Execution

 

CARRY AGREEMENT

 

This Carry Agreement (this “Agreement”) dated as of August 12, 2013, but
effective as of June 1, 2013 (the “Effective Date”), is between American Eagle
Energy Corporation, a Nevada corporation (“AEEC”), and AMZG, Inc., a Nevada
corporation and successor by name change to American Eagle Energy Inc. (“AMZG”
and together with AEEC, “AEE”), each of whose address is 2549 W. Main Street,
Suite 202, Littleton, Colorado 80120, and USG Properties Bakken I, LLC, a
Delaware limited liability company (“USG”), whose address is 601 Travis Street,
Suite 1900, Houston, TX 77022. AEE and USG are sometimes referred to herein as a
"Party" or the "Parties." NextEra Energy Gas Producing LLC, a Delaware limited
liability company (“NextEra”) joins in this Agreement for the purposes set forth
in Section 8.1.

 

RECITALS

 

A. AEE and NextEra, an affiliate of USG, are parties to Carry Agreement dated as
of April 19, 2012, as amended by First Amendment to Carry Agreement dated as of
July 15, 2012 (as amended, the “Original Carry Agreement”). AEE and USG are also
parties to A.A.P.L. Form 610 -1989 Model Form Operating Agreement dated May 1,
2011 and A.A.P.L. Form 610 -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 as such terms
are specifically defined in the Joint Operating Agreements.

 

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 "Property").

 

C. Pursuant to Purchase, Sale and Option Agreement of even date herewith among
AEEC, Next Era and USG (the “Purchase Agreement”), except for any properties
excluded under the Purchase Agreement, USG has agreed to (i) sell a portion of
its interests in the Assets (as defined in the Purchase Agreement with such
portion of the Assets being defined herein as the “First Property”) to AEEC and
(ii) grant to AEEC an option (the “Option”) to purchase another equal portion of
USG’s remaining interest in the Assets (the “Second Property”).

 

D. USG desires to facilitate the further development of and production from the
Property by paying certain amounts of the Costs of Drilling and Completing
(defined below) incurred by AEE associated with the Drilling and Completion of
five Carry Wells (defined below), in exchange for certain assignment of Earned
Wellbore Interests (defined below) or payments attributable to the proceeds from
such Earned Wellbore Interests.

 

In consideration of the mutual promises contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, USG, NextEra and AEE agree as follows:

 

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ARTICLE l

DEFINED TERMS

 

1.1 As used herein the terms “AEEC,” “AMZG,” “Agreement,” “Effective Date,”
“Joint Operating Agreements”, “NextEra”, “Party,” “Parties”, “Property”,
“Purchase Agreement” and “USG,” shall have the meaning assigned thereto above,
and the following terms shall have the following meanings:

 

"AEE Carry Interest" means, subject to the limitations contained in this
Agreement, the working interest of AEE in a Carry Well that is carried by USG in
accordance with Section 2.2, which for purposes of this definition of AEE Carry
Interest shall include (i) the working interest owned by AEE as of the date of
this Agreement and (ii) if the closing on the First Property under the Purchase
Agreement occurs then the working interest acquired pursuant to the Purchase
Agreement in the First Property as of the first day of the month in which
drilling operations begin on the first Carry Well and, (iii) if AEE exercises
the Option, then the working interest acquired by AEE in the Second Property as
of the first day of the month in which drilling operations begin on the first
Carry Well.

 

"AEE Carry Costs" means, with respect to a Carry Well, the sum of (i) all Costs
of Drilling and Completing such Carry Well plus (ii) 50% of the lease operating
expenses charged for the period from the date such well was Drilled and
Completed until the date of Payout for such well in each case to the extent such
costs and charges are attributable to the AEE Carry Interest and that are
actually paid by USG.

 

"AEE Proceeds of Production" means, with respect to a Carry Well, all of the
proceeds attributable to an Earned Wellbore Interest (including any Earned
Wellbore Interest that is part of an executed and recorded Wellbore Assignment
from AEE to USG) from the sale of the Hydrocarbons produced from such Carry
Well, after deducting all applicable ad valorem, severance and excise taxes,
lease operating expenses, royalty, overriding royalty, production payment, net
profits interest and other non-cost bearing burdens.

 

"Approved Drilling Locations" means the undeveloped drilling locations
identified in the Drilling Schedule.

 

"Business Days" means any day other than a Saturday, Sunday or a day on which
national banks are allowed by the Federal Reserve to be closed; and "days,"
without further qualification, means calendar days.

 

"Carry Obligation" has the meaning assigned thereto in Section 2.2.

 

"Carry Well" has the meaning assigned thereto in Section 2.1.

 

"Carry Well AFE" means, with respect to a Carry Well, an Authorization for
Expenditure identifying such well as a Carry Well and setting forth AEE's best
estimate of the total Costs of Drilling and Completing such Carry Well, together
with a specific description of the surface location, a wellbore diagram and a
calculation of the Costs of Drilling and Completing such Carry Well.

 

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"Commencement Date" means, with respect to a Carry Well, 7:00a.m. on the first
day on which Hydrocarbons are first sold from such Carry Well after such Carry
Well has been Drilled and Completed.

 

"Costs of Drilling and Completing" means, with respect to a Carry Well, all
costs and expenses arising out of or related to the Drilling and Completing of
such Carry Well.

 

“CPEC” means Crescent Point Energy Corp.

 

"Drill and Complete" means with respect to a Carry Well, the conducting of all
operations and activities for and related to either (i) the drilling,
completion, equipping, and tying in such well, and any other operations or
activities with respect to such Carry Well prior to achieving commercial
production from such Carry Well, together with all services, equipment,
materials and supplies, and labor and overhead associated therewith, including
constructing and upgrading access roads, obtaining and preparing the location,
obtaining permits and title opinions, obtaining drilling contractor services and
consultants reasonably necessary for the drilling of such Carry Well, obtaining
mud chemicals, pipe and supplies, moving in, rigging up, drilling, logging and
testing, setting casing, perforating, cementing, conducting fracture stimulation
and the drilling out of frac plugs, installing the wellhead, well equipment,
pump jack and other pumps, Christmas tree, valves and tubing, and other
activities necessary prior to marketing production from such Carry Well or (ii)
the Plugging and Abandoning of such Subject Well; but shall not include the
following costs (referred to herein as "Joint Costs"): (i) any activities
related to construction of a gathering system, or (ii) deepening a Carry Well or
recompleting a Carry Well in a different zone, in each case prior to the
Commencement Date for such Carry Well, unless agreed to pursuant to Section
2.l(d). "Drilling and Completing" and other derivatives of the phrase "Drill and
Complete" shall be construed accordingly.

