SECOND AMENDMENT TO PURCHASE, SALE AND OPTION AGREEMENT

 

This Second Amendment to Purchase, Sale and Option Agreement (this “Amendment”)
is entered into as of October 2, 2013, by and between USG Properties Bakken I,
LLC, a Delaware limited liability company (“Seller”), and American Eagle Energy
Corporation, a Nevada corporation (“Buyer”). Seller and Buyer are sometimes
referred to herein individually as a “Party” and collectively as the “Parties.”
NextEra Energy Gas Producing LLC, a Delaware limited liability company
(“NextEra”) joins in this Agreement for the purposes set forth in Section 12(c)
of the Original Agreement (as defined below).

 

WHEREAS, Seller and Buyer are parties to Purchase, Sale and Option Agreement
dated as of August 12, 2013, as amended by letter agreement dated September 30,
2013 (as amended, the “Original Agreement”) pursuant to which Seller agreed to
sell and Buyer agreed to purchase certain undivided interests in certain oil and
gas assets in Divide County, North Dakota. Capitalized terms used but not
defined herein are intended to have the meanings set forth in the Original
Agreement.

 

WHEREAS, the parties desire to further amend the Original Agreement, including
certain of the Exhibits attached thereto, as provided herein.

 

NOW THEREFORE, in consideration of the mutual covenants, representations,
warranties, conditions and agreements contained in this Amendment and the
Original Agreement and other valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Buyer and Seller agree as follows:

 

1.The first recital in the Original Agreement is hereby amended by deleting the
word “equal” in the third line of such recital.

 

2.Section 1 A of the Original Agreement is hereby amended by deleting from the
first line thereof the following: “Exhibit A, Parts I, II and III” and replacing
it with “Exhibit A, Parts I, II, III, IV and V”.

 

3.(a) Section 24 of the Original Agreement is hereby amended by deleting the
first sentence of such section and replacing it with the following:

 

“In consideration of Buyer’s purchase of the Property and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by Seller, Seller hereby grants to Buyer the Option, which shall
entitle Buyer to purchase undivided interests in and to the Assets (such
interests being the “Second Property”) in such amounts as are necessary to
result in the respective relative ownerships of Buyer and Seller in the Assets
to be 75/25, with the understanding that such percentages do not apply to the
properties listed on Exhibit A, Part V (as to which the percentage ration will
be 77.5/22.5) and the wellbores created pursuant to the Carry Agreement and the
Farmout Agreement, as to which wellbores the terms of such agreements shall
govern.”

 

(b) Section 24 of the Original Agreement is further amended by deleting from the
fifth to last line of such section the percentage “50%” and replacing it with
“62.5%”.

 

4.Exhibits A and B and to the Original Agreement are hereby amended by deleting
such exhibits and replacing them respectively with Exhibits A and B attached to
this Amendment.

 

 

 

 

5.The second paragraph of Exhibit D to the Original Agreement is hereby amended
by deleting from the fifth line the phrase “Exhibit A Parts I and II” and
replacing it with “Exhibit A Parts I, II, III, IV and V”.

 

6.Section (a) of Exhibit D to the Original Agreement is hereby amended by adding
at the end of such section the following “provided, however, that the ownership
interests in the wellbores described on Part VI of Exhibit A shall not be
affected by this Assignment.”

 

7.Execution. This Amendment may be executed in counterparts, each of which will
constitute an original and all of which will constitute one document. This
Amendment may be executed and delivered by either or both of the parties by
facsimile transmission or email of a PDF version (with confirmation of
transmission) of a signed counterpart of the signature page hereof to the other
at the applicable facsimile number or email address shown in Section 15 of the
Original Agreement. This Amendment shall be considered for all purposes as
prepared through the joint efforts of the parties and shall not be construed
against one party or the other as a result of the preparation, substitution or
other event of negotiation, drafting or execution hereof. After execution and
delivery by facsimile or electronic transmission or email, the parties agree to
follow up with two originally executed counterparts and signature pages so that
each party will have a counterpart with original signature pages from both
parties.

