, means collectively:

	 	(i)	 	the audited annual consolidated financial statements of the
Corporation as at and for the years ended April 30, 2007 and April 30, 2006,
together with the report of the Corporation’s auditors thereon and the notes
thereto;
	 
	 	(ii)	 	the unaudited interim comparative consolidated financial
statements of the Corporation as at and for the three month periods ended July
31, 2007 and July 31, 2006, together with the notes thereto;

	 	(dd)	 	“Flow-Through Subscription Agreements” means, collectively, the
agreements to be entered into between the Corporation and one or more of the
Underwriters or any participants in the Selling Dealer Group for and on behalf of and
as agents for purchasers of Flow-Through Common Shares on or prior to the Closing Date
setting out the contractual relationship between the Corporation and the purchasers of
Flow-Through Common Shares, in form and substance satisfactory to the Corporation and
the Underwriters and substantially as set out as Schedule “B” to this agreement or such
other form agreed to by the Corporation and the Underwriters
	 
	 	(ee)	 	“Form 10-KSB” means the annual report of the Corporation on Form 10-KSB
for the year ended April 30, 2007, as filed with the SEC, including the exhibits
thereto;
	 
	 	(ff)	 	“Form 10-Q” means the quarterly report of the Corporation on Form 10-Q
for the quarter ended July 31, 2007 as filed with the SEC, including the exhibits
thereto;
	 
	 	(gg)	 	“Forms 8-K” means each of the current reports of the Corporation on
Form 8-K since April 30, 2007 as filed with the SEC;
	 
	 	(hh)	 	“Free Writing Prospectus” means any “free writing prospectus” as
defined in Rule 405 of the Securities Act;
	 
	 	(ii)	 	“Issuer Free Writing Prospectus” means any “issuer free writing
prospectus” as defined in Rule 433 of the Securities Act;
	 
	 	(jj)	 	“Material Adverse Effect” in respect of a person, means any effect,
that is, or could reasonably be expected to be material and adverse to the condition
(financial or otherwise), properties, assets, prospects, liabilities, obligations, cash
flow, income or business operations of such person, taken as a whole;

 

- 6 -

	 	(kk)	 	“material change”, “material fact” and
“misrepresentation” shall have the meanings ascribed thereto under the
applicable Securities Laws;
	 
	 	(ll)	 	“Material Subsidiaries” means Oilsands Quest Sask Inc. and any other
Subsidiary of the Corporation, the total assets of which constitute more than 10% of
the consolidated assets of the Corporation as at July 31 , 2007 or the total revenues
of which constitute more than 10% of the consolidated revenues of the Corporation for
the three months ended July 31, 2007;
	 
	 	(mm)	 	“McDaniel” means McDaniel & Associates Consultants Ltd., independent
petroleum consultants of Calgary, Alberta;
	 
	 	(nn)	 	“McDaniel Report” means the report of McDaniel dated November 1, 2007
with respect to an estimate of the discovered resources in the Corporation’s Axe Lake
discovery as of October 31, 2007;
	 
	 	(oo)	 	“MJDS” means the multi-jurisdictional disclosure system described in
National Instrument 71-101 of the Canadian Securities Administrators, as amended;
	 
	 	(pp)	 	“MRRS Procedures” means the mutual reliance review system and
procedures provided for by National Policy 43-201 of the Canadian Securities
Administrators, as amended;
	 
	 	(qq)	 	“Offered Units” means, collectively, the Prospectus Units and the
Over-Allotment Option Units;
	 
	 	(rr)	 	“Offered Securities” means, collectively, the Prospectus Units, the
Flow-Through Common Shares and any Over-Allotment Option Securities;
	 
	 	(ss)	 	“OQI Sask Common Shares” means the common shares in the capital of OQI
Sask from time to time and, where the context permits, includes the OQI Sask
Flow-Through Shares;
	 
	 	(tt)	 	“OQI Sask Commitment Amount” means the aggregate amount of
consideration paid by the Corporation for the OQI Sask Flow-Through Shares pursuant to
the OQI Sask Flow-Through Subscription Agreement, which amount shall be equal to the
Commitment Amount;
	 
	 	(uu)	 	“OQI Sask Expenditure Period” means the period commencing on the date
that OQI Sask accepts the OQI Sask Flow-Through Subscription Agreement and ends on the
earlier of:

	 	(i)	 	the date on which the OQI Sask Commitment Amount has been fully
expended in accordance with the terms of the OQI Sask Flow-Through Subscription
Agreement; and
	 
	 	(ii)	 	December 31, 2008;

	 	(vv)	 	“OQI Sask Flow-Through Shares” means the OQI Sask Common Shares issued
on a “flow-through basis” in accordance with the provisions of the Tax Act and
subscribed for by the Corporation pursuant to the OQI Sask Flow-Through Subscription
Agreement;

 

- 7 -

	 	(ww)	 	“OQI Sask Flow-Through Subscription Agreement” means the subscription
and renunciation agreement to be entered into between the Corporation and OQI Sask
setting out the contractual relationship between OQI Sask and the Corporation with
respect to the Corporation’s subscription for OQI Sask Flow-Through Shares;
	 
	 	(xx)	 	“OQI Sask Qualifying Expenditures” means expenses that are CEE at the
date they are incurred to the extent permitted to be renounced to the Corporation under
the OQI Sask Flow-Through Subscription Agreement;
	 
	 	(yy)	 	“Prospectuses” means, collectively, the Canadian Prospectus and the
U.S. Prospectus;
	 
	 	(zz)	 	“Prospectus Supplements” means the Canadian Prospectus Supplement and
the U.S. Prospectus Supplement;
	 
	 	(aaa)	 	“Proxy Statement” means the proxy statement of the Corporation filed
with the SEC;
	 
	 	(bbb)	 	“Public Record” means all information filed by or on behalf of the
Corporation with the SEC and the Securities Commissions, including without limitation,
the Documents, the Prospectuses, any Supplementary Material and any other information
filed with the SEC or any Securities Commission in compliance, or intended compliance,
with any applicable Securities Laws;
	 
	 	(ccc)	 	“Qualifying Expenditures” means expenses that are CEE at the date they are incurred;
	 
	 	(ddd)	 	“Qualifying Provinces” means each of the provinces of Canada other than Quebec;
	 
	 	(eee)	 	“Registration Statement” means the registration statement on Form S-3
(File no. 333-147200), which became automatically effective on the Effective Date, for
the registration of Common Shares, warrants and/or units of the Corporation under the
Securities Act, including the exhibits thereto and the documents incorporated by
reference therein, as amended at the Effective Date;
	 
	 	(fff)	 	“Reserves Statement” means the statement of oil and gas reserves data
and other oil and gas information for the year ended April 30, 2007 prepared as of July
27, 2007 and filed with the ASC;
	 
	 	(ggg)	 	“SEC” means the United States Securities and Exchange Commission;
	 
	 	(hhh)	 	“SEC Rules and Regulations” means the published rules and regulations of the SEC;
	 
	 	(iii)	 	“Securities Commissions” means the securities commissions or similar
regulatory authorities in the Qualifying Provinces;
	 
	 	(jjj)	 	“Securities Laws” means the Canadian Securities Laws and the U.S.
Securities Laws;
	 
	 	(kkk)	 	“Selling Dealer Group” means the dealers and brokers other than the
Underwriters who participate in the offer and sale of the Offered Securities pursuant
to this agreement;
	 
	 	(lll)	 	“Subscriber” means a person who subscribes for Flow-Through Common Shares;

 

- 8 -

	 	(mmm)	 	“Subsidiary” means a subsidiary within the meaning of the ASA;
	 
	 	(nnn)	 	“Supplementary Material” means, collectively, any amendment to a
Prospectus, any amended or supplemented Prospectus or any ancillary material,
information, evidence, return, report, application, statement or document which may be
filed by or on behalf of the Corporation with the SEC or the Securities Commission
under the applicable Securities Laws;
	 
	 	(ooo)	 	“Tax Act” means the Income Tax Act (Canada) as amended and the
regulations thereunder;
	 
	 	(ppp)	 	“Underwriters’ Canadian counsel” means Blake, Cassels & Graydon LLP or
such other legal counsel as the Underwriters, with the consent of the Corporation, may
appoint;
	 
	 	(qqq)	 	“Underwriters’ U.S. counsel” means Paul, Weiss, Rifkind, Wharton &
Garrison LLP or such other legal counsel as the Underwriters, with the consent of the
Corporation, may appoint;
	 
	 	(rrr)	 	“United States” or “U.S.” means the United States of America,
its territories and possessions, any state of the United States and the District of
Columbia;
	 
	 	(sss)	 	“U.S. Base Prospectus” means the base prospectus included in the
Registration Statement;
	 
	 	(ttt)	 	“U.S. Exchange Act” means the U.S. Securities Exchange Act of 1934, as
amended;
	 
	 	(uuu)	 	“U.S. Preliminary Prospectus Supplement” means the preliminary
prospectus supplement relating to the Offered Securities provided to the Underwriters
for purposes of marketing the Offered Securities in the United States and filed with
the SEC pursuant to Rule 424(b) of the SEC Rules and Regulations;
	 
	 	(vvv)	 	“U.S. Prospectus Supplement” means the prospectus supplement relating
to the Offered Securities to be filed with SEC pursuant to Rule 424(b) of the SEC Rules
and Regulations in accordance with section 3(b) hereof;
	 
	 	(www)	 	“U.S. Prospectus” means the U.S. Base Prospectus as supplemented by
the U.S. Preliminary Prospectus Supplement until such time as the U.S. Prospectus
Supplement is filed with the SEC, after which time “U.S. Prospectus” means the
U.S. Base Prospectus as supplemented by the U.S. Prospectus Supplement;
	 
	 	(xxx)	 	“U.S. Securities Act” means the United States Securities Act of 1933,
as amended;
	 
	 	(yyy)	 	“U.S. Securities Laws” means all of the applicable federal and state
securities laws and regulations of the United States, including without limitation, the
U.S. Securities Act, the U.S. Exchange Act and the respective rules and regulations of
the SEC thereunder; and
	 
	 	(zzz)	 	“Warrant Indenture” means the Indenture to be entered into between the
Corporation and Computershare Trust Company of Canada, as indenture trustee, relating
to the Warrants.

 

- 9 -

     In addition, unless otherwise defined herein capitalized terms shall have the meanings
ascribed thereto in the Prospectuses.

2. Underwriting Fee

     In consideration for its services hereunder, the Corporation agrees to pay to the
Underwriters:

	 	(a)	 	at the Closing Time, a fee equal to the amount of US$0.25 (5%) for each
Prospectus Unit purchased for an aggregate fee of US$2,750,000;
	 
	 	(b)	 	at the Closing Time, a fee equal to the amount of Cdn$0.3085 (5%) for each
Flow-Through Common Share purchased for an aggregate fee of Cdn$802,100; and
	 
	 	(c)	 	at the Additional Closing Time, a fee of:

	 	(i)	 	US$0.25 (5%) for each Over-Allotment Option Unit purchased;
	 
	 	(ii)	 	US$0.236 (5%) for each Over-Allotment Option Share purchased;
and
	 
	 	(iii)	 	US$0.028 (5%) for each Over-Allotment Option Warrant
purchased.

     The foregoing fees (collectively, the “Underwriting Fee”) may, at the sole option of
the Underwriters, be deducted from the aggregate gross proceeds of the sale of the Offered
Securities and withheld for the account of the Underwriters. For greater certainty, the services
provided by the Underwriters in connection herewith will not be subject to the Goods and Services
Tax (“GST”) provided for in the Excise Tax Act (Canada) and taxable supplies provided will
be incidental to the exempt financial services provided. However, in the event that the Canada
Revenue Agency determines that GST provided for in the Excise Tax Act (Canada) is exigible on the
Underwriting Fee, the Corporation agrees to pay the amount of GST forthwith upon the request of the
Underwriters. The Corporation also agrees to pay the Underwriters’ expenses as set forth in
section 10 hereof.

3. Qualification for Sale

	 	(a)	 	The Corporation represents and warrants to the Underwriters that:

	 	(i)	 	the Corporation meets the general eligibility requirements for
use of Form S-3 under the U.S. Securities Act;
	 
	 	(ii)	 	the Corporation has filed the Registration Statement with the
SEC and the Registration Statement became effective upon filing on November 7,
2007;
	 
	 	(iii)	 	the Corporation is eligible to make use of the MJDS for the
distribution of the Offered Securities in the Qualifying Provinces;
	 
	 	(iv)	 	the Corporation has filed the Canadian Base Prospectus with the
Securities Commissions in accordance with the MJDS and Canadian Securities Laws
and has obtained a final MRRS decision document from the ASC (as the principal
regulator) confirming that a final receipt has been issued by each of the
Securities Commissions;

 

- 10 -

	 	(v)	 	the Corporation has filed the U.S. Preliminary Prospectus
Supplement with the SEC pursuant to Rule 424(b)(5) of the SEC Rules and
Regulations and has filed the Canadian Preliminary Prospectus Supplement with
the Securities Commissions pursuant to the MJDS and Canadian Securities Laws;
	 
	 	(vi)	 	the Corporation has fulfilled all requirements to be fulfilled
by the Corporation, including the filing of the Canadian Base Prospectus and
the Canadian Preliminary Prospectus Supplement but excluding the preparation
and filing of the Canadian Prospectus Supplement, to enable the Offered
Securities to be offered for sale and sold to the public in the Qualifying
Provinces through registrants who have complied with the relevant provisions of
applicable Canadian Securities Laws.

	 	(b)	 	The Corporation shall forthwith prepare the U.S. Prospectus Supplement and the
Canadian Prospectus Supplement in a form satisfactory to the Underwriters, acting
reasonably, and in compliance with all applicable Securities Laws and file the U.S.
Prospectus Supplement with the SEC pursuant to Rule 424(b) of the SEC Rules and
Regulations and the Canadian Prospectus Supplement with the Securities Commissions in
accordance with applicable Canadian Securities Laws within the time period prescribed
and will provide evidence satisfactory to the Underwriters of such timely filings.
	 
	 	(c)	 	The Corporation will promptly advise the Underwriters:

	 	(i)	 	when the U.S. Prospectus shall have been filed with the SEC
pursuant to Rule 424(b) of the SEC Rules and Regulations;
	 
	 	(ii)	 	when the Canadian Prospectus has been filed with the Securities
Commission pursuant to applicable Canadian Securities Laws;
	 
	 	(iii)	 	when, prior to the termination of the offering of the Offered
Securities, any amendment to the Registration Statement or the Prospectuses
shall have been filed or become effective or a MRRS decision document in
respect of any such amendment had been issued, as the case may be;
	 
	 	(iv)	 	of any request by the SEC or its staff for any amendments of
the Registration Statement or for any supplement to the U.S. Prospectus or any
additional information;
	 
	 	(v)	 	of any request by any Securities Commission or any regulatory
authority in Canada for any amendment or supplement to the Canadian Prospectus
or any additional information;
	 
	 	(vi)	 	of the issuance by the SEC of any stop orders suspending the
effectiveness of the Registration Statement or of any notice that would prevent
its use, or the issuance by any Securities Commission or any other regulatory
authority in Canada of any cease trading or similar order relating to the
Offered Securities, or the institution or threatening of any proceeding for
such purposes;
	 
	 	(vii)	 	of the receipt by the Corporation of any communication related
to the Prospectuses, the offering of the Offered Securities or the listing of
the

 

- 11 -

	 	 	 	Common Shares or the Warrants included in the Offered Securities on the
Exchange; and

	 	(viii)	 	of the receipt by the Corporation of any notification with respect to the
suspension of the qualification of the Offered Securities for sale in any
jurisdiction or the institution or threatening of any proceedings for such
purpose.