 

"Drilling Schedule" means the drilling schedule set forth in Exhibit B.

 

"Earned Wellbore Interest" means for each Carry Well, for a limited term from
the Commencement Date for such Carry Well until the Termination Date for such
Carry Well, an undivided 50% of the AEE Carry Interest and the associated right,
title and interest in and to the AEE Proceeds of Production attributable to: (1)
the applicable Carry Well and associated wellbore and all Hydrocarbons and other
substances produced therewith, (2) all equipment, and other personal property
and fixtures associated with such Carry Well, and (3) the oil and gas leases
described in Exhibit A insofar and only insofar as such leases cover the right
to produce from the wellbore of such Carry Well.

 

"Governmental Authority" means any federal, state, local, tribal or foreign
government, court of competent jurisdiction, administrative or regulatory body,
agency, bureau, commission, governing body of any national securities exchange
or other governmental authority or instrumentality in any domestic or foreign
jurisdiction, and any division of any of the foregoing.

 

"Hydrocarbons" means oil, gas, well gas, casinghead gas, condensate, and all
components of any of them (including liquids and products produced from any of
them).

 

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"Law" means any federal, state, local, tribal, foreign, or other law, statute,
legislation, constitution, principle of common law, resolution, ordinance, code,
proclamation, treaty, convention, order, rule, regulation or decree, whether
legislative, municipal, administrative, or judicial in nature, enacted, adopted,
passed, promulgated, made, or put into effect by or under the authority of any
Governmental Authority, including those relating to health, safety or the
environment.

 

“Ordinary Course Liens” has the meaning assigned thereto in Section 2.5.

 

"Payout" means, with respect to any Carry Well, either (i) 7:00 a.m. on the day
upon which the AEE Proceeds of Production attributable to such Carry Well equal
the USG Total Payout for such Carry Well; or (ii) 7:00 a.m. on the day upon
which AEE has paid the Prepayment Amount to USG for such Carry Well in
accordance with Section 2.6 or Section 2.8.

 

"Person" means any individual, governmental agency, corporation, limited
liability company, partnership, joint venture, trust, estate, unincorporated
organization or other entity or organization of any kind and shall include all
Governmental Authorities.

 

"Plug and Abandon" means all steps necessary or appropriate to plugging and
abandonment obligations that are required by law, contract or reasonably prudent
oil field practice, including all surface and subsurface restoration (including
any re-vegetation), the removal and disposal of all facilities and materials,
the capping of wells, burying of all flow lines, complying with all applicable
bonding requirements and filing all reports and notices. "Plugged and
Abandoned," "Plugging and Abandoning" and other derivatives of the phrase "Plug
and Abandon" shall be construed accordingly.

 

"Prepayment Amount" means, as of a certain date following the Commencement Date,
with respect to a Carry Well, the greater of (i) the USG Total Payout for such
Carry Well minus the AEE Proceeds of Production for such Carry Well, or (ii)
zero.

 

"Term" has the meaning assigned thereto in Section 6.1.

 

"Termination Date" means, with respect to a Carry Well, the date on which Payout
for such well occurs.

 

"Third Party" means any Person that is (i) not a Party to this Agreement or (ii)
not a Person that received an assignment of this Agreement that was made in
accordance with its terms.

 

"USG Total Payout" means, as of a certain date following the Commencement Date,
with respect to a Carry Well, 112% of the AEE Carry Costs for such Carry Well.

 

"USG Working Interest" means the working interest of USG in a Carry Well, but
excluding, if applicable, any AEE Carry Interest or Earned Wellbore Interest
(and including in such exclusion any working interest in such Carry Well
included in an executed and recorded Wellbore Assignment from AEE to USG
pursuant to an Earned Wellbore Interest).

 

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"Wellbore Assignment" means a term assignment substantially in the form of
Exhibit C.

 

 

ARTICLE 2

CARRY AND PAYMENT

 

2.1 Drilling of Carry Wells.

 

(a) Subject to all the terms and conditions of this Agreement, AEE shall Drill
and Complete five oil and gas wells (each a "Carry Well") in which USG shall
participate pursuant to the terms of this Agreement, at the Approved Drilling
Locations within the Property. Each Carry Well shall be drilled to a depth
sufficient to test the Middle Bakken formation. USG shall not be required to pay
the Carry Obligation for any Carry Well with respect to any operation to
sidetrack or deepen such Carry Well (unless such operation is to reach the
Middle Bakken formation and not the result of any negligence by AEE), or to
recomplete such Carry Well in a shallower zone, unless USG elects, at its sole
discretion, to participate in such operation under the Joint Operating
Agreement, in which case, if AEE also elects to participate in such operation,
the Subject Obligation shall apply to such operation. AEE shall use commercially
reasonable efforts to drill all five Carry Wells in the order set forth in the
Drilling Schedule and within six months from the Effective Date; provided AEE
may drill a Carry Well in a different order from time to time if AEE deems, in
its good faith judgment (and with prior notice to and opportunity to comment by
USG), such a variation is necessary or prudent due to a change in circumstances
affecting conduct, timing or costs of drilling operations. If after the first
Carry Well has been Drilled USG desires to alter the Drilling Schedule or
Approved Drilling Locations, and if such changes are acceptable to AEE after
good faith consideration and collaboration with USG, then the Parties agree to
amend the Drilling Schedule to reflect such changes, which changes may also
impact the timing of Drilling because of permitting and title review processes.

 

(b) If, after exercising its best commercial efforts, AEE is unable to secure
any permits from a Governmental Authority, or any consents from a Third Party,
required for AEE to perform any of its obligations hereunder, with respect to
any particular Carry Well (including any permits required for the drilling or
operation of any Carry Wells, and any consents required to transfer the
properties, rights and interests earned by USG hereunder), AEE shall use
commercially reasonable efforts to locate an alternate drilling location (which
alternate drilling location shall not already be an Approved Drilling Location
and which location is acceptable to USG). If AEE is not able to locate such an
alternate drilling location after collaboration with USG, or USG does not agree
with such alternate drilling location, notwithstanding anything to the contrary
in this Agreement, AEE shall not be required to drill, and USG shall not be
required to participate in, or pay any Costs of Drilling and Completing with
respect to, such Carry Well and the Carry Obligation for such Carry Well shall
cease to apply.

 

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(c) Except as stated in the last sentence of Section 2.1(b) and in Section
2.2(b), USG shall be required to satisfy the Carry Obligation for each of the
five Carry Wells regardless of the success or failure of any of the Carry Wells.
For any Carry Well Drilled and Completed under this Agreement, AEE agrees to use
its best efforts to flow such Carry Well to sales as soon as practicable
following completion.

