8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) February 13, 2012

Oilsands Quest Inc.

(Exact name of registrant as specified in its charter)

Colorado	001-32994	98-0461154
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

800, 1333 - 8th Street SW Calgary, Alberta, Canada	T2R 1M6
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (403) 263-1623

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02.  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;

Compensatory Arrangements for Certain Officers

(e) Retention Agreements with Annie Lamoureux, Simon Raven, and Garth Wong

Effective February 13, 2012 Oilsands Quest Inc. (the “Company”) entered into three separate and essentially identical Retention Agreements (the “Agreements”) with Annie Lamoureux, Vice President and Controller, Simon Raven, Vice President, Exploration and Development, and Garth Wong, President and Chief Executive Officer of the Company (each an “Executive”, and together, the “Executives”).  To encourage the Executives to continue their service with the Company during the Companies’ Creditors Arrangement Act (“CCAA”) process, which was commended on November 29, 2011, the Agreements provide for the payment of a retention bonus of 50% of the respective Executive’s base salary at January 1, 2012, less statutory deductions (the “Retention Bonus”).

Pursuant to the Agreements, the payment of the Retention Bonus shall be made in two parts, one payment comprising fifty percent of the Retention Bonus will be made within one month of the earlier of the exit from the CCAA process, as approved by the Alberta Court of Queen’s Bench (the “Court”), or December 31, 2012 (the “Target Date”) or June 30, 2012. The second payment, comprising the remaining balance of the Retention Bonus, is to be made within one month of the earlier of the Target Date or December 31, 2012.  If the Target Date occurs prior to June 30, 2012, the Executives will not be eligible for the second payment.

The foregoing description is qualified in its entirety by reference to the Agreements, the forms of which are attached hereto as Exhibit 10.1 and 10.2 and incorporated by reference herein.

Item 8.01.  Other Information.

On February 17, 2012, Oilsands Quest Inc. (the “Company”) issued a press release announcing that it received approval for the previously announced debtor-in-possession financing from the Alberta Court of Queen’s Bench (the “Court”), that the Court approved an extension of the CCAA process to May 18, and that the Court delayed its decision regarding the sale of the Eagles Nest property until February 22, 2012. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.  The press release is also available on the Company’s website at www.oilsandsquest.com.

Item 9.01. Financial Statements and Exhibits.

(d)  Exhibits.

Exhibit Number	Exhibit Description
10.1	Form of Retention Bonus Letter Agreement (Lamoureux/Raven)
10.2	Form of Retention Bonus Letter Agreement (Wong)
99.1	Press Release dated February 17, 2012

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: February 17, 2012	Oilsands Quest Inc. (Registrant)
	By:	/s/ Garth Wong
		Name:  Garth Wong
		Title:  President and Chief Executive Officer

EXHIBIT INDEX

Exhibit Number	Exhibit Description
10.1	Form of Retention Bonus Letter Agreement (Lamoureux/Raven)
10.2	Form of Retention Bonus Letter Agreement (Wong)
99.1	Press Release dated February 17, 2012

.

EX-10.1

EXHIBIT 10.1

 

February 13, 2012

[Address]

Form of Retention Letter Agreement

Dear Ms. Lamoureux/Mr. Raven,

Re: January 2012 Retention Program

As announced on November 29th, 2011, Oilsands Quest Inc. ("OQI") filed for creditor protection under Companies’ Creditors Arrangement Act (“CCAA”). As such, we understand this presents a lot of uncertainty for you and your future with the Company. We also understand the competitiveness within the Calgary marketplace for strong oil and gas skill sets.

To encourage you to stay with OQI and remove some uncertainty surrounding your personal circumstances in this situation, as well as to help you focus on effectively accomplishing OQI’s goals and objectives during the CCAA process, OQI has approved a retention bonus for select employees. This letter outlines the specifics of that program as it applies to you.

During this period you will continue to receive your regular salary and benefits. As well, provided that you continue to work for OQI during the CCAA process, and agree to the terms and conditions outlined below, OQI shall pay to you a “Retention Bonus” made up of 50% of your annual base salary at January 1, 2012, less statutory deductions. The Target Date is further defined as the earlier of the exit from the CCAA process, as approved by the Court, or December 31, 2012.