	 	(d)	 	The Corporation will use its best efforts to prevent the issuance of any such
stop order or the occurrence of any such suspension or objection and, upon such
issuance, occurrence or objection, to obtain as soon as possible the withdrawal of such
stop order or relief from such occurrence or prevention, including, if necessary, by
filing an amendment to the Registration Statement or the Prospectuses or a new
registration statement or prospectus or use its best efforts to have such amendment or
new registration statement or prospectus declared effective or qualified as soon as
practicable.
	 
	 	(e)	 	During the period of distribution of the Offered Securities, prior to the
filing with any Securities Commissions or the SEC of any Supplementary Material or any
documents incorporated by reference therein after the date hereof, the Corporation
shall have allowed the Underwriters and the Underwriters’ counsel to participate fully
in the preparation of, and to approve the form of, such documents and to have reviewed
any documents incorporated by reference therein.
	 
	 	(f)	 	During the period from the date hereof until completion of the distribution of
the Offered Securities, the Corporation shall allow the Underwriters to conduct all due
diligence which they may reasonably require in order to fulfill their obligations as
underwriters and in order to enable the Underwriters responsibly to execute the
certificates required to be executed by them in the Prospectuses or in any
Supplementary Material. Without limiting the generality of the foregoing, the
Corporation shall make available its directors, senior management, auditors,
independent engineers, legal counsel and other experts to be available, to answer any
questions which the Underwriters may have and to participate in one or more due
diligence sessions to be held prior to the Closing Time (collectively, the “Due
Diligence Session”). The Underwriters shall distribute a list of written questions
to be answered in advance of such Due Diligence Session and the Corporation shall
provide written responses to such questions and shall use its commercially reasonable
efforts to have its auditors, independent engineers, legal counsel and other experts
provide written responses to such questions in advance of the Due Diligence Session.
	 
	 	(g)	 	The Corporation shall, in cooperation with the Underwriters, take such action
as the Underwriters may reasonably request to qualify the Offered Securities (other
than the Flow-Through Common Shares) for offering and sale under the applicable
Securities Laws of such states of the United States as the Underwriters may designate
and maintain such qualification in effect for so long as shall be necessary to effect
the distribution of the Offered Securities (other than the Flow-Through Common Shares)
as contemplated hereby; provided, however, that with respect to state securities law
qualifications, the Corporation shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation or as a dealer in securities
in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in
any jurisdiction in which it is not otherwise so subjected.

 

- 12 -

	 	(h)	 	Until the distribution of the Offered Securities shall have been completed, the
Corporation shall promptly take or cause to be taken all additional steps and
proceedings that from time to time may be required under the Securities Laws to
continue to qualify the Offered Securities for distribution in all of the Qualifying
Provinces and to qualify the Offered Securities (other than the Flow-Through Common
Shares) for distribution in the United States or, in the event that the Offered
Securities have, for any reason, ceased so to qualify, to again qualify the Offered
Securities .

4. Delivery of Registration Statement, Prospectus and Related Documents

     The Corporation shall deliver or cause to be delivered without charge to the Underwriters and
the Underwriters’ counsel the documents set out below at the respective times indicated:

	 	(a)	 	prior to or contemporaneously with the execution of this agreement:

	 	(i)	 	copies of each of the Canadian Prospectus and the Canadian
Preliminary Prospectus Supplement signed as required under applicable Canadian
Securities Law;
	 
	 	(ii)	 	copies of the Registration Statement signed as required by the
applicable Securities Laws;
	 
	 	(iii)	 	copies of the U.S. Preliminary Prospectus Supplement; and
	 
	 	(iv)	 	copies of any documents incorporated by reference in the
Registration Statement and the Prospectuses which have not previously been
delivered to the Underwriters;

	 	(b)	 	as soon as they are available, copies of any Supplementary Material, signed as
required by the Securities Laws and including, in each case, copies of any documents
incorporated by reference therein which have not been previously delivered to the
Underwriters;
	 
	 	(c)	 	at the time of the execution of this agreement, a “comfort letter” from the
Corporation’s auditors, dated such date, addressed to the Underwriters and satisfactory
in form and substance to the Underwriters and the Underwriters’ counsel, acting
reasonably, confirming that such firm is an “independent registered accounting firm”
with respect to the Corporation and its Subsidiaries within the meaning of the
Securities Act and the SEC Rules and Regulations and Public Company Accounting
Oversight Board (United States) and “independent” with respect to the Corporation for
the purposes of the ASA and to the effect that they have carried out certain procedures
performed for the purposes of comparing certain specified financial information
contained or incorporated by reference in the Registration Statement, the Disclosure
Package and the Prospectuses with indicated amounts in the financial statements or
accounting records of the Corporation and have found such information to be in
agreement, which comfort letter shall be based on the applicable auditors’ review
having a cut-off date of not more than two Business Days prior to the date of this
Agreement;

     Comfort letters similar to the foregoing shall be provided to the Underwriters with respect to
any Supplementary Material and any other relevant document at the time the same is presented to the
Underwriters for their signature or, if the Underwriters’ signature is not required, at the time
the same is

 

- 13 -

filed. All such letters shall be in form and substance acceptable to the Underwriters
and the Underwriters’ counsel, acting reasonably.

     The deliveries referred to in subsections 4(a) and (b) shall also constitute the Corporation’s
consent to the use by the Underwriters and other members of the Selling Dealer Group of the
Registration Statement, the Disclosure Package and the Prospectuses, the Documents, the
Prospectuses and any Supplementary Material in connection with the offering and sale of the Offered
Securities.

5. Commercial Copies

	 	(a)	 	The Corporation shall, as soon as possible but in any event not later than noon
(local time at the place of delivery) on the Business Day following the date of the
filing of the Canadian Prospectus Supplement and the U.S. Prospectus Supplement, with
the Securities Commissions and no later than noon (local time) on the first Business
Day after the execution of any Supplementary Material in connection with the
Prospectuses, cause to be delivered to the Underwriters, without charge, commercial
copies of the Prospectuses or such Supplementary Material in such numbers and in such
cities as the Underwriters may reasonably request by oral or written instructions to
the Corporation or the printer thereof given no later than the time when the
Corporation authorizes the printing of the commercial copies of such documents.

	 	(b)	 	The Corporation shall cause to be provided to the Underwriters such number of
copies of any documents incorporated by reference in the Prospectuses or any
Supplementary Materials as the Underwriters may reasonably request.

6. Material Change and Certain Other Covenants

	 	(a)	 	During the period of distribution of the Offered Securities, the Corporation
will promptly inform the Underwriters in writing of the full particulars of:

	 	(i)	 	any material change (actual, anticipated or threatened) in or
affecting the business, operations, revenues, capital, properties, assets,
liabilities (absolute, accrued, contingent or otherwise), condition (financial
or otherwise) or results of operations of the Corporation;
	 
	 	(ii)	 	any change in any material fact contained or referred to in the
Registration Statement, the Disclosure Package and the Prospectuses or any
Supplementary Material; and
	 
	 	(iii)	 	the occurrence or discovery of a material fact or event which,
in any such case, is, or may be, of such a nature as to:

	 	(A)	 	render the Registration Statement, the
Disclosure Package and the Prospectuses or any Supplementary Material
untrue, false or misleading in any material respect;
	 
	 	(B)	 	result in a misrepresentation in the
Registration Statement, the Disclosure Package and the Prospectuses or
any Supplementary Material; or

 

- 14 -

	 	(C)	 	result in the Registration Statement, the
Disclosure Package and the Prospectuses or any Supplementary Material
not complying in any material respect with the Securities Laws,

	 	 	 	provided that if the Corporation is uncertain as to whether a material change,
change, occurrence or event of the nature referred to in this section has occurred
or been discovered, the Corporation shall promptly inform the Underwriters of the
full particulars of the occurrence giving rise to the uncertainty and shall consult
with the Underwriters as to whether the occurrence is of such nature.
	 
	 	(b)	 	During the period of distribution of the Offered Securities, the Corporation
will promptly inform the Underwriters in writing of the full particulars of:

	 	(i)	 	any request of any Securities Commission, the SEC or similar
regulatory authority for any amendment to, or to suspend or prevent the use of,
the Registration Statement, Disclosure Package and the Prospectuses, or any
other part of the Public Record or for any additional information;
	 
	 	(ii)	 	the issuance by any Securities Commission, the SEC or similar
regulatory authority, the Exchange or any other competent authority of any
order to cease or suspend trading of any securities of the Corporation or of
the institution or threat of institution of any proceedings for that purpose;
and
	 
	 	(iii)	 	the receipt by the Corporation of any communication from any
Securities Commission, the SEC or similar regulatory authority, the Exchange or
any other competent authority relating to the Registration Statement, the
Disclosure Package and the Prospectuses or any other part of the Public Record
or the distribution of the Offered Securities.

	 	(c)	 	The Corporation will promptly comply to the reasonable satisfaction of the
Underwriters and the Underwriters’ counsel with applicable Securities Laws with respect
to any material change, change, occurrence or event of the nature referred to in
subsections 6(a) or 6(b) above and the Corporation will prepare and file promptly at
the Underwriters’ request any amendment to the Disclosure Package, the Prospectuses,
the Registration Statement or Supplementary Material as may be required under
Securities Laws; provided that the Corporation shall have allowed the Underwriters and
the Underwriters’ counsel to participate fully in the preparation of any Supplementary
Material, to have reviewed any other documents incorporated by reference therein and
conduct all due diligence investigations which the Underwriters may reasonably require
in order to fulfill their obligations as underwriters and in order to enable the
Underwriters responsibly to execute the certificate required to be executed by them in,
or in connection with, any Supplementary Material, such approval not to be unreasonably
withheld and to be provided in a timely manner. The Corporation shall further promptly
deliver to each of the Underwriters and the Underwriters’ counsel a copy of each
Supplementary Material as filed with the Securities Commissions, and of letters with
respect to each such Supplementary Material substantially similar to those referred to
in section 4 above.
	 
	 	(d)	 	During the period of distribution of the Offered Securities, the Corporation
will promptly provide to the Underwriters, for review by the Underwriters and the
Underwriters’ counsel, prior to filing or issuance:

 

- 15 -

	 	(i)	 	any financial statement of the Corporation;
	 
	 	(ii)	 	any proposed document, including without limitation any
amendment to any document, which may be incorporated, or deemed to be
incorporated, by reference in the Registration Statement, the Preliminary
Prospectus or the Prospectuses; and
	 
	 	(iii)	 	any press release of the Corporation.

	 	(e)	 	The Corporation agrees to fulfill its obligations and comply with the terms and
conditions of the Flow-Through Subscription Agreements and agrees that the subscription
funds for the Flow-Through Common Shares will be expended in accordance with the terms
of the Flow-Through Subscription Agreements and the provisions hereof.

7. Representations and Warranties of the Corporation

	 	(a)	 	Each delivery of the Prospectuses, the Prospectus Supplements and any
Supplementary Material pursuant to section 4 above shall constitute a representation
and warranty to the Underwriters by the Corporation (and the Corporation hereby
acknowledges that each of the Underwriters is relying on such representations and
warranties in entering into this agreement) that:

	 	(i)	 	all of the information and statements (except information and
statements furnished by and relating solely to the Underwriters) contained in
the Registration Statement, the Disclosure Package and the Prospectuses or any
Supplementary Material, as applicable, including, without limitation, the
documents incorporated by reference, as the case may be, at the respective
dates of such documents and at the Closing Date:

	 	(A)	 	conform in all material respects to the
requirements of the applicable Securities Laws, including without
limitation the Securities Act and the SEC Rules and Regulations;
	 
	 	(B)	 	contain no misrepresentation;
	 
	 	(C)	 	did not and will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and
	 
	 	(D)	 	constitute full, true and plain disclosure of
all material facts relating to the Corporation and the Offered
Securities;

	 	(ii)	 	the Canadian Prospectus, or any Supplementary Material, as
applicable, including, without limitation, the documents incorporated by
reference, as the case may be, complies in all material respects with the applicable
Securities Laws;
	 
	 	(iii)	 	as of the Applicable Time, the Disclosure Package does not and
will not contain any untrue statement of a material fact or omit to state any
material fact 

 

- 16 -

	 	 	 	necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; and

	 	(iv)	 	except as is disclosed in the Registration Statement, the
Disclosure Package and the Prospectuses, there has been no intervening material
change (adverse material change until filing of the Prospectuses) (actual,
proposed or prospective, whether financial or otherwise), from the date of the
Registration Statement, the Disclosure Package and the Prospectuses to the time
of delivery thereof, in the business, operations, revenues, capital,
properties, assets, liabilities (absolute, accrued, contingent or otherwise),
condition (financial or otherwise) or results of operations of the Corporation.

	 	(b)	 	In addition to the representations and warranties contained in subsection 7(a)
hereof, the Corporation represents and warrants to the Underwriters, and acknowledges
that each of the Underwriters is relying upon such representations and warranties in
entering into this agreement, that:

	 	(i)	 	each of the Corporation and each Material Subsidiary has been
duly incorporated, continued or organized, as the case may be, and is validly
existing under the laws of the jurisdiction of its incorporation, continuance
or organization and has all requisite corporate authority and power to carry on
its businesses, as now conducted and as presently proposed to be conducted by
it, and to own its assets;
	 
	 	(ii)	 	the only Subsidiaries of the Corporation are Oilsands Quest
Sask Inc. (“OQI Sask”), Township Petroleum Corporation (“TPC”),
Western Petrochemicals Corp. (“WPC”), Stripper Energy Service Inc.
(“Stripper”) and 1291239 Alberta Ltd. (“1291235”) and the only
Material Subsidiary of the Corporation is OQI Sask;
	 
	 	(iii)	 	each of the Corporation and its Material Subsidiaries is
qualified to carry on business under the laws of each jurisdiction where it
carries on its business;
	 
	 	(iv)	 	the Corporation has full corporate power and authority to enter
into this agreement, the Flow-Through Subscription Agreements, the OQI Sask
Flow-Through Subscription Agreement and the Warrant Indenture and to perform
its obligations set out herein and therein (including, without limitation, to
issue the Offered Securities), and this agreement is and at the Closing Time,
the Flow-Through Subscription Agreements, the OQI Sask Flow-Through
Subscription Agreement and the Warrant Indenture will have been duly
authorized, executed and delivered by the Corporation and will be valid and
binding obligations of the Corporation enforceable against the Corporation in
accordance with their respective terms subject to laws relating to creditors’
rights generally and except as rights to indemnity may be limited by applicable
law;
	 
	 	(v)	 	the sale and delivery of the Offered Securities by the
Corporation:

	 	(A)	 	have been duly authorized by all necessary
action on the part of the Corporation;

 

- 17 -

	 	(B)	 	do not require the consent, approval,
authorization, registration or qualification of or with any
governmental authority, stock exchange, Securities Commission, the SEC
or other regulatory authority or other similar third party (except (A)
those which have been obtained or (B) those as may be required (and
will be obtained prior to the Closing Time) under applicable
Securities Laws);
	 