 

2.2 Costs of Carry Wells.

 

(a) USG agrees to be responsible for and pay 100% of the AEE Carry Interest
share of the Costs of Drilling and Completing each Carry Well Drilled and
Completed hereunder together with all lease operating expenses attributable to
the Earned Wellbore Interest for each Carry Well (with respect to each Carry
Well, the "Carry Obligation"); provided that (i) any Joint Costs for such Carry
Well, shall be borne by each Party in accordance with its working interest in
the applicable Carry Well, in each case notwithstanding any Earned Wellbore
Interest in favor of USG and/or any Wellbore Assignment from AEE to USG pursuant
to an Earned Wellbore Interest; (ii) if any working interest owner other than
the Parties does not consent to operations related to any Carry Well, USG shall
pay all costs associated with any and all non-consenting owners’ working
interests in any Subject Well and shall retain all right, title and interest in
all such non-consenting owners’ working interests until the payout provided for
by either the applicable Joint Operating Agreements or the relevant Governmental
Authority ; and (iii) except as provided in Section 8.2 with respect to any
interest of CPEC, the Carry Obligation shall not extend to any Third Parties
participating in such Carry Well. For the avoidance of doubt, USG shall pay its
share of costs associated with the USG Working Interest Share in each Carry Well
in accordance with the applicable Joint Operating Agreement.

 

(b) For each proposed Carry Well, AEE shall provide USG with the notice and
accompanying information required under Article VI B of the applicable JOA for a
proposed drilling operation. USG shall have 30 days after receipt of such notice
to elect to not treat such proposed drilling operation as a Carry Well and, if
USG so elects, the number of Carry Wells covered by this Agreement shall be
reduced by one or more, as applicable, and neither party shall have any
obligation under this Agreement with respect to such well but the applicable JOA
shall continue to apply to such well and proposed drilling operation. If USG
does not timely make the election described above in this Section 2.2(b), then
such proposed well under Section 2.1 shall be a Carry Well and subject to the
terms and conditions of this Agreement.

 

2.3 Payment of Costs of Drilling and Completing each Carry Well.

 

(a) AEE shall provide USG with a Carry Well AFE for each Carry Well at least 20
Business Days prior to the anticipated spud date for such Carry Well. In
connection with any Carry Well AFE, AEE agrees to provide any additional
information regarding the Carry Well that is reasonably requested by USG.

 

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(b) Subject to Section 2.2, USG shall pay AEE, in its capacity as operator of
such Carry Well, the AEE Carried Interest share and the USG Working Interest
share of the Costs of Drilling and Completing each Carry Well within 10 Business
Days following receipt of a (i) Carry Well AFE, or (ii) any undisputed invoice
relating to the Costs of Drilling and Completing such Carry Well. The Parties
agree, however, that the Carry Obligation shall not apply in the event, and to
the extent, costs exceed 120% of any Carry Well AFE. At the point when costs
exceed 120% of any Carry Well AFE, the Parties agree that all costs shall be
borne on a “heads up” basis with USG and AEE each being responsible for any
additional costs incurred in proportion to their respective working interest on
an after Payout basis.

 

(c) In the event USG fails to pay any Costs of Drilling and Completing pursuant
to Section 2.3(b) and such payment is not disputed by USG in accordance with
Section 9.19 (or if such non-payment continues following the date of resolution
of any such dispute against USG, then from such date of resolution), such
delinquent amounts shall bear interest until paid at the lesser of 10% per annum
or the maximum rate chargeable by Law. If USG fails to cure any such nonpayment
within 20 Business Days of receiving written notice of default by AEE and such
payment is not disputed by USG in accordance with Section 9.19 (or if such
non-payment continues for 20 days following the date of resolution of any such
dispute against USG, then after such 20-day time period), AEE may, at its sole
discretion and upon notice of election to USG, elect any one or more of the
following:

 

(i) terminate this Agreement;

 

(ii) withhold USG's share, if any, of production from any existing Carry Wells
and apply proceeds from the sale thereof as an offset against the total
delinquent amount due under this Agreement until such time as 100% of the
delinquent amounts has been recouped; or

 

(iii) pursue any other right or remedy now or hereafter existing at Law or in
equity by statute or otherwise, Carry to Section 9.14 and Section 9.19.

 

2.4 Non-Assignment Repayment. For each Carry Well, until the earlier of the date
Payout has occurred or the effective date of a Wellbore Assignment delivered to
USG pursuant to Section 2.5 for such Carry Well, USG shall be entitled to the
AEE Proceeds of Production attributable to the Earned Wellbore Interest with
respect to such Carry Well (a "Non-Assignment Repayment"). Payments made
pursuant to this Section 2.4 shall be made at the same times and in the same
manner as AEE's payment of royalties relating to such Carry Well. AEE shall
provide written notice of the occurrence of Payout with respect to a Carry Well
within ten Business Days of such Payout. For the avoidance of doubt, USG shall
also be entitled to all proceeds of production attributable to the USG Working
Interest in each Carry Well.

 

2.5 Wellbore Assignment Option.

 

(a) For any Carry Well, at any time following the Commencement Date for such
Carry Well until the Termination Date for such Carry Well, USG shall have the
option (the "Assignment Option") at its sole discretion and in lieu of receiving
a Non-Assignment Repayment for a Carry Well, to require AEE to deliver a
Wellbore Assignment for such Carry Well. Within ten Business Days after AEE's
receipt of a written election from USG to receive a Wellbore Assignment for such
Carry Well, AEE shall execute, acknowledge and deliver to USG a Wellbore
Assignment conveying the Earned Wellbore Interest for such Carry Well, effective
as of the first day of the month following AEE's receipt of such notice until
the Termination Date. This obligation shall apply successively to any
incremental increase in the AEE Carry Interest as a result of AEE acquiring the
First Property or the Second Property.

 

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(b) Each Wellbore Assignment shall be made subject to the terms and conditions
of any existing operating agreement and any applicable pooling or
communitization agreement with a third party; provided as between AEE and USG,
in the event of a conflict between the terms and conditions of any existing
operating agreement, including the applicable Joint Operating Agreement, or any
applicable pooling or communitization agreement, and the terms and conditions of
this Agreement (including the terms and conditions with respect to the payment
of costs for the Drilling and Completing of wells), this Agreement shall govern.