 

IN CONFIRMATION OF THE ABOVE, Buyer and Seller execute this Amendment as of the
date first stated above, and the representatives executing on behalf of Buyer
and Seller each attests to his or her authorization by such execution.

 

SELLER:   BUYER:       USG Properties Bakken I, LLC   AMERICAN EAGLE ENERGY
CORPORATION       By:  /s/ Lawrence A. Wall, Jr.   By:  /s/ Brad Colby  
Lawrence A. Wall, Jr., President     Brad Colby, President

 

        NextEra Energy Gas Producing, LLC               By: /s/ Lawrence A.
Wall, Jr.       Lawrence A. Wall, Jr.         President      

 

 

 

 

EXHIBIT “A”

 

 

 

 

 

EXHIBIT “B”

 

STIPULATION OF INTEREST AND CROSS-CONVEYANCE

 

THIS STIPULATION OF INTEREST AND CROSS-CONVEYANCE (this “Stipulation”),
effective as of June 1, 2013 at 12:01 a.m., local time in Divide County, North
Dakota (the “Effective Time”), is among USG Properties Bakken I, LLC a Delaware
limited liability company (“USG”), NextEra Energy Gas Producing, LLC (“NextEra”)
with each of USG and NextEra having an address at 601 Travis Street, Suite 1900,
Houston, Texas 77002 and American Eagle Energy Corporation, a Nevada corporation
(“AEE”), with an address at 2549 W. Main Street, Suite 202, Littleton, Colorado
80120.

 

RECITALS

 

A.           AEE and NextEra are parties to A.A.P.L. Form 610 -1989 Model Form
Operating Agreement dated May 1, 2011 and A.A.P.L. Form610 -1989 Model Form
Operating Agreements November 1, 2011 (together, the “Joint Operating
Agreements”) respectively covering the Spyglass and West Spyglass areas in
Divide County, North Dakota.

 

B.           Pursuant to the Area of Mutual Interest provisions of the Joint
Operating Agreements AEE and NextEra jointly acquired leasehold and mineral
interests in certain lands located in Divide County, North Dakota, as more fully
set forth in Exhibit A (the "Land"). USG, an affiliate of NextEra, has acquired
certain of NextEra’s interests in the Land (as defined below) and has thereby
become a party to the Joint Operating Agreements.

 

C.           Pursuant to Purchase and Sale Agreement dated August 12, 2013
between AEE and USG (the “Purchase Agreement”), the parties intend that AEE will
acquire from USG and NextEra sufficient interests in the Property (as defined
below) such that the interests held by AEE and USG will be owned in the
respective, relative ratios of (i) 65.625/34.375 for that portion of the
Property described in Part I of Exhibit A (Spyglass - Developed), (ii)
59.375/40.625 for that portion of the Property described in Part II of Exhibit A
(Spyglass - Non-developed), (iii) 56.25/43.75 for that portion of the Property
described in Part III of Exhibit A (W. Spyglass - Developed), (iv) 43.75/56.25
for that portion of the Property described in Part IV of Exhibit A (W.
Spyglass-Non-developed) and (v) 69.0625/30.9375 for that portion of the Property
described in Part V of Exhibit A (SM Energy Leases - Spyglass Developed), and
that NextEra will retain no interest in any part of the Property.

 

D.           Certain irregularities or gaps in the chain of title among the
parties may exist and the parties desire to cure any such irregularities or gaps
by executing this Stipulation.