	 	(C)	 	do not and will not (or will not with the
giving of notice, the lapse of time or the happening of any other
event or condition) result in a breach or a violation of, or conflict
with or result in a default under (A) any of the terms or provisions
of the articles or by-laws of the Corporation, (B) any resolution of
the board of directors, (or any committee thereof) or securityholders
of the Corporation, or (C) any judgment, decree, order or award of any
court, governmental body or arbitrator having jurisdiction over the
Corporation, or any agreement, license or permit to which the
Corporation is a party;
	 
	 	(D)	 	do not and will not result in the violation
of any law; and
	 
	 	(E)	 	do not and will not give rise to any lien on
or with respect to the properties or assets now owned or hereafter
acquired by the Corporation or the acceleration of or the maturity of
any indebtedness or other liabilities or obligations under any
indenture, mortgage, lease, agreement or instrument binding or
affecting any of them or any of its properties;

	 	(vi)	 	neither the Corporation nor any Material Subsidiary is a party
to any material mortgage, note, indenture, deed of trust, contract, agreement,
instrument, lease, license or other document other than as described in the
Registration Statement, the Disclosure Package and the Prospectuses;
	 
	 	(vii)	 	each of the Corporation and its Subsidiaries has conducted and
is conducting its business in compliance in all respects with all applicable
laws, rules and regulations of each jurisdiction in which its business is
carried on and holds all permits, licenses, consents and approvals to enable
its business to be carried on as now conducted and its property and assets to
be owned, leased and operated, except in each case where the failure to be in
such compliance or to hold such permits would not have a Material Adverse
Effect on the Corporation and its Subsidiaries (taken as a whole) and all such
permits, licenses, consents and approvals are in good standing and none
contains any term, provision, condition or limitation which will have a
Material Adverse Effect on the Corporation and its Subsidiaries (taken as a
whole) and the Corporation is not aware of any fact or matter which would
reasonably be expected to result in the termination of any such permit or
otherwise have a Material Adverse Effect on the Corporation and its
Subsidiaries (taken as a whole) ;
	 
	 	(viii)	 	neither the Corporation nor any Material Subsidiary is in breach or
violation of any of the terms, conditions or provisions of the articles,
constating documents, by-laws or resolutions of the shareholders or directors
(or any committee thereof) of the Corporation or the Material Subsidiary, as
the case may be;

 

- 18 -

	 	(ix)	 	neither of the Corporation nor any Subsidiary is in breach of
violation of:

	 	(A)	 	any permits, licenses, consents and approvals
issued to the Corporation or the Subsidiary, as the case may be, or
any agreement, indenture, lease, document or instrument to which the
Corporation or the Subsidiary is a party or by which it is
contractually bound, except for any breach or violations which would
not have a Material Adverse Effect on the Corporation and its
Subsidiaries (taken as a whole); or
	 
	 	(B)	 	any statute, regulation or rule applicable to
the Corporation or any Subsidiary or any judgment, order or decree of
any governmental body, agency or court having jurisdiction over the
Corporation or any Subsidiary, except for any breach or violations
which would not have a Material Adverse Effect on the Corporation and
its Subsidiaries (taken as a whole);

	 	(x)	 	to the knowledge of the senior management of the Corporation,
after reasonable inquiry, there is no person who as of the date hereof directly
or indirectly will beneficially own or have control or direction over greater
than 10% of the voting rights attached to all outstanding voting securities of
the Corporation other than as disclosed in the Registration Statement, the
Disclosure Package, and the Prospectus;
	 
	 	(xi)	 	the Corporation is not in default or breach of, and the
execution and delivery of, and the performance of and compliance with the terms
of this agreement, the Flow-Through Subscription Agreement, the OQI Sask
Flow-Through Subscription Agreement, the Warrant Indenture or any of the
transactions contemplated hereby or thereby by the Corporation, does not and
will not result in any breach of or constitute a default under, and does not
and will not create a state of facts which, after notice or lapse of time or
both, would result in a breach of or constitute a default under, any term or
provision of the articles, by-laws or resolutions of shareholders or directors
of the Corporation, or any indenture, mortgage, note, contract, agreement
(written or oral), instrument, lease or other document to which the Corporation
is a party or by which it is bound, or any law, judgment, decree, order,
statute, rule or regulation applicable to the Corporation, except for any
breach or default which would not have a Material Adverse Effect on the
Corporation and its Subsidiaries (taken as a whole);
	 
	 	(xii)	 	since April 30, 2007 there have been no facts, transactions,
events or occurrences which, to the knowledge of the Corporation, could have a
Material Adverse Effect on the Corporation and its Subsidiaries (taken as a
whole) which have not been disclosed in the Registration Statement, the
Disclosure Package and the Prospectuses or in writing to the Underwriters;
	 
	 	(xiii)	 	the Financial Statements fairly present, in all material respects and in
accordance with generally accepted accounting principles in the United States
consistently applied, the financial position of the Corporation as at the dates
thereof for the periods then ended and reflect all liabilities (absolute,
accrued, contingent or otherwise) of the Corporation as at the dates thereof;

 

- 19 -

	 	(xiv)	 	except as disclosed in the Registration Statement, the
Disclosure Package and the Prospectuses, each of the Corporation and its
Material Subsidiaries has carried on business in the ordinary course;
	 
	 	(xv)	 	there are no actions, suits, proceedings or inquiries pending
or, to the knowledge of the Corporation, threatened against or affecting the
Corporation or any of its Material Subsidiaries at law or in equity or before
or by any federal, provincial, municipal or other governmental department,
commission, board, bureau, agency or instrumentality which, in any way could
reasonably be expected to have a Material Adverse Effect on the Corporation and
its Subsidiaries (taken as a whole) or which affects or may affect the
distribution of the Offered Securities and the Corporation is not aware of any
existing ground on which such action, suit, proceeding or inquiry might be
commenced with any reasonable likelihood of success;
	 
	 	(xvi)	 	the authorized capital of the Corporation consists of 500
million Common Shares and 10 million preferred shares, issuable in series, and
as of November 15, 2007 the issued and outstanding capital of the Corporation
consists of 190,888,781 Common Shares, and one Series B Preferred Share, each
of which has been validly issued as a fully paid and non-assessable share in
the capital of the Corporation;
	 
	 	(xvii)	 	except as disclosed in the Public Record, no person, firm or corporation
holds any securities convertible or exchangeable into securities of the
Corporation or any Material Subsidiary or has any agreement, warrant, option,
right or privilege (whether pre-emptive or contractual) being or capable of
becoming an agreement, warrant, option or right for the purchase, subscription
or issuance of any unissued Common Shares;
	 
	 	(xviii)	 	except as disclosed in the Public Record the Corporation does not, directly
or indirectly, hold any shares, other securities, options or rights to
subscribe for shares or other securities of any corporation, partnership or
other entity except for the Subsidiaries;
	 
	 	(xix)	 	Computershare Trust Company of Canada acts as the transfer
agent and registrar for the Common Shares;
	 
	 	(xx)	 	none of the SEC, a Securities Commission, other securities
commission or similar regulatory authority or exchange in the Qualifying
Provinces or the United States has issued any order which is currently
outstanding preventing or suspending trading in any securities of the
Corporation, no such proceeding is, to the knowledge of the Corporation,
pending, contemplated or threatened and the Corporation is not in default of
any requirement of Securities Laws in the Qualifying Provinces or the United
States;
	 
	 	(xxi)	 	there is not in the constating documents or by-laws of the
Corporation or any Material Subsidiary, or in any agreement, mortgage, note,
debenture, indenture or other instrument or document to which the Corporation
or any Material Subsidiary is a party, any restriction upon or impediment to
the declaration of dividends by its directors or payment of dividends by its
holders of its shares;

 

- 20 -

	 	(xxii)	 	the Corporation is a reporting issuer in good standing under the laws of
Alberta;
	 
	 	(xxiii)	 	excepting out those things and matters which are not material to the
Corporation or any of its Material Subsidiaries, the Corporation and each of
its Material Subsidiaries has duly and on a timely basis filed all tax returns
required to be filed by it, has paid all taxes due and payable by it and has
paid all assessments and re-assessments and all other taxes, governmental
charges, penalties, interest and other fines due and payable by it and which
are claimed by any governmental authority to be due and owing and adequate
provision has been made for taxes payable for any completed fiscal period for
which tax returns are not yet required and there are no agreements, waivers, or
other arrangements providing for an extension of time with respect to the
filing of any tax return or payment of any tax, governmental charge or
deficiency by the Corporation or any Material Subsidiary and there are no
actions, suits, proceedings, investigations or claims or, to the knowledge of
the Corporation, threatened or pending against the Corporation or any Material
Subsidiary in respect of taxes, governmental charges or assessments or any
matters under discussion with any governmental authority relating to taxes,
governmental charges or assessments asserted by any such authority;
	 
	 	(xxiv)	 	Each of Pannell Kerr Forster and KPMG LLP are independent with respect to the
Corporation as required by applicable Canadian Securities Laws and the rules of
the Exchange and there has not been any reportable disagreement (within the
meaning of section 4.11 of National Instrument No. 51-102 of the Canadian
Securities Administrators) with the auditors of the Corporation since
incorporation of the Corporation;
	 
	 	(xxv)	 	the Corporation and each Material Subsidiary maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that in all material respects:

	 	(A)	 	transactions are executed in accordance with
management’s general or specific authorization;
	 
	 	(B)	 	transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain
accountability for assets; and
	 
	 	(C)	 	access to assets is permitted only in
accordance with management’s general or specific authorization.

	 	(xxvi)	 	the information and statements set forth in the Public Record were true,
correct and complete and did not contain any misrepresentation as at the date
of such information or statement and the Corporation has not filed any confidential
material change reports which continue to be confidential;
	 
	 	(xxvii)	 	as at the date of this agreement, no insider, other than as disclosed in
writing to the Underwriters, has advised the Corporation of its intention to
sell any securities of the Corporation held by it;

 

 

- 21 -

	 	(xxviii)	 	the representations and warranties made by the Corporation in the
Flow-Through Subscription Agreements will be true and correct as of the date at
which they are made;
	 
	 	(xxix)	 	each of the Corporation and its Material Subsidiaries owns or possesses, or
can acquire on reasonable terms, adequate patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names or other intellectual
property (collectively, “Intellectual Property”) necessary to carry on
the business now operated by it and neither the Corporation or any Subsidiary
has received any notice and is not otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any Intellectual
Property invalid or inadequate to protect the interest of the Corporation or
its Subsidiaries therein, and which infringement or conflict (if the subject of
any unfavourable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, would result in a Material Adverse Effect on the
Corporation or its Subsidiaries (taken as a whole);
	 
	 	(xxx)	 	each of the Corporation and its Subsidiaries has good and
marketable title to its property and assets free and clear of all liens and
defects that would affect the value thereof or interfere with the use made or
to be made thereof by the Corporation or such Subsidiary, as the case may be,
except for such liens and defects which would not, singly or in the aggregate,
result in a Material Adverse Effect on the Corporation or its Subsidiaries
(take as a whole), and each of the Corporation and its Subsidiaries holds all
of its leased real or personal property under valid and enforceable leases with
no exceptions that would interfere with the use made or to be made thereof by
the Corporation or such Subsidiary, as the case may be, except for such
exceptions which would not, singly or in the aggregate, result in a Material
Adverse Effect on the Corporation as its Subsidiaries (taken as a whole), and
neither the Corporation or any of its Subsidiaries, as the case may be, has
received notice of any claim of any sort that has been asserted by any person
adverse to the rights of the Corporation or any of its Subsidiaries, as the
case may be, to the continuing possession and use of the leased or subleased
properties except for such claims which would not, singly or in the aggregate,
result in a Material Adverse Effect on the Corporation on its Subsidiaries
(taken as a whole) and except as disclosed in writing to the Underwriters, each
of the Corporation and its Material Subsidiaries owns or leases all such
properties as are necessary to its business as currently conducted or proposed
to be conducted;
	 
	 	(xxxi)	 	the Corporation and each Material Subsidiary made available to McDaniel prior
to the issuance of the McDaniel Report all information requested by McDaniel,
which information did not contain any misrepresentation; the Corporation has no
knowledge of any adverse material change in any information provided to
McDaniel since the date that such information was so provided; the Corporation
believes that the McDaniel Report accurately estimates the discovered resources
at the Axe Lake Discovery (as that term is used in the

 

- 22 -

	 	 	 	McDaniel Report) as at the effective date thereof based upon information available
in respect of such resources at the time such report was prepared and the
assumptions contained therein; and the Corporation has no knowledge of any
adverse material change in any resource information upon which the McDaniel
Report is based;

	 	(xxxii)	 	except for the Underwriters, there is no other person, firm or corporation
acting or purporting to act at the request of the Corporation who is entitled
to any brokerage, finder’s, underwriter’s or agency fee in connection with the
transactions contemplated herein;
	 
	 	(xxxiii)	 	no authorization, approval or consent of any court or governmental
authority or agency is required to be obtained by the Corporation in connection
with the sale and delivery of the Offered Securities except as contemplated
hereby;
	 
	 	(xxxiv)	 	the minute books for the Corporation and each of its Material Subsidiaries
contain full, true and correct copies of the constating documents of the
Corporation and each of its Material Subsidiaries, as the case may be, and
contain copies or drafts of all minutes of all meetings and all consent
resolutions of the directors, committees of the directors and shareholders of
the Corporation and each of its Material Subsidiaries, as the case may be, and
all such meetings were duly called, properly held and all such consent
resolutions were properly obtained;
	 
	 	(xxxv)	 	the issued and outstanding Common Shares are listed and posted for trading on
the Exchange and the Corporation is in material compliance with the by-laws,
rules and regulations of the Exchange;
	 
	 	(xxxvi)	 	to the knowledge of the Corporation, none of its directors or officers are
subject to an order or ruling of any securities regulatory authority or stock
exchange prohibiting such individual from acting as a director or officer of a
public company or of a company listed on a particular stock exchange;
	 
	 	(xxxvii)	 	the Corporation and each Material Subsidiary is insured by insurers of
recognized financial responsibly against such losses and risks and in such
amounts as are prudent and customary in the businesses in which it is engaged;
all policies of insurance insuring the Corporation and each Material Subsidiary
or its businesses, assets, employees, officers and directors are in full force
and effect, except where the failure to be in full force and effect would not
have an adverse material effect on the business, operations, capital or
condition (financial or otherwise) of the Corporation and its Subsidiaries
(taken as a whole) or their assets;
	 
	 	(xxxviii)	 	the Corporation has full corporate power and authority to issue the
Flow-Through Common Shares and renounce to the Subscribers Qualifying
Expenditures in an amount equal to the Commitment Amount and, at the Closing
Time, the Flow-Through Common Shares will be duly and validly created and
issued and will be outstanding as fully paid and non-assessable Common Shares
in the share capital of the Corporation;

 

- 23 -

	 	(xxxix)	 	each of the Corporation and OQI Sask is a “principal business corporation”
as defined in subsection 66(15) of the Tax Act;
	 
	 	(xl)	 	except as the result of any agreement or arrangement to which
the Corporation is not a party and of which it has no knowledge, upon issuance
pursuant to the provisions of the Flow-Through Subscription Agreements, the
Flow-Through Common Shares will be “flow-through shares” as defined in
subsection 66(15) of the Tax Act and will not be “prescribed shares” for the
purpose of Regulation 6202.1 to the Tax Act;
	 
	 	(xli)	 	except to the extent that any violation or other matter
referred to in this subparagraph does not have a Material Adverse Effect on the
Corporation and its Subsidiaries (taken as a whole):