 

(c) Upon the effective date of any Wellbore Assignment by AEE pursuant to
Section 2.5(a), AEE shall have no further obligation to deliver, and USG shall
have no further right to receive, any Non-Assignment Repayment from any Carry
Well covered by such Wellbore Assignment, pursuant to Section 2.4 or otherwise,
except as USG is entitled to production proceeds pursuant to such Wellbore
Assignment. Other than liens or encumbrances arising by, through or under USG in
the ordinary course of business (“Ordinary Course Liens”), USG agrees to not
subject any Carry Well to any lien or encumbrance or any hydrocarbon sales
contracts, production payments or other forward-sales contracts arising nor will
USG create or assign to any third party any overriding royalty, net profits,
interest or other non-cost bearing interest covering such Earned Wellbore
Interest. USG agrees to cause any Ordinary Course Liens to be released at or
prior to Payout.

 

2.6 Balloon Payment. If Payout for any Carry Well that has been Completed has
not occurred as of the second anniversary of the Commencement Date for such
Carry Well, then within 30 days after such second anniversary, AEE shall pay in
cash delivered by wire transfer of same day funds to USG the Prepayment Amount
for such Carry Well. With respect to any Carry Well that is a dry hole, within
30 days after the second anniversary of drilling rig release for such Carry
Well, AEE shall pay in cash delivered by wire transfer of same day funds to USG
the Prepayment Amount for such Carry Well. In the event AEE fails to pay any
amounts owed in accordance with this paragraph, USG shall have the right to
withhold any reassignment due to AEE of any Earned Wellbore Interest and further
withhold AEE's share of production attributable thereto and apply proceeds from
the sale thereof as an offset against the total delinquent amount due under this
Agreement until such time as 100% of the delinquent amounts has been recouped.

 

2.7 USG Remedies for Non-Payment. In the event AEE fails to pay to USG any
Non-Assignment Repayment amount pursuant to Section 2.4 or a Prepayment Amount
pursuant to Section 2.6 and such payment is not disputed in accordance with
Section 9.19 (or if such non-payment continues following the date of resolution
of any such dispute against AEE, then from such date of resolution), such
delinquent amounts shall bear interest until paid at the lesser of 10% per annum
or the maximum rate chargeable by Law. If AEE fails to cure any such nonpayment
within 20 days of receiving written notice of default by USG or in the event AEE
fails to deliver Wellbore Assignment(s) pursuant to Section 2.5 upon written
exercise of the Assignment Option, and such payment or assignment is not
disputed by AEE in accordance with Section 9.19 (or if such non-payment or
failed assignment continues for 20 days following the date of resolution of any
such dispute against AEE, then after such 20-day time period), USG may, at its
sole discretion and upon notice of election to AEE, elect any one or more of the
following:

 

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(a) terminate this Agreement;

 

(b) pursue its remedies under the applicable Joint Operating Agreement; or

 

(c) pursue any other right or remedy now or hereafter existing at Law or in
equity by statute or otherwise, subject to Section 9.14 and Section 9.19.

 

2.8 USG Remedies for Failure to Drill. In the event AEE fails to comply with any
of its drilling obligations pursuant Section 2.1 with no payment under dispute
in accordance with Section 9.19, and AEE fails to commence substantive drilling
efforts within 30 days after receiving written notice of default from USG, then
the Parties agree that: (i) the Carry Obligation and any other obligations of
USG under this Agreement shall immediately terminate, (ii) AEE shall assign to
USG all of AEE’s right, title and interest in the proposed drilling proration
units insofar and only insofar as such interest covers the proposed wellbore for
any undrilled Carry Wells agreed to under Section 2.1, and (iii) USG shall have
the immediate right to propose any well(s) to satisfy the AEE’s outstanding
drilling obligations and retain a contract operator to drill and operate such
well(s) on USG’s behalf. These remedies shall be in addition to any other right
or remedy now or hereafter existing at Law or in equity by statute or otherwise,
subject to Section 9.14 and Section 9.19.

 

2.9 Prepayment of Prepayment Amount. At any time following the Commencement Date
for a Carry Well, AEE shall have the right to prepay the outstanding Prepayment
Amount for any Carry Well, in cash delivered by wire transfer of same day funds
to USG, which, for the avoidance of doubt, shall be deemed to cause "Payout" for
such Carry Well, in accordance with the definition of such term.

 

 

ARTICLE 3

REASSIGNMENT UPON PAYOUT

 

3.1 Reassignment. Subject to Section 2.6, within 10 Business Days after the
Termination Date for a Carry Well and AEE has provided written notice of the
same to USG and USG has been furnished with evidence of such Payout, in the
event that USG has exercised the Assignment Option and received a Wellbore
Assignment from AEE in accordance with Section 2.5 for such Carry Well, USG
shall execute, acknowledge and deliver to AEE such documents as AEE may
reasonably request to evidence the Termination Date for such Carry Well and the
automatic reversion unto AEE of the interest conveyed pursuant to such Wellbore
Assignment (including, without limitation, an assignment conveying to AEE 100%
of the right, title and interest in such Carry Well that USG obtained pursuant
to any such Wellbore Assignment covering such Carry Well, but expressly
excluding all non-consenting working interests received by USG in any Carry
Well, effective as of the first day of the month following the Termination Date
for such Carry Well, and such Wellbore Assignment shall contain a special
warranty of title as set forth Exhibit C).

 

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3.2 Amounts in Excess of Payout. AEE shall be entitled to its respective
proceeds of production attributable to its working interest for a Carry Well
following Payout for such Carry Well. In the event that USG shall receive any
proceeds from such Carry Well to which AEE is entitled under this Agreement,
then USG shall promptly forward any such proceeds to AEE.

 

ARTICLE 4

AEE'S REPRESENTATIONS AND WARRANTIES

 

Each of AEEC and AMZG makes the following representations and warranties as of
the Effective Date, as of the date of delivery of each Carry Well AFE and as of
the date of delivery of each Wellbore Assignment to USG:

 

4.1 Organization and Standing. Each of AEEC and AEEI represents that it is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and is duly qualified to carry on its business in the
State where the Property is located.

 

4.2 Power. AEE has all requisite power and authority to carry on its business as
presently conducted. The execution and delivery of this Agreement does not, and
the fulfillment of and compliance with the terms and conditions hereof will not
violate, or be in conflict with, any provision of such entity's governing
documents, or any provision of any agreement or instrument to which such entity
is a party or by which it is bound, or any judgment, decree, order, statute,
rule or regulation applicable to such entity.

 

4.3 Authorization and Enforceability. This Agreement constitutes AEE's legal,
valid and binding obligation, enforceable in accordance with its terms, subject,
however, to the effects of bankruptcy, insolvency, reorganization, moratorium
and other laws for the protection of creditors, as well as to general principles
of equity, regardless of whether such enforceability is considered in a
proceeding in equity or at Law.

