PURCHASE AND SALE AGREEMENT

 

This Purchase and Sale Agreement (this “Agreement”) is entered into as of
December 20, 2012, by and between USG Properties Bakken I, LLC, a Delaware
limited liability company (“Seller”), and American Eagle Energy Corporation, a
Nevada corporation (“Buyer”).

 

WHEREAS, Seller owns the Property (as defined below) and desires to sell the
Property to Buyer, and Buyer desires to purchase the Property from Seller, upon
the terms and conditions set forth herein.

 

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

 

1.The Property. Buyer agrees to purchase, and Seller agree to sell, convey and
assign, all of Seller’s right, title and interest in and to the below-described
property (such right, title and interest, the “Property”), subject to the terms
and conditions of this Agreement:

 

A.The oil, gas and mineral leases described in Exhibit A and any and all other
leases owned by Seller covering any of the below-referenced units or fields (the
“Leases”), insofar as they cover the lands situated within the Nomad and Thomte
Spacing and Drilling Units located in Divide County, North Dakota (the “Lands”),
together with all rights, privileges and obligations appurtenant thereto;

 

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”).

 

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2.Purchase Price.

 

A.The purchase price for the Property (the “Purchase Price”), to be paid by
Buyer to Seller is $8,000,000, subject to adjustment as provided in Section 3
below (as so adjusted, the “Adjusted Purchase Price”) and payable as provided in
Section 2B. The Purchase Price shall be allocated among the respective
Properties and as to type of asset as set forth in Schedule 2A attached hereto.
Buyer and Seller agree to use such allocations in all tax and related filings
with respect to the transactions contemplated hereby.

 

B.Thirty percent (30%) of the Purchase Price shall be paid to Seller by Buyer at
Closing and seventy percent (70%) of the Purchase Price shall be paid to Seller
by Buyer on or before June 28, 2013, each of such payments to be paid by wire
transfer of immediately available funds to an account designated by Seller in
writing. If the second payment described in the first sentence of this Section
2B is not made on or before the date set forth for such payment above, Buyer
shall pay Seller interest on such late payment at a rate per annum equal to the
90-day LIBOR rate as shown in The Wall Street Journal money market section, as
such rate may change from time to time, calculated on the basis of the actual
number of days elapsed from the date on which such payment was due to the date
of late payment.

 

3.Purchase Price Adjustments.

 

The Purchase Price will be adjusted as follows to reflect the allocation of
expenses and revenues attributable to the Property as of the Effective Time such
that Seller shall bear all expenses and receive all the proceeds related to the
Property before the Effective Time and Buyer shall bear all expenses and receive
all the proceeds related to the Property after the Effective Time. No less than
one day before Closing, Seller will submit for Buyer’s review and approval a
preliminary settlement statement identifying estimates of all such adjustments.

 

A.The Purchase Price will be adjusted upward by: (i) all proceeds attributable
to the operation of the Property not yet received by Seller to the extent they
are attributable to times before the Effective Time; (ii) all operating and
capital expenses actually paid by Seller with respect to the operation of the
Property after the Effective Time (but specifically excluding all portions of
capital expenses incurred prior to the Effective Time) and, (iii) any property
taxes and excise, severance and other taxes attributable to the Property or on
or measured by the production therefrom (collectively “Production Taxes”) paid
by Seller, to the extent relating to times on and after the Effective Time,
based upon the assessment rates for the most recent calendar year or other time
period then available.

 

B.The Purchase Price will be adjusted downward by: (i) all proceeds attributable
to the operation of the Property received by Seller to the extent they are
attributable to times after the Effective Time; and (ii) any Production Taxes
paid by Buyer, to the extent relating to times prior to the Effective Time,
based upon the assessment rates for the most recent calendar year or other time
period then available; and, any other decreases in the Purchase Price pursuant
to Section 9 below.

 

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Within 90 days after Closing, Seller will provide a final settlement statement
for Buyer’s review and approval containing a final calculation of the
adjustments to the Purchase Price. If Buyer does not submit a notice of
disagreement with respect to such adjustments within 15 days after receipt
thereof, such adjustments shall become final and binding. If Buyer submits a
notice of disagreement with respect to such adjustments within such 15 day
period, the parties shall negotiate in good faith to resolve such disagreement
as soon as possible. If the Adjusted Purchase Price is greater than the Purchase
Price, then Buyer shall pay the amount by which the Adjusted Purchase Price
exceeds the Purchase Price to Seller. If the Purchase Price is greater than the
Adjusted Purchase Price, then Seller shall pay the amount by which the Purchase
Price exceeds the Adjusted Purchase Price to Seller. Such payment shall be made
within 10 days after the parties agree upon the Adjusted Purchase Price by wire
transfer of immediately available funds. Notwithstanding the foregoing, if
either party receives revenues that belong to the other party based on an
Effective Time allocation, the receiving party will promptly remit those
revenues to the other party, and if either party pays an expense that is the
responsibility of the other party based on the Effective Time allocation
described above, the party on whose behalf the expenses were paid agrees to
promptly reimburse the other party. Without limiting the foregoing, Seller shall
file all returns and pay all Production Taxes relating to times prior to the
Effective Time.