	 	(A)	 	the Corporation and each Subsidiary is not in
violation of any applicable federal, provincial, state, municipal or
local laws, regulations, orders, government decrees or ordinances with
respect to environmental, health or safety matters (collectively,
“Environmental Laws”);
	 
	 	(B)	 	the Corporation and each Subsidiary has
operated its business at all times and has received, handled, used,
stored, treated, shipped and disposed of all contaminants without
violation of Environmental Laws;
	 
	 	(C)	 	except as have been disclosed in the
Registration Statement, the Disclosure Package and the Prospectuses,
there have been no spills, releases, deposits or discharges of
hazardous or toxic substances, contaminants or wastes into the earth,
air or into any body of water or any municipal or other sewer or drain
water systems by the Corporation and each Subsidiary that have not
been remedied;
	 
	 	(D)	 	no orders, directions or notices have been
issued and remain outstanding pursuant to any Environmental Laws
relating to the business or assets of the Corporation and each
Subsidiary;
	 
	 	(E)	 	the Corporation and each Subsidiary has not
failed to report to the proper federal, provincial, municipal or other
political subdivision, government, department, commission, board,
bureau, agency or instrumentality, domestic or foreign
(“Government Authority”) the occurrence of any event which is
required to be so reported by any Environmental Law; and
	 
	 	(F)	 	the Corporation and each Subsidiary holds, or
will hold at the required time, all licences, permits and approvals
required under any Environmental Laws in connection with the operation
of its business and the ownership and use of its assets, all such
licences, permits and approvals are in full force and effect, and
except for notifications and conditions of general application to
assets of the type owned by it and the Corporation and each Subsidiary
has not received any notification

 

- 24 -

	 	 	 	pursuant to any Environmental Laws that any work, repairs,
constructions or capital expenditures are required to be made by
it as a condition of continued compliance with any Environmental
Laws, or any licence, permit or approval issued pursuant thereto,
or that any licence, permit or approval referred to above is about
to be reviewed, made subject to limitation or conditions, revoked,
withdrawn or terminated;

	 	(xlii)	 	any and all operations of the Corporation and each Subsidiary and, to the
knowledge of the Corporation, any and all operations by third parties, on or in
respect of the assets and properties of the Corporation and each Subsidiary,
have been conducted in accordance with good oil and gas and mining industry
practices and in material compliance with applicable laws, rules, regulations,
orders and directions of governmental and other competent authorities;
	 
	 	(xliii)	 	in respect of the assets and properties of the Corporation and each
Subsidiary that are operated by it, if any, it holds all valid licenses,
permits and similar rights and privileges that are required and necessary under
applicable law to operate such assets and properties as presently operated;
	 
	 	(xliv)	 	the Common Shares and Warrants included in the Offered Securities and the
Common Shares to be issued upon exercise of the Warrants have been duly and
validly authorized and reserved and, when issued and delivered against payment
therefor, will be duly and validly issued, fully paid and non-assessable and
free of any preemptive or similar rights and will conform to the description
thereof contained in the Registration Statement, the Disclosure Package and the
Prospectuses;
	 
	 	(xlv)	 	no officer, director, employee or any other person not dealing
at arm’s length with the Corporation and each Subsidiary or, to the knowledge
of the Corporation, any associate or affiliate of any such person, owns, has or
is entitled to any royalty, net profits interest, carried interest, licensing
fee or any other encumbrances or claims of any nature whatsoever which are
based on the Corporation’s or such Subsidiary’s revenues;
	 
	 	(xlvi)	 	the Corporation and each Material Subsidiary is not a party to or bound by
any agreement of guarantee, indemnification (other than an indemnification of
directors and officers in accordance with the by-laws of the Corporation and
applicable laws, indemnification agreements or covenants that are entered into
arising in the ordinary course of business, including operating and similar
agreements, indemnification and contribution provisions in agency and
underwriting agreements and in transfer agency agreements) or any other like
commitment of the obligations, liabilities (contingent or otherwise) or
indebtedness of any other person;
	 
	 	(xlvii)	 	other than as set forth in the Registration Statement, the Disclosure
Package or the Prospectuses, the Corporation and each Material Subsidiary does
not have any loans or other indebtedness outstanding which have been made to or
from any of its shareholders, officers, directors or employees or any other
person not dealing at arm’s length with the Corporation that are currently
outstanding;

 

- 25 -

	 	(xlviii)	 	none of the directors, officers or employees of the Corporation or any
Material Subsidiary, any person who owns, directly or indirectly, more than 10%
of any class of securities of the Corporation, or any associate or affiliate of
any of the foregoing, had or has any material interest, direct or indirect, in
any material transaction or any proposed material transaction with the
Corporation or any Material Subsidiary which, as the case may be, materially
affects, is material to or will materially affect the Corporation and its
Subsidiaries (taken as a whole);
	 
	 	(xlix)	 	the Corporation has filed all reports required to be filed with the SEC
pursuant to Section 13 of the U.S. Exchange Act, and the Common Shares are
listed on the Exchange;
	 
	 	(l)	 	the responses given by the Corporation and its
directors and officers in the Due Diligence Session held on November 18, 2007
(and any due diligence sessions held subsequent thereto) were true and correct
where they relate to matters of fact, and the Corporation and its directors and
officers have responded in as thorough and complete a fashion as possible and
where the responses reflect the opinion or view of the Corporation or its
directors or officers, such opinions or views were honestly held at the time
they were given;
	 
	 	(li)	 	neither the Corporation nor, to its knowledge, any of its
shareholders is a party to any unanimous shareholders agreement, pooling
agreement, voting trust or other similar type of arrangements in respect of
outstanding securities of the Corporation, other than the Voting and Exchange
Trust Agreement respecting the exchangeable shares of OQI Sask;
	 
	 	(lii)	 	OQI Sask has full corporate power and authority to issue the
OQI Sask Flow-Through Shares and renounce to the Corporation OQI Sask
Qualifying Expenditures in an amount equal to the OQI Sask Commitment Amount
and, at the Closing Time, the OQI Sask Flow-Through Shares will be duly and
validly created and issued and will be outstanding as fully paid and
non-assessable securities in the capital of OQI;
	 
	 	(liii)	 	OQI Sask has been duly incorporated and is validly existing under the laws of
its jurisdiction of incorporation and has all the requisite corporate power and
authority to carry on its business, as now conducted and as presently proposed
to be conducted, and to own its properties and assets in each jurisdiction in
which it carries business and owns properties or assets;
	 
	 	(liv)	 	as of the date hereof, the authorized capital of OQI Sask
consists of an unlimited number of OQI Sask Common Shares, an unlimited number
of preferred shares issuable in series; and an unlimited number of Exchangeable
Shares; there are 14,976,412 Common Shares (owned by the Corporation),
8,900,747 Series 2 Preferred Shares (owned by the Corporation), 62,266,404
Exchangeable Shares (32,996,669 owned by the Corporation) and 1,730,000 Options
outstanding to acquire 14,237,900 Exchangeable Shares (exchange ratio 8.23).
Except as described in the immediately preceding sentence, there are no other
issued or outstanding securities of OQI Sask and, without limitation, there are
no options, warrants, conversion privileges or other rights, agreements,
arrangements or commitments obligating OQI Sask to issue or sell

 

- 26 -

	 	 	 	any shares of any capital stock of OQI Sask or securities or obligations of
any kind convertible into or exchangeable for any shares of capital stock
of OQI Sask, nor are there outstanding any stock appreciation rights,
phantom equity or similar rights, agreements, arrangements or commitments
based upon the book value, income or any other attribute of OQI Sask;

	 	(lv)	 	OQI Sask is not in default or breach of, and the execution and
delivery of the OQI Sask Flow-Through Subscription Agreement, and the sale of
the OQI Sask Flow-Through Shares by OQI Sask will not result in any breach of,
or be in conflict with or constitute a material default under, or create a
state of facts which, after notice or lapse of time, or both, would constitute
a material default under any term or provisions of the constating documents,
by-laws or resolutions of the directors and shareholders of OQI Sask, or any
mortgage, note, indenture, contract, agreement (written or oral), instrument,
lease or other document to which OQI Sask is a party or by which it is bound,
or any judgment, decree, order, statute, rule or regulation applicable to OQI
Sask, which default or breach might reasonably be expected to materially
adversely affect the business, operations, capital or condition (financial or
otherwise) of OQI Sask or its properties or assets;
	 
	 	(lvi)	 	no Securities Commission or any other similar regulatory
authority has issued any order preventing or suspending trading of any
securities of OQI Sask, no such proceeding is, to the knowledge of OQI Sask,
pending, contemplated or threatened, nor is OQI Sask in default of any
requirement of applicable Securities Laws that would have a material affect on
the distribution of the OQI Sask Flow-Through Shares from OQI Sask to the
Corporation;
	 
	 	(lvii)	 	OQI Sask has full corporate power and authority to enter into the OQI Sask
Flow-Through Subscription Agreement and to perform its obligations set out
therein and the OQI Sask Flow-Through Subscription Agreement will be at the
Closing Time duly authorized, executed and delivered by OQI Sask, and the OQI
Sask Flow-Through Subscription Agreement will be at the Closing Time a legal,
valid and binding obligation of OQI Sask enforceable against OQI Sask in
accordance with its terms, subject to the general qualifications that:

	 	(A)	 	enforceability may be limited by bankruptcy,
insolvency or other laws affecting creditors’ rights generally;
	 
	 	(B)	 	equitable remedies, including the remedies of
specific performance and injunctive relief, are available only in the
discretion of the court and the courts have statutory and inherent
powers to stay proceedings before them and the execution of judgments;
and
	 
	 	(C)	 	rights to indemnity and contribution
hereunder may be limited under applicable law;

	 	(lviii)	 	except as a result of any agreement to which OQI Sask is not a party and of
which it has no knowledge, upon issuance pursuant to the provisions of the OQI
Sask Flow-Through Subscription Agreement, the OQI Sask Flow-Through Shares will
be “flow-through shares” as defined in subsection 66(15) of the Tax

 

- 27 -

	 	 	 	Act and will not be “prescribed shares” for the purpose of Regulation
6202.1 of the Tax Act;

	 	(lix)	 	the representations and warranties made by OQI Sask in the OQI
Sask Flow-Through Subscription Agreement will be true and correct as of the
date at which they are made and as of the Closing Date;
	 
	 	(lx)	 	neither the Corporation nor OQI Sask has any reason to believe
that OQI Sask will be unable to incur during the OQI Sask Expenditure Period
and renounce to the Corporation OQI Sask Qualified Expenditures in the amount
equal to the OQI Sask Commitment Amount effective on or before the end of the
OQI Sask Expenditure Period;
	 
	 	(lxi)	 	neither the Corporation nor OQI Sask has any reason to expect
any reduction of OQI Sask Qualified Expenditures by virtue of subsection
66(12.73) of the Tax Act;
	 
	 	(lxii)	 	other than expenses to be renounced by December 31, 2007 in connection with
the issuances of “flow-through” shares in March and May of 2007 in an aggregate
amount not exceeding Cdn$26,500,000, all expenses in respect of
“flow-through” shares previously issued have been renounced to the subscribers therefore and
OQI Sask does not have any other obligations to renounce expenditures related
to “flow-through” securities;
	 
	 	(lxiii)	 	no authorization, approval or consent of any court or governmental authority
or agency is required to be obtained by OQI Sask in connection with the sale
and delivery of the OQI Sask Flow-Through Shares except as contemplated hereby;
and
	 
	 	(lxiv)	 	the minute books for OQI Sask contain full, true and correct copies of the
constating documents of OQI Sask and contain copies of all minutes of all
meetings and all consent resolutions of the directors, committees of the
directors and shareholders of OQI Sask and all such meetings were duly called,
properly held and all such consent resolutions were properly adopted.

8. Indemnity

	 	(a)	 	The Corporation shall indemnify and save each of the Underwriters, and each of
the Underwriters’ agents, directors, officers, affiliates and employees harmless
against and from all liabilities, claims, demands, losses (other than losses of
profit), costs (including, without limitation, legal fees and disbursements on a full
indemnity basis), damages and expenses to which the Underwriters, or any of the
Underwriters’ agents, directors, officers, affiliates or employees may be subject or
which the Underwriters, or any of the Underwriters’ agents, directors, officers,
shareholders or employees may suffer or incur, whether under the provisions of any
statute or otherwise, in any way caused by, or arising directly or indirectly from or
in consequence of:

	 	(i)	 	any information or statement contained in the Registration
Statement, the Disclosure Package or the Prospectuses or any Supplementary
Material or in any other document or material filed or delivered by or on
behalf of the

 

- 28 -

	 	 	 	Corporation pursuant hereto (other than any information or statement
relating solely to the Underwriters and furnished to the Corporation by the
Underwriters expressly for inclusion in the Registration Statement, the
Disclosure Package or the Prospectuses or any Supplementary Material or
such other document or material) which is or is alleged to be untrue or any
omission or alleged omission to provide any information or state any fact
(other than any information or fact relating solely to the Underwriters)
the omission of which makes or is alleged to make any such information or
statement untrue or misleading in light of the circumstances in which it
was made;

	 	(ii)	 	any misrepresentation or alleged misrepresentation (except a
misrepresentation which is based upon information relating solely to the
Underwriters and furnished to the Corporation by the Underwriters expressly for
inclusion in the Registration Statement, the Disclosure Package or the
Prospectuses or any Supplementary Material or in any document or other part of
the Public Record) contained in the Registration Statement, the Disclosure
Package, the Prospectuses, any Supplementary Material or in any other document
or any other part of the Public Record filed by or on behalf of the
Corporation;
	 
	 	(iii)	 	any prohibition or restriction of trading in the securities of
the Corporation or any prohibition or restriction affecting the distribution of
the Offered Securities imposed by any competent authority if such prohibition
or restriction is based on any misrepresentation or alleged misrepresentation
of a kind referred to in subsection 8(a)(ii);
	 
	 	(iv)	 	any order made or any inquiry, investigation (whether formal or
informal) or other proceeding commenced or threatened by any one or more
competent authorities (not based upon the activities or the alleged activities
of the Underwriters or their banking or Selling Dealer Group members, if any)
prohibiting, restricting, relating to or materially affecting the trading or
distribution of the Offered Securities; or
	 
	 	(v)	 	any breach of, default under or non-compliance by the
Corporation with any requirements of the applicable Securities Laws, the
by-laws, rules or regulations of the Exchange or any representation, warranty,
term or condition of this agreement or in any certificate or other document
delivered by or on behalf of the Corporation hereunder or pursuant hereto;

	 	 	 	except to the extent that any such liability, claim, demand, loss, cost, damage or
expense resulted from the Indemnified Person (defined in subsection 8(b) below)
acquiring or holding the Flow Through Common Shares as principal.
	 