 

STIPULATIONAND CROSS-CONVEYANCE

 

For and in consideration of the sum of ten dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, USG, NextEra and AEE do hereby sell, assign, transfer and convey
to each other interests in the assets described below (the “Property”)
sufficient such that after giving effect to this Stipulation the respective,
relative ownership interests in the Property will be (i) 65.625/34.375 for that
portion of the Property described in Part I of Exhibit A, (ii) 59.375/40.625 for
that portion of the Property described in Part II of Exhibit A, (iii)
56.25/43.75 for that portion of the Property described in Part III of Exhibit A,
(iv) 43.75/56.25 for that portion of the Property described in Part IV of
Exhibit A, (v) 69.0625/30.9375 for that portion of the Property described in
Part V of Exhibit A, and (vi) 0% for NextEra in all of the Property:

 

 

 

 

(a)          The oil, gas and mineral leases described in Exhibit A, insofar as
they cover any or all of the lands described in Exhibit A (the “Lands”),
together with all rights, privileges and obligations appurtenant thereto,
including rights in any unit in which said leases or Lands are included
(collectively the “Leases”), provided, however, that the ownership interests in
the wellbores described on Part VI of Exhibit A shall not be affected by this
Stipulation;

 

(b)          All oil, gas and condensate wells (whether producing, not producing
or abandoned), and all water source, water injection and other injection and
disposal wells and systems located on the Leases or the Lands, or used in
connection therewith, including without limitation those described in Exhibit A
(collectively the “Wells”), together with all equipment, facilities, and
fixtures located on or used in developing or operating the Leases, the Lands, or
the Wells, or producing, storing, treating or transporting oil, gas, water, or
other products or byproducts, including pipelines, flow lines, gathering
systems, tank batteries, improvements, fixtures, inventory, movables and
immovables (collectively the “Lease Property and Equipment”);

 

(c)          To the extent assignable or transferable, all permits, licenses,
easements, rights-of-way, servitudes, surface leases, surface use agreements,
and similar rights and interests applicable to or used in operating the Leases,
the Lands, the Wells, or the Lease Property and Equipment (collectively the
“Permits and Easements”);

 

(d)          To the extent assignable or transferable, all contracts and
contractual rights, obligations and interests, insofar as they relate to the
Leases, the Lands, the Wells, the Lease Property and Equipment or the Permits
and Easements (the “Related Contracts”); and

 

(e)          To the extent assignable or transferable, all other tangibles,
miscellaneous interests and other assets on or used in connection with the
Leases, the Lands, the Wells, the Lease Property and Equipment, or the Permits
and Easements (collectively the “Miscellaneous Personal Property”), including
records, files, and other data that relate to the Leases, the Lands, the Wells,
the Lease Property and Equipment, the Permits and Easements, or the Related
Contracts, and lease, land and well files, production records, title opinions,
contract, regulatory and environmental files, and geological and geophysical
information (collectively the “Property Records”).

 

Each of USG, NextEra and AEE warrants that it has not granted, created or
reserved any burden, claim or title defect that would cause the Net Revenue
Interest in a Lease or Well to be less than the Net Revenue Interest for such
Lease or Well set forth in Exhibit A or the Working Interest in a Lease or Well
to be greater than the Working Interest for such Lease or Well set forth in
Exhibit A, except for any such excess Working Interest accompanied by a
proportionate increase in the Net Revenue Interest for such Lease or Well.

 

For purposes of this Stipulation, “Working Interest” shall mean, with respect to
a Lease or Well the percentage interest in a Lease or Well that is burdened with
the obligation to bear and pay costs and expenses of maintenance, development
and operations in connection with such Lease or Well, without regard to
royalties, overriding royalties, net profits interests or other similar burdens.

 

 

 

 

For purposes of this Stipulation, “Net Revenue Interest” shall mean, with
respect to a Lease or Well, the interest in and to all hydrocarbons produced,
saved, and sold from or allocated to such Lease or Well, after giving effect to
all royalties, overriding royalties, production payments, carried interests, net
profits interests, reversionary interests, and other burdens upon, measured by,
or payable out of production therefrom.