 

4.4 Liability for Brokers' Fees. AEE has not directly or indirectly incurred any
liability, contingent or otherwise, for brokers' or finders' fees relating to
the transactions contemplated by this Agreement for which USG shall have any
responsibility whatsoever.

 

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4.5 No Bankruptcy. There are no bankruptcy proceedings pending, being
contemplated by or, threatened against AEE.

 

4.6 Qualified to Hold and Operate Carry Wells. AEE is qualified under all
applicable Laws to own the Carry Wells, and AEE is qualified under all
applicable Laws to operate the Carry Wells.

 

4.7 Litigation. There is no suit, action, investigation, arbitration proceeding,
or legal, administrative or other proceeding pending before any Governmental
Authority or arbitrator against AEE or otherwise affecting the Carry Wells that
might (a) result in impairment or loss of AEE's title to any part of the Carry
Wells, (b) hinder or impede AEE's ownership or operation of the Carry Wells, or
(c) hinder or impede the ability of AEE to consummate the transactions
contemplated hereby; nor, to AEE's knowledge, is any such proceeding threatened.
Seller is not in default under any material order, writ, injunction, or decree
of any Governmental Authority.

 

4.8 Compliance with Law. AEE has not received a written notice of any violation
of any Law, or any judgment, decree or order of any court, applicable to the
Carry Wells, which remains uncured.

 

4.9 Title. Except as listed on Schedule 4.9 (a) the Carry Wells are not subject
to or burdened by any lien, security interest, mortgage, deed of trust or other
encumbrance arising by, through or under AEE, and (b) AEE has not created or
assigned to any third party any overriding royalty, production payment, net
profits, interest or other non-cost bearing interest that would affect the Carry
Wells.

 

4.10 Environmental. All material permits or other governmental authorizations
required under any environmental Law in connection with the ownership or
operation of the portion of the Property owned by AEE have been obtained and are
in full force and effect, and, to AEE's knowledge, the portion of the Property
owned by AEE is currently in material compliance therewith. AEE does not have
any knowledge of any release, disposal, event, condition, circumstance,
activity, practice or incident concerning any land, facility, asset or property
included in the portion of the Property owned by AEE or the lands covered
thereby that would reasonably be expected to interfere with or prevent the
ability of the portion of the Property owned by AEE to be owned and operated in
compliance with all applicable environmental Laws.

 

4.11 Foreign Person. Neither AEEC nor AMZG is a "foreign person" within the
meaning of Section 1445 of the Internal Revenue Code of 1986, as amended.

 

4.12 Hydrocarbon Sales. The Property and the Carry Wells are not subject to any
hydrocarbon sales contracts, production payments or other forward-sales
contracts that are not listed on Schedule 4.12 attached hereto or that have not
been disclosed to USG in writing pursuant to Section 9.3.

 

12

 

 

ARTICLE 5

USG'S REPRESENTATIONS AND WARRANTIES

 

USG makes the following representations and warranties as of the Effective Date,
as of the date of each payment of Costs of Drilling and Completing and as of the
date of delivery of each Wellbore Assignment to AEE:

 

5.1 Organization and Standing. USG is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified to carry on its business in the State where the
Property is located.

 

5.2 Power. USG has all requisite power and authority to carry on its business as
presently conducted. The execution and delivery of this Agreement does not, and
the fulfillment of and compliance with the terms and conditions hereof will not
violate, or be in conflict with, any material provision of USG's governing
documents, or any material provision of any agreement or instrument to which USG
is a party or by which it is bound, or any judgment, decree, order, statute,
rule or regulation applicable to USG.

 

5.3 Authorization and Enforceability. This Agreement constitutes USG's legal,
valid and binding obligation, enforceable in accordance with its terms, subject,
however, to the effects of bankruptcy, insolvency, reorganization, moratorium
and other laws for the protection of creditors, as well as to general principles
of equity, regardless whether such enforceability is considered in a proceeding
in equity or at Law.

 

5.4 Liability for Brokers' Fees. USG has not directly or indirectly incurred any
liability, contingent or otherwise, for brokers' or finders' fees relating to
the transactions contemplated by this Agreement for which AEE shall have any
responsibility whatsoever.

 

5.5 USG's Evaluation. USG is not acquiring the Earned Wellbore Interests for
sale in connection with any distribution thereof or any other security related
thereto within the meaning of Securities Act of 1933, as amended. USG is an
experienced and knowledgeable investor in the oil and gas business. USG has been
advised by and has relied solely upon its own expertise in legal, tax and other
professional counsel concerning the transaction contemplated by this Agreement,
the Property and the value thereof. USG (a) is familiar with investments of the
nature of the Earned Wellbore Interests, (b) understands that this investment
involves substantial risks, (c) has adequately investigated the Earned Wellbore
Interests, (d) has substantial knowledge and experience in financial and
business matters such that it is capable of evaluating, and has evaluated, the
merits and risks inherent in an investment in the Earned Wellbore Interests, and
(e) is able to bear the economic risks of such investment. USG has had the
opportunity to visit with AEE and meet with its officers and other
representatives to discuss the Property, has received all materials, documents
and other information that USG deems necessary or advisable to evaluate an
investment in the Earned Wellbore Interests, and has made its own independent
examination, investigation, analysis and evaluation of an investment in the
Earned Wellbore Interests, including its own estimate of the value of the Earned
Wellbore Interests. USG has undertaken such due diligence as USG deems adequate.

 

13

 

 

5.6 Qualified to Hold the Property. USG is eligible under all applicable Laws to
own the Property.

 

5.7 Foreign Person. USG is not a "foreign person" within the meaning of Section
1445 of the Internal Revenue Code of 1986, as amended.

 

ARTICLE 6

TERM

 

6.1 Term. The "Term" of this Agreement shall begin on the Effective Date and,
unless earlier terminated by mutual written consent of the Parties or by AEE
pursuant to Section 2.3(c)(i) or USG pursuant to Section 2.7 or Section 2.8,
shall continue until such time as Payout has occurred for all Carry Wells (less
any Carry Well that USG has no Carry Obligation pursuant to 2.1(b)). Subject to
Section 2.6, the obligations of USG to make any payment and any re-assignment of
the Earned Wellbore Interest to AEE pursuant to Section 3.1 and the provisions
of Article 9 (excluding Section 9.11 which shall be limited as set forth
therein) shall survive the termination of this Agreement.

 

ARTICLE 7

JOINT OPERATING AGREEMENT

 

7.1 Proposal of Operations. Notwithstanding anything to the contrary in the
Joint Operating Agreement, USG shall not propose any operation on the Property
for the drilling of any well under either Joint Operating Agreement until at
least 60 days after the time that all five Carry Wells have been Drilled and
Completed.