	 	(b)	 	If any claim contemplated by subsection 8(a) shall be asserted against any of
the persons or corporations in respect of which indemnification is or might reasonably
be considered to be provided for in such subsections, such person or corporation (the
“Indemnified Person”) shall notify the Corporation (provided that failure to so
notify the Corporation of the nature of such claim in a timely fashion shall relieve
the Corporation of liability hereunder only if and to the extent that such failure
materially prejudices the Corporation’s ability to defend such claim) as soon as
possible of the nature of such claim and the Corporation shall be entitled (but not
required) to assume the defence of any suit

 

- 29 -

	 	 	 	brought to enforce such claim, provided however, that the defence shall be through
legal counsel selected by the Corporation and acceptable to the Indemnified Person
acting reasonably and that no admission of liability or settlement may be made by
the Corporation or the Indemnified Person without the prior written consent of the
other, such consent not to be unreasonably withheld. The Indemnified Person shall
have the right to retain its own counsel in any proceeding relating to a claim
contemplated by subsection 8(a) if:

	 	(i)	 	the Indemnified Person has been advised by counsel that there
may be a reasonable legal defense available to the Indemnified Person which is
different from or additional to a defense available to the Corporation and that
representation of the Indemnified Person and the Corporation by the same
counsel would be inappropriate due to the actual or potential differing
interests between them (in which case the Corporation shall not have the right
to assume the defense of such proceedings on the Indemnified Person’s behalf);
	 
	 	(ii)	 	the Corporation shall not have taken the defense of such
proceedings and employed counsel within ten days after notice has been given to
the Corporation of commencement of such proceedings; or
	 
	 	(iii)	 	the employment of such counsel has been authorized by the
Corporation in connection with the defense of such proceedings;

	 	 	 	and, in any such event, the reasonable fees and expenses of such Indemnified
Person’s counsel (on a solicitor and his client basis) shall be paid by the
Corporation, provided that the Corporation shall not, in connection with any one
such action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be liable
for the fees and expenses of more than one separate law firm (in addition to any
local counsel) for all such Indemnified Persons.
	 
	 	(c)	 	The Corporation hereby waives its rights to recover contribution from the
Underwriters with respect to any liability of the Corporation by reason of or arising
out of any misrepresentation in the Registration Statement, the Disclosure Package or
the Prospectuses or any Supplementary Material or any other part of the Public Record
provided, however, that such waiver shall not apply in respect of liability caused or
incurred by reason of any misrepresentation which is based upon information relating
solely to the Underwriters contained in such document and furnished to the Corporation
by the Underwriters expressly for inclusion in the Registration Statement, the
Disclosure Package or the Prospectuses or any Supplementary Material or any other part
of the Public Record.
	 
	 	(d)	 	If any legal proceedings shall be instituted against the Corporation in respect
of the Registration Statement, the Disclosure Package or the Prospectuses or any
Supplementary Material or any other part of the Public Record or the Offered Securities
or if any regulatory authority or stock exchange shall carry out an investigation of
the Corporation in respect of the Registration Statement, the Disclosure Package or the
Prospectuses or any Supplementary Material or any other part of the Public Record or
the Offered Securities and, in either case, any Indemnified Person is required to
testify, or respond to procedures designed to discover information, in connection with
or by reason of the services performed by the Underwriters hereunder, the Indemnified
Persons may

 

- 30 -

	 	 	 	employ their own legal counsel and, provided such proceeding is not brought as a
result of any negligence, fraud, willful misconduct or any actions or inactions of
the Indemnified Person, the Corporation shall pay and reimburse the Indemnified
Persons for the reasonable fees, charges and disbursements (on a full indemnity
basis) of such legal counsel, the other expenses reasonably incurred by the
Indemnified Persons in connection with such proceedings or investigation and a fee
at the normal per diem rate for any director, officer or employee of the
Underwriters involved in the preparation for or attendance at such proceedings or
investigation.

	 	(e)	 	The rights and remedies of the Indemnified Persons set forth in sections 8, 9
and 11 (in the case of the Underwriters) hereof are to the fullest extent possible in
law cumulative and not alternative and the election by any Underwriter or other
Indemnified Person to exercise any such right or remedy shall not be, and shall not be
deemed to be, a waiver of any other rights and remedies.
	 
	 	(f)	 	The Corporation hereby acknowledges that the Underwriters are
acting as trustees
for the Underwriters’ respective agents, directors, officers, shareholders and
employees under this section 8 and under section 9 with respect to all such agents,
directors, officers, affiliates and employees.
	 
	 	(g)	 	The Corporation waives any right it may have of first requiring an Indemnified
Person to proceed against or enforce any other right, power, remedy or security or
claim or to claim payment from any other person before claiming under this indemnity.
It is not necessary for an Indemnified Person to incur expense or make payment before
enforcing such indemnity.
	 
	 	(h)	 	The rights of indemnity contained in this section 8 shall not apply if the
Corporation has complied with the provisions of sections 3 and 4 and the person
asserting any claim contemplated by this section 8 was not provided with a copy of the
Prospectuses or any amendment to the Prospectuses or other document which corrects any
misrepresentation or alleged misrepresentation which is the basis of such claim and
which was required, under applicable Securities Laws, to be delivered to such person by
the Underwriters.
	 
	 	(i)	 	If the Corporation has assumed the defense of any suit brought to enforce a
claim hereunder, the Indemnified Person shall provide the Corporation copies of all
documents and information in its possession pertaining to the claim, take all
reasonable actions necessary to preserve its rights to object to or defend against the
claim, consult and reasonably cooperate with the Corporation in determining whether the
claim and any legal proceeding resulting therefrom should be resisted, compromised or
settled and reasonably cooperate and assist in any negotiations to compromise or
settle, or in any defense of, a claim undertaken by the Corporation.

9. Contribution

     In order to provide for just and equitable contribution in circumstances in which the
indemnification provided for in this agreement is due in accordance with its terms but is, for any
reason, held by a court to be unavailable from the Corporation on grounds of policy or otherwise,
the Corporation and the party or parties seeking indemnification shall contribute to the aggregate
liabilities, claims, demands, losses (other than losses of profit), costs (including, without
limitation, legal fees and

 

- 31 -

disbursements on a full indemnity basis), damages and expenses to which they may be subject or
which they may suffer or incur:

	 	(a)	 	in such proportion as is appropriate to reflect the relative benefit received
by the Corporation on the one hand, and by the Underwriters on the other hand, from the
offering of the Offered Securities; or
	 
	 	(b)	 	if the allocation provided by subsection 9(a) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in subsection 9(a) above but also to reflect the relative fault of
the Underwriters on the one hand, and the Corporation, on the other hand, in connection
with the statements, commissions or omissions or other matters which resulted in such
liabilities, claims, demands, losses, costs, damages or expenses, as well as any other
relevant equitable considerations.

     The relative benefits received by the Corporation, on the one hand, and the Underwriters, on
the other hand, shall be deemed to be in the same proportion that the total proceeds of the
offering received by the Corporation (net of fees but before deducting expenses) bear to the fees
received by the Underwriters. In the case of liability arising out of the Prospectuses, any
Supplementary Material or any other part of the Public Record, the relative fault of the
Corporation, on the one hand, and of the Underwriters, on the other hand, shall be determined by
reference, among other things, to whether the misrepresentation or alleged misrepresentation,
order, inquiry, investigation or other matter or thing referred to in section 8 relates to
information supplied or which ought to have been supplied by, or steps or actions taken or done on
behalf of or which ought to have been taken or done on behalf of the Corporation or the
Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such misrepresentation or alleged misrepresentation, order, inquiry,
investigation or other matter or thing referred to in section 8.

     The amount paid or payable by an Indemnified Person as a result of liabilities, claims,
demands, losses (other than losses of profit), costs, damages and expenses (or claims, actions,
suits or proceedings in respect thereof) referred to above shall, without limitation, include any
legal or other expenses reasonably incurred by the Indemnified Person in connection with
investigating or defending such liabilities, claims, demands, losses, costs, damages and expenses
(or claims, actions, suits or proceedings in respect thereof) whether or not resulting in any
action, suit, proceeding or claim.

     Each of the Corporation and the Underwriters agree that it would not be just and equitable if
contributions pursuant to this agreement were determined by pro rata allocation or by any other
method of allocation which does not take into account the equitable considerations referred to in
the immediately preceding sections. The rights to contribution provided in this section 9 shall be
in addition to, and without prejudice to, any other right to contribution which the Underwriters or
other Indemnified Persons may have.

     Any
liability of the Underwriters under this section 9 shall be limited
to the amount of the underwriting fees actually
received by the Underwriters under section 2.

10. Expenses

     Whether or not the transactions contemplated herein shall be completed all costs and expenses
(including applicable GST) of or incidental to the transactions contemplated hereby including,
without limitation, those relating to the distribution of the Offered Securities, shall be borne by
the Corporation

 

- 32 -

including, without limitation, all costs and expenses of or incidental to the preparation,
filing, reproduction (including the commercial copies thereof) of the Registration Statement, the
Disclosure Package, the Prospectuses, or any Supplementary Material and the delivery thereof to the
Underwriters, the fees and expenses of the Corporation’s counsel, the fees and expenses of agent
counsel retained by the Corporation or the Corporation’s counsel, the fees and expenses of the
Corporation’s transfer agent and any auditors, engineers and other outside consultants, all stock
exchange listing fees, the reasonable legal fees and disbursements of Underwriters’ U.S. and
Canadian counsel, the out-of-pocket expenses of the Underwriters and all other costs and expenses
relating to the transactions contemplated herein.

11. Termination

	 	(a)	 	The Underwriters, or any of them, may, without liability, terminate their
obligations hereunder, by written notice to the Corporation in the event that after the
date hereof and at or prior to the Closing Time:

	 	(i)	 	any order to cease or suspend trading in any securities of the
Corporation or prohibiting or restricting the distribution of any of the
Offered Securities is made, or proceedings are announced, commenced or
threatened for the making of any such order, by any securities commission or
similar regulatory authority, the Exchange or any other competent authority,
and has not been rescinded, revoked or withdrawn;
	 
	 	(ii)	 	any inquiry, action, suit, investigation or other proceeding
(whether formal or informal) in relation to the Corporation or any of its
directors or senior officers is announced, commenced or threatened by any
securities commission or similar regulatory authority, the Exchange or any
other competent authority or there is a change in law, regulation or policy or
the interpretation or administration thereof, if, in the reasonable opinion of
the Underwriters or any one of them, the change, announcement, commencement or
threatening thereof materially adversely affects, or may materially adversely
affect, the trading or distribution of the Offered Securities or any other
securities of the Corporation;
	 
	 	(iii)	 	there shall have occurred or be discovered any adverse change,
as determined by the Underwriters or any one of them in their sole discretion,
acting reasonably, in the business, operations, capital or condition (financial
or otherwise), business or business prospects of the Corporation or its
properties, assets, liabilities or obligations (absolute, accrued, contingent
or otherwise) which in the opinion of the Underwriters or any one of them,
acting reasonably, after consultation with the Corporation, would reasonably be
expected to have a significant adverse effect on the market price or value or
marketability of the Offered Securities;
	 
	 	(iv)	 	there should develop, occur or come into effect or existence,
or be announced, any event, action, state, condition or occurrence of national
or international consequence, or any law, action, regulation or other
occurrence of any nature whatsoever, which, in the sole opinion of the
Underwriters or any one of them, acting reasonably, seriously adversely affects
or involves, or will seriously adversely affect or involve, the financial
markets generally or the business, operations or affairs of the Corporation and
its Subsidiaries (taken as a whole);

 

- 33 -

	 	(v)	 	the Underwriters shall become aware of any material information
with respect to the Corporation which had not been publicly disclosed or
disclosed in writing to the Underwriters at or prior to the date hereof and
which in the sole opinion of the Underwriters or any one of them, acting
reasonably, could be expected to have a material adverse effect on the market
price or value of the Offered Securities or any other securities of the
Corporation or the investment quality or marketability of the Offered
Securities or any other securities of the Corporation;
	 
	 	(vi)	 	the Corporation shall be in breach of, default under or
non-compliance with any representation, warranty, covenant, term or condition
of this agreement in any material respect;
	 
	 	(vii)	 	the state of the financial markets in Canada and the United
States is such that the Offered Securities cannot in the sole opinion of the
Underwriters or any of them, acting reasonably, be profitably marketed; or
	 
	 	(viii)	 	there is announced any change or proposed change in the income tax laws of
Canada or the interpretation or administration thereof and such change, which
in the sole opinion of the Underwriters, or any one of them, acting reasonably,
could be expected to have a significant adverse effect on the market price or
value of the Offered Securities or any other securities of the Corporation.

	 	(b)	 	The Underwriters, or any of them, may exercise any or all of the rights
provided for in subsection 11(a) or section 12 or 16 notwithstanding any material
change, change, event or state of facts and (except where the Underwriter purporting to
exercise any of such rights is in breach of its obligations under this agreement)
notwithstanding any act or thing taken or done by the Underwriters or any inaction by
the Underwriters, whether before or after the occurrence of any material change,
change, event or state of facts including, without limitation, any act of the
Underwriters related to the offering or continued offering of the Offered Securities
for sale and any act taken by the Underwriters in connection with any amendment to the
Prospectuses including the execution of any amendment or any other Supplementary
Material and the Underwriters shall only be considered to have waived or be estopped
from exercising or relying upon any of their rights under or pursuant to subsection
11(a) or section 12 or 16 if such waiver or estoppel is in writing and specifically
waives or estops such exercise or reliance.
	 
	 	(c)	 	Any termination pursuant to the terms of this agreement shall be effected by
notice in writing delivered to the Corporation provided that no termination shall
discharge or otherwise affect any obligation of the Corporation under section 8, 9, 10
or 16. The rights of the Underwriters to terminate their obligations hereunder are in
addition to, and without prejudice to, any other rights or remedies they may have.
	 
	 	(d)	 	If an Underwriter elects to terminate its obligation to purchase the Offered
Securities as aforesaid, whether the reason for such termination is within or beyond
the control of the Corporation, the liability of the Corporation hereunder with respect
to such Underwriter shall be limited to the indemnity referred to in section 8, the
contribution rights referred to in section 9 and the payment of expenses referred to in
section 10.