 

Except for the special warranty of title set forth above, THE PARTIES CONVEY THE
PROPERTY TO EACH OTHER WITHOUT AND EXPRESSLY DISCLAIM ANY EXPRESS, STATUTORY OR
IMPLIED WARRANTY OR REPRESENTATION OF ANY KIND, INCLUDING WARRANTIES RELATING TO
(i) THE CONDITION OR MERCHANTABILITY OF THE PROPERTY, (ii) THE FITNESS OF THE
PROPERTY FOR ANY PARTICULAR PURPOSE, OR (iii) CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS. THE PARTIES HAVE INSPECTED (OR HAVE BEEN GIVEN THE OPPORTUNITY TO
INSPECT), THE PROPERTY AND ARE SATISFIED AS TO THE PHYSICAL, OPERATING,
REGULATORY COMPLIANCE, SAFETY AND ENVIRONMENTAL CONDITION (BOTH SURFACE AND
SUBSURFACE) OF THE PROPERTY AND EXPRESSLY AND KNOWINGLY ACCEPTS THE PROPERTY AS
IS, WHERE IS, AND WITH ALL FAULTS AND DEFECTS AND IN ITS PRESENT CONDITION AND
STATE OF REPAIR. Without limiting the generality of the foregoing, no party
makes any representation or warranty as to (i) the amount, value, quality,
quantity, volume or deliverability of any oil, gas or other minerals or reserves
(if any) in, under or attributable to the Property, (ii) the physical,
operating, regulatory compliance, safety or environmental condition of the
Property, (iii) the geological or engineering condition of the Property or any
value thereof; (iv) the ability of the Property to generate income or profits;
or (v) the cost of owning or operating the Property.

 

THE PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE
EFFECTIVE, THE DISCLAIMERS OF CERTAIN REPRESENTATIONS AND WARRANTIES CONTAINED
IN THIS STIPULATION OF INTEREST AND CROSS CONVEYANCEARE “CONSPICUOUS”
DISCLAIMERS FOR THE PURPOSE OF ANY APPLICABLE LAW.

 

To the extent that the Leases cover state or federal leases, separate
assignments on the appropriate state or federal forms required for filing in the
applicable state or federal records are being delivered contemporaneously
herewith. Such separate assignments are intended to cover the same interests
that are being conveyed hereby.

 

This Stipulation shall be governed, construed and enforced in accordance with
the laws of North Dakota without regard to conflicts of law.

 

This Stipulation shall extend to and shall be binding upon the successors and
assigns of the Parties.

 

 

 

 

THIS STIPULATION is executed by the parties as of the Effective Time.

 

  USG Properties Bakken I, LLC   By:       __________________,    
__________________         American Eagle Energy Corporation         By:      
__________________,     __________________         NextEra Energy Gas Producing,
LLC         By:       __________________,     __________________

 

STATE OF ________________ §   § ss. COUNTY OF ______________ §

 

This instrument was acknowledged before me on _____________, 2013, by
_____________, as ____________ of ____________________, a ____________________,
on behalf of said _____________ __________________. Witness my hand and official
seal.

 

      NOTARY PUBLIC

 

(SEAL) My commission expires: _________________, 20___

 

 

 

 

STATE OF ________________ §   § ss. COUNTY OF ______________ §

 

This instrument was acknowledged before me on _____________, 2013, by
_____________, as ____________ of ____________________, a ____________________,
on behalf of said _____________ __________________. Witness my hand and official
seal.

 

      NOTARY PUBLIC

 

(SEAL) My commission expires: _________________, 20___     STATE OF
________________ §   § ss. COUNTY OF ______________ §

 

This instrument was acknowledged before me on _____________, 2013, by
_____________, as ____________ of ____________________, a ____________________,
on behalf of said _____________ __________________. Witness my hand and official
seal.

 

      NOTARY PUBLIC

 

(SEAL) My commission expires: _________________, 20___

 

 

 

 

EXHIBIT A

TO THE STIPULATION OF INTEREST AND CROSS-CONVEYANCE