 

ARTICLE 8

TERMINATION OF ORIGINAL CARRY AGREEMENT; CPEC

 

8.1 Termination. USG, AEE and NextEra each agree that in consideration of the
amounts paid by AEE under the Original Carry Agreement and the amounts to be
paid at the Closing under the Purchase Agreement with respect to the First
Property AEE will have satisfied an undivided 50% of its obligations under the
Original Carry Agreement and that if AEE exercises the Option and purchases the
Second Property that AEE’s obligations under the Original Carry Agreement will
have been completely satisfied.

 

8.2 CPEC Interests. In the event CPEC elects to not participate in any of the
Carry Wells, USG shall assume both AEE’s and USG’s rights and perform AEE’s and
USG’s obligations under the applicable Joint Operating Agreement with respect to
such non-consenting interest. In the event CPEC does elect to participate in a
Carry Well, then AEE shall assign to USG a Wellbore Assignment covering an
amount of AEE’s working interest in such well equal to CPEC’s interest in such
well and USG shall pay to AEE as the purchase price for such interest an amount
equal to the product of the working interest in such well so assigned multiplied
by the per percentage point working interest purchase price allocated to the
applicable leases and lands under the terms of the Purchase Agreement. Such
assignment shall be effective as of the Effective Time (as defined in the
Purchase Agreement) and shall be free and clear of all liens, claims and other
encumbrances arising by, through or under AEE since the Effective Time. For
purposes of illustration only, attached hereto as Schedule 8.2 are estimated
before and after payout interests for AEE and USG under the three cases of the
AEE Carry Interest increasing as set forth above in the definition of AEE Carry
Interest and in each such case with the assumption that CPEC has elected not to
participate in any Carry Well. The numbers shown on Schedule 8.2 are estimates
only and may change based on numerous factors, including, without limitation,
CPEC’s actual elections, third party statutory and contractual elections and
definitive title work.

 

14

 

 

ARTICLE 9

MISCELLANEOUS

 

9.1 Exhibits. The Exhibits to this Agreement are hereby incorporated in this
Agreement by reference and constitute a part of this Agreement.

 

9.2 Expenses. Except as otherwise specifically provided, all fees, costs and
expenses incurred by USG or AEE in negotiating this Agreement or in consummating
the transactions contemplated by this Agreement shall be paid by the Party
incurring such fees, costs or expenses, including engineering, land, title,
legal and accounting fees, costs and expenses.

 

9.3 Notices. All notices and other communications under this Agreement shall be
in writing and delivered (a) personally, (b) by registered or certified mail
with postage prepaid, and return receipt requested, (c) by nationally recognized
commercial overnight courier service with charges prepaid, or (d) by facsimile
transmission, directed to the intended recipient as follows:

 

If to AEE:

 

c/o American Eagle Energy Corporation

2549 W. Main Street, Suite 202

Littleton, Colorado 80120

Attn: Brad Colby

Telephone: (303) 798-5235

Facsimile: (303) 798-5767

 

If to USG:

 

USG Properties Bakken I, LLC

601 Travis Street, Suite 1900

Houston, Texas 77022

Attention: Michael Jessop

Telephone: (713) 374-1534

Facsimile: (713) 751-0375

Email: michael.jessop@nee.com

 

A notice or other communication shall be deemed delivered on the earlier to
occur of (i) its actual receipt, (ii) the fifth Business Day following its
deposit in registered or certified mail, with postage prepaid and return receipt
requested, (iii) the first Business Day following its deposit with a nationally
recognized commercial overnight courier service, with charges prepaid, or (iv)
the date it is sent by confirmed facsimile transmission (if sent before 5:00
p.m. local time of the receiving party on a Business Day) or the next Business
Day (if sent after 5:00 p.m. of such local time or sent on a day that is not a
Business Day). Any Party may change the address to which notices and other
communications hereunder can be delivered by giving the other Party notice in
the manner herein set forth.

 

15

 

 

9.4 Amendments. Except for waivers specifically provided for in this Agreement,
this Agreement may not be amended nor any rights hereunder waived except by an
instrument in writing signed by the Party to be charged with such amendment or
waiver and delivered by such Party to the Party claiming the benefit of such
amendment or waiver.

 

9.5 Headings. The headings of the Articles and Sections of this Agreement are
for guidance and convenience of reference only and shall not limit or otherwise
affect any of the terms m· provisions of this Agreement.

 

9.6 Counterparts: Fax Signatures. The Parties may execute this Agreement in any
number of counterparts, each of which shall be deemed an original instrument,
but all of which together shall constitute one instrument. This Agreement shall
become operative when each Party has executed and delivered at least one
counterpart. This Agreement may be delivered by facsimile or electronic (pdf)
transmission, and a facsimile, electronic, or similar transmission evidencing
execution shall be effective as a valid and binding agreement between the
Parties for all purposes.

 

9.7 Governing Law; Venue; Wavier of Jury Trial. This Agreement and the
transactions contemplated hereby shall be construed in accordance with, and
governed by, the laws of the State of North Dakota, without regard to its
conflicts of laws rules. The Parties hereby consent to personal jurisdiction in
the State of Colorado for any action arising out of this Agreement or the
transactions contemplated hereby. Subject to Section 9.19, all actions or
proceedings with respect to, arising directly or indirectly in connection with,
out of, related to, or from this Agreement or the transactions contemplated
hereby shall be exclusively litigated in the Federal courts for the District of
Colorado located in the City and County of Denver, Colorado; provided that, to
the extent that such courts refuse to exercise jurisdiction hereunder, the
Parties agree that jurisdiction shall be proper in any court in which
jurisdiction may be obtained. EACH OF THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY; THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE PARTIES ENTERING INTO THIS AGREEMENT.

 

9.8 Entire Agreement. This Agreement constitutes the entire understanding among
the Parties, their respective partners, members, trustees, shareholders,
officers, directors and employees with respect to the subject matter hereof,
superseding all negotiations, prior discussions and prior agreements and
understandings relating to such subject matter.

 

16

 

 

9.9 Relationship of the Parties. This Agreement is not intended to create, and
shall not be construed to create, an association for profit, a trust, a joint
venture, a mining partnership or other relationship of partnership, or entity of
any kind between the Parties that would render either Party liable for the
actions of the other Party. Neither Party shall have any right, power or
authority to act, or create any duty or obligation, express or implied, on
behalf of any other Party, or to hold itself out as a representative or agent of
the other Party. For every purpose the Parties understand and agree that the
liabilities of the Parties shall be several, not joint or collective, and that
each Party shall be solely responsible for its own obligations.

 

9.10 Binding Effect. This Agreement shall be binding upon, and shall inure to
the benefit of, the Parties, and their respective successors and assigns.