 

- 34 -

12. Closing Documents

     The obligations of the Underwriters hereunder to purchase the Offered Securities to be
purchased at the Closing Time shall be conditional upon all representations and warranties and
other statements of the Corporation herein being, at and as of the Closing Time, true and correct
in all material respects, the Corporation having performed in all material respects, at the Closing
Time, all of its obligations hereunder theretofore to be performed and the Underwriters receiving
at the Closing Time:

	 	(a)	 	favourable legal opinions of the Corporation’s counsel and the Underwriters’
Canadian counsel addressed to the Underwriters, in form and substance reasonably
satisfactory to the Underwriters, with respect to such matters as the Underwriters may
reasonably request relating to the Corporation, the offering of the Offered Securities
and the transactions contemplated hereby, including, without limitation, that:

	 	(i)	 	the Corporation and each Material Subsidiary has been duly
incorporated and is validly subsisting under the laws of the jurisdiction of
its incorporation and has all requisite corporate capacity, power and authority
to carry on its business as now conducted by it and to own its properties and
assets;
	 
	 	(ii)	 	the Corporation has full corporate power and authority to enter
into this agreement, the Flow-Through Subscription Agreements, the OQI Sask
Flow-Through Subscription Agreement and the Warrant Indenture and to perform
its obligations set out herein and this agreement and have been duly
authorized, executed and delivered by the Corporation and this agreement
constitutes a legal, valid and binding obligation of the Corporation and, in
the case of the OQI Sask Flow-Through Subscription Agreement of OQI Sask,
enforceable against it in accordance with its or their respective terms,
subject to laws relating to creditors’ rights generally and except as rights to
indemnity may be limited by applicable law;
	 
	 	(iii)	 	the execution and delivery of this agreement, the Flow-Through
Subscription Agreements, the OQI Sask Flow-Through Subscription Agreement and
the Warrant Indenture and the fulfillment of the terms hereof and thereof by
the Corporation, and the performance of and compliance with the terms of this
agreement, the Flow-Through Subscription Agreements, the OQI Sask Flow-Through
Subscription Agreement and the Warrant Indenture by the Corporation and, as
applicable, OQI Sask does not and will not result in a breach of, or constitute
a default under, and do not and will not create a state of facts which, after
notice or lapse of time or both, will result in a breach of or constitute a
default under: (a) any applicable federal or state laws of the United States or
applicable laws of the Province of Alberta or the federal laws of Canada
applicable therein; (b) any term or provision of the articles, by-laws or other
constating documents, as applicable, of the Corporation or OQI Sask, as
applicable, or, of which counsel is aware, any resolutions of the shareholders
or directors (or any committee thereof) of the Corporation or OQI Sask, as
applicable; (c) any indenture, mortgage, note, contract, agreement (written or
oral), instrument, lease or other document to which the Corporation or OQI
Sask, as applicable, is a party or by which it is bound, of which counsel is
aware; or (d) any judgment, decree or order, of any court, governmental agency
or body or regulatory authority having jurisdiction over or binding the

 

- 35 -

	 	 	 	Corporation or OQI Sask, as applicable, or their respective properties or
assets, of which counsel is aware;

	 	(iv)	 	the Common Shares included in the Prospectus Securities have
been validly issued as fully paid and non-assessable Common Shares of the
Corporation and the Over-Allotment Option has been duly and validly created and
authorized;
	 
	 	(v)	 	the Warrants have been validly issued as obligations of the
Corporation;
	 
	 	(vi)	 	to such counsel’s knowledge, the Corporation is subject to and
has complied in all material respects with the requirements of Section 13 of
the U.S. Exchange Act;
	 
	 	(vii)	 	the Corporation is a “reporting issuer” not in default of any
requirement of the Securities Act (Alberta) and the regulations thereunder and
is eligible to participate in NI 71-101 in each Qualifying Province;
	 
	 	(viii)	 	the attributes of the Offered Securities, the Warrant Indenture and the
Over-Allotment Option conform in all material respects with the description
thereof contained in the Disclosure Package and the Prospectuses;
	 
	 	(ix)	 	the Offered Securities are eligible investments as set out
under the heading “Eligibility for Investment” in the Canadian Prospectus;
	 
	 	(x)	 	all necessary documents have been filed, all necessary
proceedings have been taken and all legal requirements have been fulfilled as
required under the applicable Securities Laws of each of the Qualifying
Provinces in order to qualify the Offered Securities for distribution and sale
to the public in each of such Qualifying Provinces by or through investment
dealers and brokers duly registered under the applicable laws of such provinces
who have complied with the relevant provisions of such applicable Securities
Laws and to qualify the Over-Allotment Option for distribution to the
Underwriters in each of the Qualifying Provinces;
	 
	 	(xi)	 	the Registration Statement is effective under the Securities
Act, and no stop order suspending the effectiveness of the Registration
Statement or any part thereof, preventing or suspending the use of the
Preliminary Prospectus or the Prospectuses or any part thereof shall have been
issued and to such counsel’s knowledge no proceedings for that purpose or
pursuant to Section 8A under the Securities Act shall have been initiated or
threatened by the SEC, and all requests for additional information on the part
of the SEC (to be included or incorporated by reference in the Registration
Statement, the U.S. Preliminary Prospectus or the Prospectus or otherwise)
shall have been complied with to the reasonable satisfaction of the
Underwriters; each Issuer Free Writing Prospectus, the U.S. Preliminary
Prospectus and the U.S. Prospectus shall have become effective immediately upon
its filing with the SEC;
	 
	 	(xii)	 	the Registration Statement and the U.S. Prospectus, as of
their respective effective or issue times, appear on their face to be
appropriately responsive in

 

- 36 -

	 	 	 	 all material respects to the requirements of the Securities Act and the SEC
Rules and Regulations;

	 	(xiii)	 	the Corporation has the necessary corporate power and authority to execute
and deliver the Prospectuses and all necessary corporate action has been taken
by the Corporation to authorize the execution and delivery by it of the
Canadian Prospectus and the filing thereof, as the case may be, in each of the
Qualifying Provinces in accordance with Applicable Securities Laws;
	 
	 	(xiv)	 	subject to the qualifications set out therein, the statements
in the Canadian Prospectus under the heading “Canadian Federal Income Tax
Considerations” constitute a fair summary of the principal Canadian federal
income tax consequences arising under the Tax Act to persons referred to
therein who hold Offered Securities;
	 
	 	(xv)	 	except as the result of any agreement or arrangement to which
the Corporation is not a party and of which it has no knowledge, upon issuance
pursuant to the provisions of the Flow-Through Subscription Agreements, the
Flow-Through Common Shares will be “flow-through shares” as defined in
subsection 66(15) of the Tax Act and will not be “prescribed shares” for the
purpose of Regulation 6202.1 of the Regulations to the Tax Act.
	 
	 	(xvi)	 	the Common Shares and Warrants included in the Offered
Securities are conditionally approved for listing and, upon notification to the
Exchange of the issuance and sale thereof and fulfillment of the conditions of
the Exchange, will be listed and posted for trading on the Exchange;
	 
	 	(xvii)	 	Computershare Trust Company of Canada has been duly appointed by the
Corporation as the transfer agent and registrar for the Common Shares
(including the Common Shares included in the Offered Securities) and the
Warrants;
	 
	 	(xviii)	 	subject to the qualifications set out therein, the statements in the U.S.
Prospectus under the heading “Certain United States Income Tax Considerations”
to the extent that they constitute summaries of U.S. federal law or regulation
or legal conclusions, have been reviewed by the Corporation’s U.S. counsel and
fairly summarize the matters described under that heading in all material
respects.
	 
	 	(xix)	 	the authorized and issued capital of the Corporation;

	 	 	 	and as to all other legal matters, including compliance with applicable Securities
Laws in any way connected with the issuance, sale and delivery of the Offered
Securities as the Underwriters may reasonably request.
	 
	 	(b)	 	In addition to the opinions set forth above, at the Closing Time, the
Underwriters shall have received from each of Corporation’s U.S. counsel and the
Corporation’s Canadian counsel, a letter of each firm containing statements to the
effect that such counsel has reviewed and participated in discussions concerning the
preparation of the Registration Statement, the Disclosure Package and the Prospectuses
with certain officers or

 

- 37 -

	 	 	 	employees of the Corporation and its auditors. Such counsel may also state that the
limitations inherent in the independent verification of factual matters and in the
role of outside counsel are such, however, that they cannot and do not assume any
responsibility for the accuracy, completeness or fairness of any of the statements
made in the Registration Statement, the Disclosure Package or the Prospectuses.

	 	 	 	The letters of such counsel shall also state that, subject to the limitations set
forth in the preceding paragraph, on the basis of the information they gained in the
course of performing the services referred to above, no facts came to such counsel’s
attention which gave them reason to believe that (a) the Registration Statement
(other than the Financial Statements, schedules and other financial data, and
statistical information relating to oil and gas resources, production and working
interests, including the information derived from the McDaniel Report in reliance on
the authority of such firm as experts within the meaning of the US Securities Act,
contained therein or omitted therefrom, as to which such counsel need not comment),
at the time it became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, (b) the Disclosure Package (other than the
Financial Statements, schedules and other financial data, and statistical
information relating to oil and gas resources, production and working interests,
including the information derived from the McDaniel Report in reliance on the
authority of such firm as experts within the meaning of the US Securities Act,
contained therein or omitted therefrom, as to which such counsel need not comment),
as of the Applicable Time, contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or (c) the
U.S. Prospectus (other than the Financial Statements, schedules and other financial
data, and statistical information relating to oil and gas resources, production and
working interests, including the information derived from the McDaniel Report in
reliance on the authority of such firm as experts within the meaning of the US
Securities Act, contained therein or omitted therefrom, as to which such counsel
need not comment) as of its date and the date of such letter, contained or contains
an untrue statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
	 
	 	 	 	The letters of such counsel may be in such form and may also contain such
qualifications and other statements as are customary for such letters delivered by
Canadian or U.S. counsel, as applicable. In addition, the Underwriters’ U.S.
counsel shall deliver, at the Closing Date, a letter addressed to the Underwriter,
substantially similar in form and content to the letter described above and
reasonably acceptable to the Underwriters.
	 
	 	 	 	It is understood that the respective counsel may rely on the opinions of local
counsel acceptable to them as to matters governed by the laws of jurisdictions other
than where they are qualified to practice law, and on certificates of officers of
the Corporation, the transfer agent and the Corporation’s auditors as to relevant
matters of fact. It is further understood that the Underwriters’ counsel may rely
on the opinion of the Corporation’s counsel as to matters which specifically relate
to the Corporation or the Offered Securities, including the issuance of the Offered
Securities;

	 	(c)	 	a certificate of the Corporation dated the Closing Date or the Additional
Closing Date (as applicable) addressed to the Underwriters and signed on behalf of the
Corporation by the 

 

- 38 -

	 	 	 	President and Chief Executive Officer and the Chief Financial
Officer of the Corporation or such other officers of the Corporation satisfactory to
the Underwriters, acting reasonably, certifying that:

	 	(i)	 	the Corporation has complied with and satisfied in all material
respects all terms and conditions of this agreement on its part to be complied
with or satisfied at or prior to the Closing Time;
	 
	 	(ii)	 	the representations and warranties of the Corporation set forth
in this agreement are true and correct in all material respects at the Closing
Time, as if made at such time; and
	 
	 	(iii)	 	no event of a nature referred to in subsection 11(a)(i),
11(a)(ii), 11(a)(iii) or 11(a)(vi) has occurred or to the knowledge of such
officer is pending, contemplated or threatened (excluding any requirement to
make any determination as to any Underwriter’s opinion);

	 	 	 	and the Underwriters shall have no knowledge to the contrary;
	 
	 	(d)	 	a comfort letter of the Corporation’s auditors addressed to the Underwriters
and dated the Closing Date, satisfactory in form and substance to the Underwriters,
acting reasonably, bringing the information contained in the comfort letters referred
to in subsection 4(c) hereof up to the Closing Time, which comfort letters shall be not
more than two Business Days prior to the Closing Date;
	 
	 	(e)	 	evidence satisfactory to the Underwriters that the Common Shares and the
Warrants included in the Offered Securities have been conditionally listed on the
Exchange, and upon notice to the Exchange shall be posted for trading as at the opening
of business on the Closing Date or first trading date after notice of the issuance of
such Common Shares and Warrants;
	 
	 	(f)	 	executed copies of the Flow-Through Subscription Agreements, the OQI Sask
Flow-Through Subscription Agreement and the Warrant Indenture; and
	 
	 	(g)	 	such other certificates and documents as the Underwriters may request, acting
reasonably.

13. Deliveries

	 	(a)	 	The sale of the Prospectus Securities to be purchased hereunder shall be
completed at the Closing Time at the offices of the Corporation’s counsel in Calgary,
Alberta or at such other place as the Corporation and the Underwriters may agree.
Subject to the conditions set forth in section 12, the Underwriters, on the Closing
Date, shall deliver to the Corporation, by wire transfer, the amounts of US$55,000,000
and Cdn$16,042,000 against delivery by the Corporation of:

	 	(i)	 	the opinions, certificates and documents referred to in section
12;

 

- 39 -

	 	(ii)	 	definitive certificates representing, in the aggregate, all of
the Prospectus Securities registered in such name or names as the Underwriters
shall notify the Corporation in writing not less than 24 hours prior to the
Closing Time; and
	 
	 	(iii)	 	payment to TD Securities Inc. by certified cheque, bank draft
or wire transfer or such other means as the Corporation and the Underwriters
may agree, of the Underwriting Fee provided for in subsection 2(a);

	 	 	 	or the Underwriters may, in their discretion, deliver by wire transfer the net
amount of the amount in respect of the Prospectus Securities referred to above and
the amount referred to in (iii) above.
	 
	 	(b)	 	The sale of the Over-Allotment Option Securities, if applicable, shall be
completed at the offices of the Corporation’s counsel in Calgary, Alberta or at such
other place as the Corporation and the Underwriters may agree, on the date (the
“Additional Closing Date”) and at the time (“Additional Closing Time”)
specified by the Underwriters in the written notice given by the Underwriters pursuant
to their election to purchase such Over-Allotment Option Securities (provided that in
no event shall such time be earlier than the Closing Time or earlier than two or later
than ten Business Days after the date of the written notice of the Underwriters to the
Corporation in respect of the Over-Allotment Option Securities), or at such other time
and date as the Underwriters and the Corporation may agree upon in writing. Subject to
the conditions set forth in section 12 (with the references therein to the Closing Time
changed to the Additional Closing Time), the Underwriters, at the Additional Closing
Time, shall deliver to the Corporation, by bank or wire transfer or such other means as
the Corporation and the Underwriters may agree, the aggregate purchase price for the
Over-Allotment Option Securities agreed to be purchased by the Underwriters from the
Corporation pursuant to the exercise of the Over-Allotment Option, against delivery by
the Corporation of:

	 	(i)	 	the opinions, certificates and documents referred to in section
12 (with the references therein to the Closing Time and Closing Date changed to
the Additional Closing Time and Additional Closing Date respectively);
	 
	 	(ii)	 	definitive certificates representing, in the aggregate, all of
the Common Shares and Warrants comprising the Over-Allotment Option Securities
registered in such name or names as the Underwriters shall notify the
Corporation in writing not less than 24 hours prior to the Additional Closing
Time; and
	 
	 	(iii)	 	payment to TD Securities Inc. by certified cheque, bank or
wire transfer or such other means as the Corporation and the Underwriters may
agree, of the Underwriting Fee provided for in subsection 2(c) in respect of
the Over-Allotment Option Securities;

	 	 	 	or the Underwriters may, in their discretion, deliver by wire transfer the net
amount of the amount in respect of the Over-Allotment Option Securities referred to
above and the amount referred to in (b)(iii) above.
	 
	 	 	 	Whether or not specifically contemplated in this agreement, all provisions of this
agreement shall apply in the same manner and upon the same terms and conditions in
respect of any Over-Allotment Option Securities as would apply to the Prospectus

 

- 40 -

	 	 	 	Securities issued and sold pursuant to this agreement, and any steps to be taken or
conditions to be satisfied at the Additional Closing shall be the same as those
steps to be taken or conditions to be satisfied at Closing Time.

14. Restrictions on Offerings

     The Corporation covenants and agrees with the Underwriters that the Corporation will not,
directly or indirectly, during the period commencing the date of this agreement and ending on the
day which is 90 days following the Closing Date, without the prior written consent of the TD
Securities Inc., on behalf of the Underwriters, (which consent will not be unreasonably withheld),
(i) offer, issue, secure, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, or otherwise lend,
transfer or dispose of, directly or indirectly, any Common Shares, or any securities convertible
into or exercisable or exchangeable for Common Shares, or (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic consequences of
ownership of Common Shares, whether any such transaction described in clauses (i) or (ii) is to be
settled by delivery of Common Shares, other securities or cash or otherwise or (iii) announce any
intention to effect any of the foregoing, provided that notwithstanding the foregoing the
Corporation may (A) grant stock options pursuant to the Corporation’s existing stock option plan or
issue securities pursuant to bona fide compensation arrangements to or for the benefit of
employees, consultants and directors (not in excess of the number of options allowable under the
rules of the Exchange) and issue shares to the holders thereof or to holders of other stock options
existing to the date hereof, (B) issue securities in connection with the exchange, transfer,
conversion, or exercise rights of existing outstanding securities or existing commitments to issue
securities.