The terms of payment of the Retention Bonus are as follows:

1. This is not an agreement for term employment until the Target Date. If you resign before the Target Date, or are dismissed for cause, you will not be eligible to receive payment of the Retention Bonus.

2. The payment of the Retention Bonus shall be made in two parts, one payment comprising fifty percent of the Retention Bonus will be made within one month of the earlier of the Target Date or June 30, 2012. The second payment, comprising the remaining balance of the Retention Bonus, within one month of the earlier of the Target Date or December 31, 2012.  If the Target Date occurs prior to June 30, 2012, you will not be eligible for the second payment.

3. If your employment is terminated without cause following the date of this letter but before the Target Date, then you will be paid the Retention Bonus according to the terms outlined in the paragraph above based on the passage of time after January 1, 2012 and your termination date. If your employment is terminated prior to June 30, 2012, you will not be eligible for the second payment. You will be paid the Retention Bonus within one month of your termination date.

4. As is the case of all employees, you will continue to be bound by those duties of fidelity and confidentiality and are reminded of the express terms of confidentiality as acknowledged by you at the start of your employment.

5. Finally, as is the case of all matters related to individual compensation, you are not to disclose the fact that you have received a Retention Bonus nor the amount of said bonus. If it is determined that you have disclosed this information to any other party (except your spouse and professional financial advisor if any, and in such case only on a further promise of confidentiality), you may be disciplined up to and including termination for cause, in which case you would forfeit your right to payment of the Retention Bonus.

If you are in agreement with these terms, please sign the duplicate copy of this letter (enclosed) and return it to Linda Meidert no later than February 15, 2012.

We thank you for your continued dedication and effort to OQI and look forward to a mutually rewarding relationship.

Sincerely,

Oilsands Quest Inc.

Garth Wong

President and Chief Executive Officer

I accept the terms of agreement as set out above.

Signature Date

EX-10.2

EXHIBIT 10.2

 

February 13, 2012

[Address]

Form of Retention Letter Agreement

Dear Mr. Wong,

Re: January 2012 Retention Program

As announced on November 29th, 2011, Oilsands Quest Inc. ("OQI") filed for creditor protection under Companies’ Creditors Arrangement Act (“CCAA”). As such, we understand this presents a lot of uncertainty for you and your future with the Company. We also understand the competitiveness within the Calgary marketplace for strong oil and gas skill sets.

To encourage you to stay with OQI and remove some uncertainty surrounding your personal circumstances in this situation, as well as to help you focus on effectively accomplishing OQI’s goals and objectives during the CCAA process, OQI has approved a retention bonus for select employees. This letter outlines the specifics of that program as it applies to you.

During this period you will continue to receive your regular salary and benefits. As well, provided that you continue to work for OQI during the CCAA process, and agree to the terms and conditions outlined below, OQI shall pay to you a “Retention Bonus” made up of 50% of your annual base salary at January 1, 2012, less statutory deductions. The Target Date is further defined as the earlier of the exit from the CCAA process, as approved by the Court, or December 31, 2012.

The terms of payment of the Retention Bonus are as follows:

1.   This is not an agreement for term employment until the Target Date. If you resign before the Target Date, or are dismissed for cause, you will not be eligible to receive payment of the Retention Bonus.

2.   The payment of the Retention Bonus shall be made in two parts, one payment comprising fifty percent of the Retention Bonus will be made within one month of the earlier of the Target Date or June 30, 2012. The second payment, comprising the remaining balance of the Retention Bonus, within one month of the earlier of the Target Date or December 31, 2012.  If the Target Date occurs prior to June 30, 2012, you will not be eligible for the second payment.

3.   If your employment is terminated without cause following the date of this letter but before the Target Date, then you will be paid the Retention Bonus according to the terms outlined in the paragraph above based on the passage of time after

January 1, 2012 and your termination date. If your employment is terminated prior to June 30, 2012, you will not be eligible for the second payment. You will be paid the Retention Bonus within one month of your termination date.

4.   As is the case of all employees, you will continue to be bound by those duties of fidelity and confidentiality and are reminded of the express terms of confidentiality as acknowledged by you at the start of your employment.