 

9.11 Survival. The representations, warranties, indemnities and covenants
contained in this Agreement shall survive indefinitely; provided that any
representation with regards to AEE's title to each Carry Well shall terminate as
of the date a Wellbore Assignment is delivered for such Carry Well and shall be
superseded by the title representation set forth in such Wellbore Assignment;
provided further, that the representations and warranties of AEE and USG as set
forth in Sections 4.6 through 4.12 and Sections 5.6 and 5.7, respectively, shall
terminate one year after the end of the Term.

 

9.12 No Third-Party Beneficiaries. This Agreement is intended only to benefit
the

Parties and their respective permitted successors and assigns.

 

9.13 Waiver. The waiver or failure of any Party to enforce any provision of this
Agreement shall not be construed or operate as a waiver of any further breach of
such provision or of any other provision of this Agreement.

 

9.14 Limitation on Damages. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, EACH PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR DIRECT DAMAGES
ONLY, AND IN NO EVENT SHALL A PARTY BE LIABLE TO THE OTHER PARTY, ANY SUCCESSORS
IN INTEREST OR ANY BENEFICIARY OR ASSIGNEE OF THIS AGREEMENT FOR ANY
CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, OR PUNITIVE DAMAGES ARISING OUT OF
THIS AGREEMENT OR ANY BREACH HEREOF. THIS SECTION 9.14 SHALL APPLY
NOTWITHSTANDING THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, FAULT OR
RESPONSIBILITY OF THE PARTY WHOSE LIABILITY IS WAIVED BY THIS PROVISION, OR ANY
OTHER EVENT OR CONDITION, WHETHER ANTICIPATED OR UNANTICIPATED, AND REGARDLESS
OF WHETHER PRE-EXISTING PRIOR TO THE DATE OF THIS AGREEMENT.

 

9.15 Assignment. No Party may assign any or all of its rights under this
Agreement without the prior written consent of the other Party; provided USG may
assign this Agreement to an affiliate of USG that also receives an assignment of
all of USG's interest in the Property and expressly assumes USG's obligations
under this Agreement and the Joint Operating Agreements, without the prior
written consent of AEE.

 

17

 

 

9.16 Severability. It is the intent of the Parties that the provisions contained
in this Agreement shall be severable. Should any provisions, in whole or in
part, be held invalid as a matter of law, such holding shall not affect the
other pot1ions of this Agreement, and such portions that are not invalid shall
be given effect without the invalid portion.

 

9.17 Confidentiality. Neither Party shall make any press release or other public
announcement regarding the existence of this Agreement, the contents hereof or
the transactions contemplated hereby without the prior written consent of the
other Party; provided, however, that the foregoing shall not restrict
disclosures to the extent (i) necessary for a Party to perform this Agreement,
(ii) required (upon advice of counsel) by applicable securities or other laws or
regulations or the applicable rules of any stock exchange having jurisdiction
over the Parties or their respective affiliates or (iii) such Party has given
the other Party a reasonable opportunity to review such disclosure prior to its
release and no objection is raised; and provided, further, that, in the case of
clauses (i) and (ii), each Party shall use its reasonable efforts to consult
with the other Party regarding the contents of any such release or announcement
prior to making such release or announcement.

 

Notwithstanding anything in this section to the contrary, the Parties shall keep
all information and data relating to this Agreement, and the transactions
contemplated hereby, strictly confidential except for disclosures to authorized
agents, bankers and/or representatives of the Parties and any disclosures
required to perform this Agreement; provided, however, that the foregoing shall
not restrict disclosures that are required (upon advice of counsel) by
applicable securities or other laws or regulations or the applicable rules of
any stock exchange having jurisdiction over the Parties or their respective
affiliates; and provided, further, that prior to making any such disclosures to
such representatives, agents or holders of preferential rights to purchase, the
Party disclosing such information shall obtain an undertaking of confidentiality
from each such party.

  

9.18 References; Titles and Construction. All references in this Agreement to
Exhibits, Schedules, Sections, and other subdivisions refer to the Exhibits,
Schedules, Sections, and other subdivisions of this Agreement unless expressly
provided otherwise. Titles and headings appearing at the beginning of any
subdivision are for convenience only and do not constitute any part of any such
subdivision and shall be disregarded in construing the language contained in
this Agreement. The words "this Agreement," "herein," "hereby," "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this Section"
and "this Subsection" and similar phrases refer only to the Sections or
Subsections hereof in which the phrase occurs. The word "or" is not exhaustive,
and "including" (and its various derivatives), means "including without
limitation." Pronouns in masculine, feminine and neuter gender shall be
construed to include any other gender. Words in the singular form shall be
construed to include the plural and words in the plural form shall be construed
to include the singular, unless the context otherwise requires. In the event an
ambiguity or question of intent or interpretation of this Agreement arises, this
Agreement shall be construed as if jointly drafted by the Parties, and no
presumption or burden of proof shall arise favoring or disfavoring a Party as a
result of authorship or drafting of any provision of this Agreement.

 

18

 

 

9.19 Dispute Resolution.

 

(a) Unless otherwise specified in this Agreement, all disputes arising under
this Agreement between the Parties, including any such disputes related to the
interpretation of this Agreement (a "Dispute"), must be resolved in accordance
with this Section 9.19, through the use of binding arbitration administered by a
panel of three arbitrators in accordance with the Commercial Arbitration Rules
of the American Arbitration Association (the "AAA"), as supplemented to the
extent necessary to determine any procedural appeal questions by the Federal
Arbitration Act (Title 9 of the United States Code).

 

(b) In the event of a Dispute, the Parties shall use their reasonable efforts to
resolve such Dispute through negotiations between (i) senior executives of the
applicable Pm1ies, or (ii) delegated project managers of the applicable Parties
with authority to resolve the applicable Dispute.

 

(c) If, after 30 days following commencement of negotiations by initial notice
of a Party of intent to negotiate a Dispute in accordance with Section 9.19(b),
the Parties have been unable to resolve the applicable Dispute through such
negotiation in good faith on behalf of each Party, arbitration of a Dispute may
be initiated by a Party (a "Claimant") serving written notice on the AAA and the
other Party ("Respondent") that the Claimant has referred the Dispute to binding
arbitration. Claimant's notice initiating binding arbitration must describe in
reasonable detail the nature of the Dispute and the facts and circumstances
relating thereto and identify the arbitrator Claimant has appointed. Respondent
shall respond to Claimant within 30 days after receipt of Claimant's notice,
identifying the arbitrator Respondent has appointed. All arbitrators must be
neutral parties who have never been officers, directors or employees of the
Parties or any of their affiliates, and who have not performed any work for
either of the Parties or its affiliates. Arbitrators must have not less than
seven years of experience as a lawyer in the energy industry with experience in
exploration and production issues. The two arbitrators so chosen shall select a
third arbitrator within 30 days after the second arbitrator has been appointed.
If either the Respondent fails to name its Party appointed arbitrator within the
time permitted, or if the two arbitrators are unable to agree on a third
arbitrator within 30 days from the date the second arbitrator has been
appointed, then the missing arbitrator(s) shall be selected by the AAA from its
Large, Complex Commercial Case Panel or the Center for Public Resources Panel of
Distinguished Neutrals, giving due regard to the selection criteria set forth
above. The AAA shall select the missing arbitrator(s) not later than 90 days
from initiation of arbitration.