15. Notices

     Any notice or other communication to be given hereunder shall, in the case of notice to the
Corporation, be addressed to:

Oilsands Quest Inc.

205, 707 — 7th Avenue S.W.

Calgary, Alberta

T2P 3H6

Attention:     Karim Hirji

Telecopy No.: (403) 263-9812

with a copy to:

Burns, Figa & Will P.C.

Suite 1000

6400 S. Fiddlers Green Circle

Greenwood Village, CO 80111

Attention:     Theresa Mehringer

Telecopy No.: (303) 796-2777

 

 

- 41 -

and a copy to:

Macleod Dixon llp

3700, 400 – 3rd Avenue S.W.

Calgary, Alberta

T2P 4H2

Attention:          Craig Hoskins

Telecopy No.: (403) 264-5973

and in the case of notice to the Underwriters, be addressed to:

TD Securities Inc.

800, 324 — 8th Avenue S.W.

P.O. Box 2850

Calgary, Alberta

T2P 2Z2

Attention:          Robert J. Mason

Telecopy No.:     (403) 292-2776

and to:

Genuity Capital Markets

1700, 300 – 5th Ave. SW

Calgary, Alberta

T2P 3C4

Attention:          Tony P. Loria

Telecopy No.:     (403) 266-1755

and to:

CIBC World Markets Inc.

9th Floor, Bankers Hall East

855 – 2nd St. SW

Calgary, Alberta

T2P 4J7

Attention:          Brenda A. Mason

Telecopy No.:     (403) 260-0524

 

 - 42 - 

and to:

Desjardins Securities Inc.

145 King St West

Suite 2750

Toronto, Ontario

M5H 1J8

Attention:          Dennis Logan

Telecopy No.:     (416) 861-9992

and to:

Blackmont Capital Inc.

2200, 440 — 2nd Avenue SW

Calgary, Alberta

T2P 5E9

Attention:           Terris N. Chorney

Telecopy No.:     (403) 260-5751

and to:

Canaccord Capital Corporation

2200, 450 — 1st Street SW

Calgary, Alberta

T2P 5P8

Attention:          Timothy J. Hart

Telecopy No.:     (403) 508-3866

and to:

Lehman Brothers Canada Inc.

3300, 150 — 6th Avenue SW

Calgary, Alberta

T2P 3Y7

Attention:          Geoffrey S. Belsher

Telecopy No.     (403) 237-5972

with a copy to:

Blake, Cassels & Graydon llp

3500, 855 – 2nd Street S.W.

Calgary, Alberta

T2P 4J8

Attention:          Pat Finnerty

Telecopy No.:    (403) 260-9700

 

 - 43 - 

and with a copy to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, NY 10019

Attention:               Andrew J. Foley

Telecopy No.:         (212) 492-0078

or to such other address as the party may designate by notice given to the others. Each
communication shall be personally delivered to the addressee or sent by facsimile transmission to
the addressee, and:

	 	(a)	 	communication which is personally delivered shall, if delivered before 4:30
p.m. (local time) on a Business Day, be deemed to be given and received on that day
and, in any other case be deemed to be given and received on the first Business Day
following the day on which it is delivered; and
	 
	 	(b)	 	a communication which is sent by facsimile transmission shall, if sent on a
Business Day before 4:30 p.m. (local time), be deemed to be given and received, subject
to confirmation of transmission on that day and, in any other case, be deemed to be
given and received on the first Business Day following the day on which it is sent,
subject to confirmation of transmission.

16. Conditions

     All terms, covenants and conditions of this agreement to be performed by the Corporation shall
be construed as conditions, and any breach or failure to comply with any material terms and
conditions which are for the benefit of the Underwriters shall entitle the Underwriters to
terminate their obligations to purchase the Offered Securities, by written notice to that effect
given to the Corporation prior to the Closing Time. The Underwriters may waive in whole or in part
any breach of, default under or non-compliance with any representation, warranty, term or condition
hereof, or extend the time for compliance therewith, without prejudice to any of their rights in
respect of any other representation, warranty, term or condition hereof or any other breach of,
default under or non-compliance with any other representation, warranty, term or condition hereof,
provided that any such waiver or extension shall be binding on the Underwriters only if the same is
in writing.

17. Survival of Representations and Warranties

     All representations, warranties, terms and conditions herein including, without limitation,
those contained in section 7 or contained in certificates or documents submitted pursuant to or in
connection with the transactions contemplated herein shall survive the payment by the Underwriters
for the Offered Securities and the distribution of the Offered Securities pursuant to the
Prospectuses and shall continue in full force and effect for the benefit of the Underwriters for a
period of three years from the Closing Date regardless of any investigation by or on behalf of the
Underwriters with respect thereto.

18. Several Liability of Underwriters

     The Underwriters’ rights and obligations under this agreement are several and not joint and
several including, without limitation, that:

 

 - 44 - 

	 	(a)	 	each of the Underwriters shall be obligated to purchase only the percentage of
the total number of Prospectus Securities and, if applicable, Over-Allotment Option
Securities set forth opposite their names set forth in this section 18; and
	 
	 	(b)	 	The applicable percentage of the total number of Offered Securities which each
of the Underwriters shall be separately obligated to purchase is as follows:

	 	 	 	 	 
	TD Securities Inc.
	 	 	48.0	%
	Genuity Capital Markets
	 	 	19.5	 
	CIBC World Markets Inc.
	 	 	10.0	 
	Desjardins Securities Inc.
	 	 	7.5	 
	Blackmont Capital Inc.
	 	 	5.0	 
	Canaccord Capital Corporation
	 	 	5.0	 
	Lehman Brothers Canada Inc.
	 	 	5.0	 
	 
	 	 	 	 
	 
	 	 	100.0	%
	 
	 	 	 	 

	 	(c)	 	If one or more of the Underwriters (the “Refusing Underwriters”) do not
complete the purchase and sale of the Offered Securities which such Underwriters have
agreed to purchase under this agreement (other than in accordance with section 11) (the
“Defaulted Securities”) and if the number of Defaulted Securities is 10% or
less of the aggregate number of Offered Securities to be purchased at such time, the
Continuing Underwriters shall purchase the Defaulted Securities pro rata to their
respective underwriting percentages. If the number of Defaulted Securities is more
than 10% of such aggregate number, TD Securities Inc. may delay the Closing Date or the
Additional Closing Date, as the case may be, for not more than five Business Days and
the remaining Underwriters (the “Continuing Underwriters”) will be entitled, at
their option, to purchase all but not less than all of the Defaulted Securities pro
rata according to the number of Offered Securities to have been acquired by the
Continuing Underwriters under this agreement or in any proportion agreed upon, in
writing, by the Continuing Underwriters. If no such arrangement has been made, the
Continuing Underwriters will not be obliged to purchase the Defaulted Securities and,
if the Continuing Underwriters do not elect to purchase the Defaulted Securities:

	 	(i)	 	the Continuing Underwriters will not be obliged to purchase any
of the Offered Securities;
	 
	 	(ii)	 	the Corporation will not be obliged to sell less than all of
the Prospectus Securities or to the extent the Over-Allotment Option is
exercised, the Over-Allotment Option Securities;
	 
	 	(iii)	 	the Corporation will be entitled to terminate its obligations
under this agreement, in which event there will be no further liability
thereunder on the part of the Corporation or the Continuing Underwriters,
except pursuant to the provisions of sections 7(b)(lviii), 9, and 10; and
	 
	 	(iv)	 	any liability of the Refusing Underwriters will remain
unaffected.

	 	(d)	 	Nothing in this agreement shall obligate the Corporation to sell less than all
of the Prospectus Securities or to the extent the Over-

 

 - 45 - 

	 	 	 	Allotment Option is exercised,
the Over-Allotment Option Securities, or shall relieve any Underwriter in default from
liability to the Corporation or any non-defaulting Underwriter in respect of the
defaulting Underwriter’s default hereunder.

19. Authority to Bind Underwriters

     The Corporation shall be entitled to and shall act on any notice, waiver, extension or
communication given by or on behalf of the Underwriters by TD Securities Inc., which shall
represent the Underwriters, and which shall have the authority to bind the Underwriters in respect
of all matters hereunder, except in respect of any settlement under section 8 or 9, any matter
referred to in section 11 or any agreement under section 18. While not affecting the foregoing, TD
Securities Inc. shall consult with the other Underwriters with respect to any such notice, waiver,
extension or other communication.

20. Underwriters Covenants

	 	(a)	 	Each of the Underwriters shall offer the Offered Securities (other than the
Flow-Through Common Shares) for sale to the public in Canada (other than in the
province of Quebec) and the United States and the Flow-Through Common Shares for sale
to the public in Canada (other than in the province of Quebec) only, directly and
through the Selling Dealer Group, upon the terms and conditions set forth in the
Prospectuses and this agreement.
	 
	 	(b)	 	Each of the Underwriters shall use its reasonable commercial efforts to complete, and
to cause the Selling Dealer Group to complete, the distribution of the Offered
Securities as soon as possible after the Closing Time.
	 
	 	(c)	 	Each of the Underwriters covenants and agrees with the Corporation that it
will:

	 	(i)	 	conduct activities in connection with the proposed offer and
sale of the Offered Securities in compliance with all the Securities Laws and
cause a similar covenant to be contained in any agreement entered into with any
Selling Dealer Group established in connection with the distribution of the
Offered Securities;
	 
	 	(ii)	 	as soon as reasonably practicable after the Closing Date (and
in any event within 30 days thereof) provide the Corporation with a breakdown
of the number of Offered Securities sold in each of the Qualifying Provinces
and, upon completion of the distribution of the Offered Securities, provide to
the Corporation notice to that effect, if required by applicable Securities
Laws.

	 	(d)	 	For the purposes of this section 20, the Underwriters shall be entitled to
assume that the Offered Securities may be lawfully offered for sale and sold in the
Qualifying Provinces and that the Offered Units are registered under the U.S.
Securities Laws, unless the Underwriters have actual knowledge, or have been notified
in writing to the contrary by the Corporation or any applicable securities regulatory
authority.
	 
	 	(e)	 	The Underwriters shall be entitled to offer the Prospectus Units and the
Over-Allotment Option Securities in any jurisdiction outside of Canada and the United
States but only in compliance with applicable law and in a manner which will not
require the Corporation to register in such jurisdiction or file a prospectus or
similar offering document in such jurisdiction.

 

 - 46 - 

	 	(f)	 	No Underwriter will be liable to the Corporation under this section 20 with
respect to a default by any of the other Underwriters but will be liable to the
Corporation only for its own default.

21. Severance

     If one or more of the provisions contained herein shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this agreement, but this agreement shall be construed as if
such invalid, illegal or unenforceable provision or provisions had never been contained herein.

22. Relationship Between the Corporation and the Underwriters

     The Corporation: (i) acknowledges and agrees that the Underwriters have certain statutory
obligations as registrants under the applicable Securities Laws; and (ii) consent to the
Underwriters acting hereunder while continuing to act for their clients. To the extent that the
Underwriters’ statutory obligations as registrants under the applicable Securities Laws or
fiduciary relationships with their clients conflicts with their obligations hereunder the
Underwriters shall be entitled to fulfil their statutory obligations as registrants under the
applicable Securities Laws and their duties to their clients. Nothing in this agreement shall be
interpreted to prevent the Underwriters from fulfilling their statutory obligations as registrants
under the applicable Securities Laws or to act as a fiduciary of their clients.

     The Corporation acknowledges and agrees that: (i) the purchase and sale of the Offered
Securities pursuant to this agreement, including the determination of the offering price of the
Offered Securities and any related discounts and commissions, is an arm’s-length commercial
transaction between the Corporation, on the one hand, and the several Underwriters, on the other
hand, and the Corporation is capable of evaluating and understanding and understand and accept the
terms, risks and conditions of the transactions contemplated by this agreement; (ii) in connection
with each transaction contemplated hereby and the process leading to such transaction each
Underwriter is and has been acting solely as a principal and is not the financial advisor, agent or
fiduciary of the Corporation or its affiliates, stockholders, creditors or employees or any other
party; (iii) no Underwriter has assumed or will assume an advisory, agency or fiduciary
responsibility in favour of the Corporation with respect to any of the transactions contemplated
hereby or the process leading thereto (irrespective of whether such Underwriter has advised or is
currently advising the Corporation on other matters) and no Underwriter has any obligation to the
Corporation with respect to the offering contemplated hereby except the obligations expressly set
forth in this agreement; (iv) the several Underwriters and their respective affiliates may be
engaged in a broad range of transactions that involve interests that differ from those of the
Corporation and that the several Underwriters have no obligation to disclose any of such interests
by virtue of any advisory, agency or fiduciary relationship; and (v) the Underwriters have not
provided any legal, accounting, regulatory or tax advice with respect to the offering contemplated
hereby and the Corporation has consulted its own legal, accounting, regulatory and tax advisors to
the extent it deemed appropriate.

23. Stabilization

     In connection with the distribution of the Offered Securities, the Underwriters may over-allot
or effect transactions which stabilize or maintain the market price of the Common Shares and the
Warrants at levels other than those which might otherwise prevail on the open market, but in each
case only as permitted by applicable law. Such stabilizing transactions, if any, may be
discontinued at any time.

 

 - 47 - 

24. Governing Law

     This agreement shall be governed by and construed in accordance with the laws of the Province
of Alberta and the laws of Canada applicable therein. Each of the Corporation and the Underwriters
hereby attorn to the non-exclusive jurisdiction of the courts of the Province of Alberta.

25. Time of the Essence

     Time shall be of the essence of this agreement.

26. Counterpart Execution

     This agreement may be executed in one or more counterparts each of which so executed shall
constitute an original and all of which together shall constitute one and the same agreement.
Delivery of counterparts may be effected by facsimile transmission.

27. Further Assurances

     Each party to this agreement covenants agrees that from time to time, it will, at the request
of the requesting party, execute and deliver all such documents and do all such other acts and
things as any party hereto, acting reasonably, may from time to time request be executed or done in
order to better evidence or perfect or effectuate any provision of this agreement or of any
agreement or other document executed pursuant to this agreement or any of the respective
obligations intended to be created hereby or thereby.

28. Entire Agreement

     It is understood that the terms and conditions of this agreement supersede any previous verbal
or written agreement between the Underwriters and the Corporation.

[The remainder of this page was intentionally left blank.]

 

 - 48 - 

     If the foregoing is in accordance with your understanding and is agreed to by you, please
confirm your acceptance by signing the enclosed copies of this letter at the place indicated and by
returning the same to TD Securities Inc.

	 	 	 	 	 
	TD SECURITIES INC.	 	 
	 
	 	 	 	 
	By:

	 	     “Robert J. Mason”
 

	 	 
	 
	 	 	 	 
	GENUITY CAPITAL MARKETS	 	 
	 
	 	 	 	 
	By:

	 	     “Tony P. Loria”	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	CIBC WORLD MARKETS INC.	 	 
	 
	 	 	 	 
	By:

	 	     “Brenda A. Mason”	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	DESJARDINS SECURITIES INC.	 	 
	 
	 	 	 	 
	By:

	 	     “Dennis Logan”	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	BLACKMONT CAPITAL INC.	 	 
	 
	 	 	 	 
	By:

	 	     “Terris N. Chorney”	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	CANACCORD CAPITAL CORPORATION	 	 
	 
	 	 	 	 
	By:

	 	     “Timothy J. Hart”	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	LEHMAN BROTHERS CANADA INC.	 	 
	 