5.   Finally, as is the case of all matters related to individual compensation, you are not to disclose the fact that you have received a Retention Bonus nor the amount of said bonus. If it is determined that you have disclosed this information to any other party (except your spouse and professional financial advisor if any, and in such case only on a further promise of confidentiality), you may be disciplined up to and including termination for cause, in which case you would forfeit your right to payment of the Retention Bonus.

If you are in agreement with these terms, please sign the duplicate copy of this letter (enclosed) and return it to Linda Meidert no later than February 15, 2012.

We thank you for your continued dedication and effort to OQI and look forward to a mutually rewarding relationship.

Sincerely,

Oilsands Quest Inc.

Ronald Blakely

Chairman of the Board

I accept the terms of agreement as set out above.

Signature Date

EX-99.1

EXHIBIT 99.1

  CUSIP# 678046 10 3 NYSE Amex: BQI

NEWS RELEASE

DATE: February 17, 2012

Oilsands Quest Receives Court Approval of Financing and CCAA Extension;

Receives New Higher Bid for Non-Core Eagles Nest Asset

CALGARY, ALBERTA – Oilsands Quest Inc. (NYSE Amex: BQI) (“Oilsands Quest,” or “the Company”) has received Court approval of its previously-announced DIP financing and its request to extend creditor protection. Court approval of the announced sale of the Company’s Eagles Nest asset has been delayed, because a second party has come forward with a substantially higher offer for the asset.

The Alberta Court of Queen’s Bench (the “Court”) approved Oilsands Quest’s debtor-in-possession ("DIP") financing of CDN$3.75 million, to fund ongoing operating costs and other expenses while the Company is under creditor protection. Advances under the DIP facility are now available to the Company.

Oilsands Quest also requested and obtained an extension of the order providing creditor protection under the Companies’ Creditors Arrangement Act (Canada) ("CCAA"), which was to expire February 17, 2012. Creditor protection under the CCAA will now expire May 18, 2012, unless further extended as required and approved by the Court.

Oilsands Quest previously stated that it would request Court approval for the sale of its Eagles Nest property to an unrelated third party for CDN$4.4 million. However, on February 15, 2012, the Company received an additional offer to purchase the Eagles Nest property from another third party. Under this new offer, the buyer would pay CDN$6 million for the asset, with a non-refundable deposit of CDN$400,000. In light of the late offer, the Court delayed its decision on the asset sale until February 22, 2012, to allow time for the new offer to be evaluated fully and for any additional prospective bidders to come forward.

Oilsands Quest continues to operate under the protection of CCAA with the assistance of a Court-appointed monitor. The Company’s common shares remain suspended from trading until either a delisting occurs or until the NYSE permits the resumption of trading.

About Oilsands Quest

Oilsands Quest Inc. (www.oilsandsquest.com) is exploring and developing oil sands permits and licences, located in Saskatchewan and Alberta, and developing Saskatchewan's first commercial oil sands discovery.

For more information:

Investor Relations

Email: ir@oilsandsquest.com

Investor Line: 1-877-718-8941

Forward-looking statements:

This news release includes certain statements that may be deemed to be “forward-looking statements,” including the expected date for closing the sale of the Eagles Nest asset. All statements, other than statements of historical facts, included in this news release that address activities, events or developments that management expects, believes or anticipates will or may occur in the future are forward-looking statements.

  CUSIP# 678046 10 3 NYSE Amex: BQI

Forward-looking statements are statements other than relating to historical fact and are frequently characterized by words such as “plan”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate”, “potential”, “prospective” and other similar words or statements that certain events or conditions “may” “will” or “could” occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking statements, which include but are not limited to the ability to raise additional capital, risks associated with the Company’s ability to implement its business plan, its ability to successfully complete the previously announced solicitation process while under creditor protection, its ability to submit a timely plan to its stakeholders and the court under the CCAA and to resolve its operational, legal and financial difficulties, the possible delisting of its securities from NYSE Amex, risks inherent in the oil sands industry, regulatory and economic risks, land tenure risks and those factors listed under the caption “Risk Factors” in the Company’s Form 10-Q filed with the Securities and Exchange Commission on December 9, 2011. The Company undertakes no obligation to update forward-looking information if circumstances or management’s estimates or opinions should change, except as required by law. The reader is cautioned not to place undue reliance on forward-looking statements.