 

(d) The hearing shall be conducted in Denver, Colorado.

 

(e) The arbitrators may not grant or award indirect, consequential, punitive or
exemplary damages.

 

(f) In any action under this Agreement, the arbitration and court costs and
attorneys' fees of the Parties shall be borne in the manner determined by the
arbitrators.

 

19

 

 

 

 

 

 

 

20

 

 

EXECUTED as of the date first above written.

 

 

AMERICAN EAGLE ENERGY CORPORTION

 

By: Brad Colby                                                             

 

Name: President                                                            

 

Title: President                                                              

 

 

 

AMERICAN EAGLE ENERGY INC.

 

By: Brad Colby                                                             

 

Name: President                                                           

 

Title: President                                                             

 

 

 

USG PROPERTIES BAKKEN I, LLC

 

By: /s/ Lawrence A. Wall, Jr.                                     

 

Name: Lawrence A. Wall, Jr.                                      

 

Title: President                                                             

 

 

 

NEXTERA GAS PRODUCING, LLC

 

By:_____________________________________

 

Name:__________________________________

 

Title:___________________________________

 

21

 

 

Exhibit A

 

The Property

 

22

 

 

Exhibit B

 

Drilling Schedule

 

23

 

 

Exhibit C

 

WELLBORE ASSIGNMENT

 

 

THIS WELLBORE ASSIGNMENT (this “Assignment”), effective as of ________________,
____ at 12:01 a.m., local time in Divide County, North Dakota (the “Effective
Time”), is from American Eagle Energy Corporation, a Nevada corporation
(“ASSIGNOR”), with an address at 2549 W. Main Street, Suite 202, Littleton,
Colorado 80120 to USG Properties Bakken I, LLC a Delaware limited liability
company (“ASSIGNEE”), with an address at 601 Travis Street, Suite 1900, Houston,
Texas 77002.

 

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, ASSIGNOR does hereby assign to ASSIGNEE, subject to the
reversionary interest described below, __% of Assignor’s right, title and
interest in and to the following assets INSOFAR AND ONLY INSOFAR as such assets
cover and pertain directly to production of oil, gas and other minerals from the
WELLBORE ONLY OF THE [________________] WELL (the “Well”) with a surface
location in the [_____________________________________] (such right title an
interest in such wellbore being referred to as the “Property”) EXCEPTING AND
RESERVING unto Assignor all of Assignor’s right, title and interest in such
assets otherwise relating to or in any other manner pertaining to the lands
located in [_____________________]:

 

(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”);

 

(b) The Well and all water source, water injection and other injection and
disposal wells and systems located on the Leases or the Lands, and used in
connection with the Well, together with all equipment, facilities, and fixtures
used in operating Well, 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 Well (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 Well (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 Well (collectively
the “Miscellaneous Personal Property”), including records, files, and other data
that relate to the Well and lease, land and well files, production records,
title opinions, contract, regulatory and environmental files, and geological and
geophysical information (collectively the “Property Records”);

 

24

 

 

EXCEPTING AND RESERVING to Assignor a reversionary interest of 100% of the
interests assigned hereby such reversionary interest to be automatically
effective as of the Termination Date as such term is defined in Carry Agreement
dated as of July __, 2013 between Assignor and Assignee.

 

ASSIGNOR warrants that it has not granted, created or reserved any burden, claim
or title defect that would cause its Net Revenue Interest in the Well to be less
than the Net Revenue Interest for such Well set forth in Exhibit A or its
Working Interest in the Well to be greater than the Working Interest for such
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
Well. ASSIGNOR quitclaims to ASSIGNEE the benefit of all previous warranties in
ASSIGNOR’s chain of title, insofar as they may cover the Property.

 

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

 

For purposes of this Assignment, “Net Revenue Interest” shall mean, with respect
to the Well, the interest in and to all hydrocarbons produced, saved, and sold
from or allocated to the 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, ASSIGNOR CONVEYS THE
PROPERTY TO ASSIGNEE WITHOUT AND EXPRESSLY DISCLAIMS 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. ASSIGNEE HAS INSPECTED (OR HAS BEEN GIVEN THE OPPORTUNITY TO
INSPECT), THE PROPERTY AND IS 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, ASSIGNOR
makes no 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.

 

25

 

 

ASSIGNOR AND ASSIGNEE AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE
EFFECTIVE, THE DISCLAIMERS OF CERTAIN REPRESENTATIONS AND WARRANTIES CONTAINED
IN THIS ASSIGNMENT ARE “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 Agreement shall be governed, construed and enforced in accordance with the
laws of North Dakota without regard to conflicts of law.

 

This Assignment shall extend to and shall be binding upon the successors and
assigns of ASSIGNOR and ASSIGNEE.

 

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

 

ASSIGNOR:

 

American Eagle Energy Corporation

 

By: _____________________________

__________________,

__________________

 

 

ASSIGNEE:

 

USG Properties Bakken I, LLC

 

By: _____________________________

__________________,

__________________

 

 

 

STATE OF ________________ §   § ss. COUNTY OF ______________ §

 

 

This instrument was acknowledged before me on _____________, 201_, by
_____________, as ____________ of ____________________, a ____________________,
on behalf of said _____________ __________________. Witness my hand and official
seal.

 

 

_____________________________

NOTARY PUBLIC

 

 

(SEAL) My commission expires: _________________, 20___

 

26

 

 

STATE OF ________________ §   § ss. COUNTY OF ______________ §

 

 

This instrument was acknowledged before me on _____________, 201_, by
_____________, as ____________ of ____________________, a ____________________,
on behalf of said _____________ __________________. Witness my hand and official
seal.

 

 

_____________________________

NOTARY PUBLIC

 

 

(SEAL) My commission expires: _________________, 20___

 

27

 

 

Schedule 4.9

 

28

 

 

Schedule 4.12

 

29

 

 

Schedule 8.2

 

30