	 	 	 	 
	By:

	 	     “Geoffrey S. Belsher”	 	 
	 

	 	 	 	 

 

 - 49 - 

ACCEPTED AND AGREED to as of November 21, 2007.

OILSANDS QUEST INC.

	 	 	 	 	 
	By:

	 	     “Karim Hirji”
 

	 	 

 

 

SCHEDULE “A”

ISSUER FREE WRITING PROSPECTUS INCLUDED IN THE DISCLOSURE PACKAGE

	1.	 	Corporate Presentation dated November, 2007
	 
	2.	 	Term Sheets dated November 20, 2007 respecting the Offering
	 
	3.	 	Press Release dated November 20, 2007.
	 
	4.	 	Term Sheets (Final Terms) dated November 21, 2007 respecting the Offering.
	 
	5	 	Press Release dated November 21, 2007 announcing the pricing of the Offering.

 

 

SCHEDULE “B”

FORM OF FLOW-THROUGH SUBSCRIPTION AGREEMENT

TO:                     Oilsands Quest Inc. (the “Corporation”)

	1.	 	                                        , as the duly authorized agent (the “Agent”) for those persons
listed on Appendix “A” attached hereto (the “Subscribers”) and in the respective
numbers set out therein, hereby irrevocably subscribes for                      common shares of the
Corporation issued on a “flow-through basis” (“Flow-Through Shares”) at a price of
Cdn$6.17 per Flow-Through Share for an aggregate subscription price of $                    , upon
the terms and conditions set forth in this agreement (the “Flow-Through Subscription
Agreement”) constituted by the acceptance hereof and as described in the final short-form
shelf prospectus as amended and supplemented, (the “Prospectus”) of the Corporation
dated November 16, 2007.
	 
	 	 	The Agent represents and warrants to the Corporation that it has been authorized to enter
into this Flow-Through Subscription Agreement on behalf of the Subscribers and to make the
representations, warranties and statements contained herein on their behalf. The
Subscribers have received a copy of the Prospectus and have tendered payment of their
respective subscription price to the Agent in order that it may deliver a certified cheque
or bank draft payable to the Corporation in respect thereof.
	 
	2.	 	In this Flow-Through Subscription Agreement:

	 	(a)	 	“Canadian Exploration Expense(s)” or “CEE” means Canadian
exploration expense described in paragraph (a), (d) or (f) of the definition of
“Canadian exploration expense” in subsection 66.1(6) of the Tax Act or that would be
included in paragraph (h) of that definition if the reference therein to “paragraphs
(a) to (d) and (f) to (g.1)” were read as “paragraphs (a), (d) and (f)”, excluding any
amounts which are prescribed to constitute “Canadian exploration and development
overhead expense” under the Tax Act, the amount of any assistance received by the
Corporation described in paragraph 66(12.6)(a) of the Tax Act and any expense described
in paragraph 66(12.6)(b.1) of the Tax Act;
	 
	 	(b)	 	“Commitment Amount” means an amount equal to Cdn$6.17 multiplied by the
number of Flow-Through Shares subscribed for hereunder;
	 
	 	(c)	 	“Expenditure Period” means the period commencing on the date of
acceptance of this Flow-Through Subscription Agreement and ending on the earlier of:

	 	(i)	 	the date on which the Corporation has incurred (or has been
deemed to have incurred) Qualifying Expenditures equal to the Commitment Amount
in accordance with the terms hereof; and
	 
	 	(ii)	 	December 31, 2008;

	 	(d)	 	“Principal Business Corporation” means a principal-business corporation
as defined in subsection 66(15) of the Tax Act;
	 
	 	(e)	 	“Qualifying Expenditures” means expenses that are CEE at the date they
are incurred;

 

 - 2 - 

	 	(f)	 	“Québec Taxation Act” means the Taxation Act (Québec), together with
any and all regulations promulgated thereunder, as amended form time to time;
	 
	 	(g)	 	“Tax Act” means the Income Tax Act (Canada), together with any and all
regulations promulgated thereunder, as amended from time to time.

Any reference to a word or term defined in the Tax Act shall include, for the purposes of Québec
income taxation, a reference to the equivalent word or term, if any, defined in the Québec Taxation
Act from time to time. Any reference to the Tax Act or a provision thereof shall include, for
purposes of Québec income taxation, a reference to the Québec Taxation Act or the equivalent
provision thereof as such act may be amended, re-enacted or replaced from time to time. Any
reference to a filing or similar requirement imposed under the Tax Act shall include, for purposes
of Québec income taxation, a reference to the Québec Taxation Act or the equivalent provision
thereof as such act may be amended, re-enacted or replaced from time to time; provided that, if no
filing or similar requirement is provided under the Québec Taxation Act, a copy of any material
filed under the Tax Act shall be filed with the ministère du Revenu du Québec. All capitalized
terms used herein and not otherwise defined herein shall have the same meanings herein as are
ascribed thereto in the Prospectus.

	3.	 	All capitalized terms used herein and not otherwise defined herein shall have the same
meanings herein as are ascribed thereto in the Prospectus.
	 
	4.	 	Each Subscriber represents, warrants, covenants, certifies, acknowledges and declares to the
Corporation and the Agent (and acknowledges that the Corporation and the Agent are relying
thereon) that:

	 	(a)	 	this Flow-Through Subscription Agreement is subject to acceptance by the
Corporation and is effective only upon such acceptance;
	 
	 	(b)	 	the Subscriber has received and reviewed a copy of the Prospectus;
	 
	 	(c)	 	except as provided herein or as otherwise set out in the Prospectus, the
Subscriber waives any right it may have to any potential incentive grants, credits or
similar or like payments or benefits which accrue as a result of the operations
relating to CEE and acknowledges that all such grants, credits, payments or benefits
accrue to the benefit of the Corporation;
	 
	 	(d)	 	the Subscriber, if an individual, is of the full age of majority and is
otherwise legally competent to enter into this Flow-Through Subscription Agreement;
	 
	 	(e)	 	neither the Subscriber, nor the beneficial purchaser, as the case may be, has
or will knowingly enter into any agreement or arrangement to which the Corporation is
not a party which will cause the Flow-Through Common Shares to be or become “prescribed
            shares” for purposes of the Tax Act;
	 
	 	(f)	 	the Subscriber, and any beneficial purchaser for whom it is acting deals, and
until January 1, 2009 will continue to deal, at arm’s length with the Corporation for
the purposes of the Tax Act; and
	 
	 	(g)	 	the liability of the Corporation to renounce CEE is limited to the extent
specifically stated in the Prospectus and in this Flow-Through Subscription Agreement.

 

 - 3 - 

	5.	 	The Corporation hereby represents and warrants to and for the benefit of the Subscribers and
the Agent (and acknowledges that the Subscribers and the Agent are relying thereon) that:

	 	(a)	 	the Corporation has been duly incorporated and organized, and is a valid and
subsisting corporation, under the laws of Colorado, and is qualified to carry on
business in the Province of Alberta and in each other jurisdiction, if any, wherein the
carrying out of the activities contemplated hereby makes such qualification necessary;
	 
	 	(b)	 	the Corporation has the full corporate right, power and authority to execute
and deliver this Flow-Through Subscription Agreement, to issue the Flow-Through Shares
to the Subscribers and to incur and renounce to the Subscribers Qualifying Expenditures
in an amount equal to the Commitment Amount;
	 
	 	(c)	 	each of the Corporation and Oilsands Quest Sask Inc. (“OQI Sask”) is a
Principal Business Corporation;
	 
	 	(d)	 	except as the result of any agreement or arrangement of which the Corporation
has no knowledge and of which it is not a party, the Flow-Through Shares will be
“flow-through shares” as defined in subsection 66(15) of the Tax Act and will not
constitute “prescribed shares” for the purpose of the definition of “flow-through
share” in subsection 66(15) of the Tax Act and Regulation 6202.1 of the Regulations to
the Tax Act;
	 
	 	(e)	 	other than agreements entered into in connection with the issuances of
“flow-through” shares in March and May of 2007 in an aggregate amount not exceeding
Cdn$26,500,000, the Corporation is not party to any other flow-through share or other
agreement pursuant to which it has not yet fulfilled its obligations to incur and
renounce Qualifying Expenditures;
	 
	 	(f)	 	this Flow-Through Subscription Agreement constitutes a valid and binding
obligation of the Corporation enforceable against it in accordance with its terms;
	 
	 	(g)	 	the Corporation is related to OQI Sask within the meaning of the Tax Act and
will be related to OQI Sask at all times during the Expenditure Period; and
	 
	 	(h)	 	the execution and delivery of, and the performance of the terms of this
Flow-Through Subscription Agreement by the Corporation, including the issuance of the
Flow-Through Shares, the incurring of Qualifying Expenditures and the renunciation of
Qualifying Expenditures to the Subscribers pursuant hereto does not and will not
constitute a breach of or constitute a default under the constating documents of the
Corporation or any law, regulation, order or ruling applicable to the Corporation or
any agreement, contract or indenture to which the Corporation is a party or by which it
is bound.

	6.	 	The Corporation covenants and agrees with each of the Subscribers:

	 	(a)	 	to keep proper books, records and accounts, including books, records and
accounts of all Qualifying Expenditures and all transactions affecting the Commitment
Amount and the Qualifying Expenditures, and, in the event the Canada Revenue Agency
denies or proposes to deny the deduction of Qualifying Expenditures renounced to the
Subscribers hereunder and upon reasonable notice and on a reasonable basis, to make
such books, records and accounts available for inspection and review by or on behalf of
any

 

 - 4 - 

	 	 	 	Subscriber at the Subscriber’s expense for the sole purpose of responding to the
demand or a proposal of the Canada Revenue Agency;

	 	(b)	 	to file with the appropriate tax authorities, the form prescribed by subsection
66(12.68) of the Tax Act together with a copy of this Flow-Through Subscription
Agreement and the Prospectus within the time period prescribed by law;
	 
	 	(c)	 	to file with the appropriate tax authorities, the form prescribed by subsection
66(12.7) of the Tax Act on or before the last day of the first month following each
month in which any renunciation is made pursuant to the terms of this Flow-Through
Subscription Agreement;
	 
	 	(d)	 	to incur (or be deemed to incur pursuant to subsection 66(12.61) of the Tax
Act), during the Expenditure Period, Qualifying Expenditures in such amount as enables
the Corporation to renounce to each of the Subscribers in accordance with the Tax Act
and this Flow-Through Subscription Agreement, Qualifying Expenditures in an amount
equal to the portion of the Commitment Amount attributable to each such Subscriber;
	 
	 	(e)	 	to renounce to each of the Subscribers, effective on or before December 31,
2007, Qualifying Expenditures incurred (or deemed to be incurred) during the
Expenditure Period as required under the Tax Act in an amount equal to the portion of
the Commitment Amount attributable to each such Subscriber;
	 
	 	(f)	 	to deliver to each Subscriber at the Subscriber’s address set forth in Schedule
“A” attached hereto, not later than March 31, 2008, a statement setting forth the
aggregate amounts of CEE renounced to such Subscriber pursuant hereto;
	 
	 	(g)	 	in the event the amount to be renounced hereunder is reduced pursuant to
subsection 66(12.73) of the Tax Act, the Corporation shall indemnify such Subscriber as
to, and pay to such Subscriber an amount equal to, the amount of any tax payable or
that may become payable under the Tax Act (and any other corresponding provincial
legislation) by such Subscriber as a consequence of such reduction;
	 
	 	(h)	 	that if the Corporation fails to renounce, effective on or before December 31,
2007, to a Subscriber Qualifying Expenditures incurred during the Expenditure Period
equal to the portion of the Commitment Amount attributable to such Subscriber, the
Corporation shall indemnify such Subscriber as to, and pay to such Subscriber, an
amount equal to the amount of any tax payable or that may become payable under the Tax
Act (and under any corresponding provincial legislation) by such Subscriber as a result
of such failure;
	 
	 	(i)	 	that each of the Corporation and OQI Sask will maintain its status as a
Principal Business Corporation throughout the Expenditure Period;
	 
	 	(j)	 	that all Qualifying Expenditures renounced to the Subscribers pursuant to this
Flow-Through Subscription Agreement will be Qualifying Expenditures incurred (or deemed
to be incurred) by the Corporation that, but for the renunciation to the Subscribers,
the Corporation would be entitled to deduct in computing its income for the purposes of
Part I of the Tax Act;

 

 - 5 - 

	 	(k)	 	that the Corporation will not be subject to the provisions of subsection
66(12.67) of the Tax Act in a manner which impairs its ability to renounce Qualifying
Expenditures to the Subscribers in an amount equal to the Commitment Amount;
	 
	 	(l)	 	that the Corporation will refrain from entering into any agreements or
transactions, or taking deductions which would otherwise reduce its cumulative CEE to
an extent, that would preclude the renunciation of Qualifying Expenditures hereunder in
an amount equal to the Commitment Amount as contemplated herein;
	 
	 	(m)	 	if the Corporation is required under the Tax Act to reduce Qualifying
Expenditures previously renounced to the Subscriber, the Corporation shall make such
reduction pro rata by number of Flow-Through Shares issued or to be issued pursuant to
flow-through subscription agreements of even date with this Flow-Through Subscription
Agreement provided that the Corporation shall not reduce Qualifying Expenditures
renounced under this Flow-Through Subscription Agreement until it has first reduced to
the extent possible expenditures renounced pursuant to flow-through subscription
agreements dated after the date of this Flow-Through Subscription Agreement; and
	 
	 	(n)	 	the Corporation shall renounce Qualifying Expenditures with respect to this
Flow-Through Subscription Agreement and all other flow-through subscription agreements
of even date with this Flow-Through Subscription Agreement pro rata by number of
Flow-Through Shares issued or to be issued pursuant thereto before or concurrently with
renouncing Qualifying Expenditures pursuant to any flow-through share subscription
agreements dated after the date of this Flow-Through Subscription Agreement.

	7.	 	Nothing herein shall constitute or be construed to constitute a partnership of any kind
whatsoever between the Subscribers or any of them and the Corporation.
	 
	8.	 	The contract arising out of this Flow-Through Subscription Agreement and all documents
relating thereto, which by common accord has been and will be drafted in English, shall be
governed by and construed in accordance with the laws of the Province of Alberta and the laws
of Canada applicable therein.
	 
	9.	 	Time shall be of the essence hereof.
	 
	10.	 	The covenants, representations and warranties contained in this Flow-Through Subscription
Agreement shall be true and correct as of closing and shall survive the closing of the
offering of securities under the Prospectus.
	 
	11.	 	The subscriptions of the Subscribers are further subject to any rights available to the
Subscribers under applicable laws.
	 
	12.	 	This Flow-Through Subscription Agreement shall be binding on and enure to the benefit of the
Subscribers, the Corporation and their respective heirs, executors, administrators, successors
and assigns.

 

 - 6 - 

DATED at Calgary, Alberta, this _____ day of                     , 2007.

	 	 	 
	 

	 	                                        , as duly authorized agent
for those Subscribers whose names are set out on
Schedule “A” attached hereto.
	 
	 	 
	 

	 	Per:                                                                           
     

THIS SUBSCRIPTION AND RENUNCIATION AGREEMENT IS ACCEPTED AND AGREED TO BY THE CORPORATION at
Calgary, Alberta, this ___day of                     , 2007.

OILSANDS QUEST INC.

Per:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00133-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00133-of-00352.parquet"}]]