 

4.Effective Time. The “Effective Time” shall mean 12:01 a.m. local time in
Divide County, North Dakota, on November 1, 2012. If the Closing does not occur
on the first day of a calendar month, costs and expenses for that month shall be
allocated as if the revenues and expenses for that calendar month were produced
or incurred on an equal daily basis for that calendar month.

 

5.Reciprocal Representations, Warranties and Covenants. Buyer and Seller each
represents and warrants to the other that, as to itself, the following
statements are true and accurate as of the date hereof through the Closing Date:

 

A.It is duly organized and in good standing under the laws of its state of
incorporation or organization, is (or, as of the date of Closing hereunder, will
be) duly qualified to carry on its business in the State of North Dakota, and
has all the requisite power and authority to enter into and perform this
Agreement.

 

B.This Agreement has, and all other documents it is to execute and deliver on or
before the Closing Date have been (or will be) duly executed by its authorized
representatives, constitute its valid and legally binding obligations, and
subject to applicable law, are enforceable against it in accordance with their
respective terms. Except as would not result in a material adverse effect on the
Property taken as a whole, execution, delivery, and performance of this
Agreement and such documents does not conflict with or violate any agreement or
instrument to which it is a party or by which it is bound, or any law, rule,
regulation, ordinance, judgment, decree or order to which it or the Property is
subject.

 

C.There is no action, suit, proceeding, claim or investigation pending or, to
the best of its knowledge, threatened, against it that seeks to restrain or
prohibit, or to obtain damages from it, with respect to this Agreement or the
consummation of all or part of the transaction contemplated by this Agreement.

 

D.It has not incurred any obligation for brokers’, finders’ or similar fees for
which the other party would be liable.

 

E.Prior to Closing, it will give the other party prompt written notice of any
matter materially affecting the accuracy of any of its representations or
warranties under this Agreement.

 

6.Seller’s Representations, Warranties and Covenants. Seller represents and
warrants to Buyer that the following statements are true and accurate, as of the
date hereof through the Closing Date:

 

A.Except for burdens that have been taken into account in determining the
Working Interests (as defined below) and Net Revenue Interests (as defined
below) included in the Property and for liens, encumbrances and other burdens
that will be released contemporaneously with the Closing, the Property is free
and clear of all mortgages, deeds of trust, liens, and other encumbrances
created by, through or under Seller and Seller has made no dispositions or
elections or taken any other action that would increase its share of costs to
greater than the Working Interest or decrease its net share of production to
less than the Net Revenue Interest set forth on Exhibit A. To Seller’s
knowledge, there are no preferential rights, consents to assignment or other
restrictions on alienation of the Property, except as heretofore disclosed in
writing by Seller to Buyer.

 

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B.Except as previously disclosed by Seller to Buyer, to Seller’s knowledge there
is no demand or lawsuit, nor any compliance order, notice of probable violation
or other private or governmental action, pending or, to the best of Seller’s
knowledge, threatened against Seller of which Seller has knowledge but Buyer
does not have knowledge, that would result in an impairment or loss of title to
any part of the Property, or impairment of the value thereof, or would hinder or
impede the operation or transfer of the Property.

 

C.Except as required by applicable law or the Related Contracts, Seller will not
commence or consent to commencement of, or elect to participate in, any
operation to drill any new well on the Leases or the Lands or to frac,
re-complete, deepen, rework, plug back, plug and abandon, or conduct other
significant operations with respect to any Well without the prior written
consent of Buyer, not to be unreasonably withheld.

 

D.From the date hereof through Closing, Seller will pay when due all expenses
coming due and payable in connection with the Property. Without the prior
written consent of Buyer, which shall not be unreasonably withheld, and except
as required by applicable law or Related Contracts, Seller will not do any of
the following with respect to the Property, except to the extent resulting from
the actions of the operator of the Property: (i) enter into any new agreements
or commitments; (ii) incur any liabilities other than in the ordinary course of
business for normal operating expenses; (iii) release, surrender, modify or
terminate all or any portion of the Leases or the Related Contracts; or (iv)
encumber, sell or otherwise dispose of any of the Property other than
hydrocarbons sold in the ordinary course of business.

 

E.All taxes, assessments and other governmental charges payable with respect to
the Property have been properly paid in a timely manner.

 

F.From the date hereof through Closing, Seller will immediately notify Buyer of
any material change in the condition of the Property of which Seller is aware,
including without limitation any casualty loss.

 

G.Promptly after the execution and delivery of this Agreement, Seller will give
written notice to Buyer of any condition or occurrence of which Seller has
actual knowledge relating to any or all of the Property that could constitute an
Environmental Issue (as defined below). Seller shall have the right, up to the
day prior to the Closing, to supplement its original notice by giving one or
more additional written notices to Buyer, if Seller later becomes aware of any
additional conditions or occurrences of the type referred to above. Any and all
notices given by Seller to Buyer under this Section 6.G shall be herein referred
to, collectively, as the “Environmental Disclosure.”

 

7.Buyer’s Representations, Warranties and Covenants. Buyer represents and
warrants to Seller that the following statements are true and accurate, as of
the date hereof and the Closing Date:

 

A.Buyer is acquiring the Property for investment purposes only and not with a
view toward resale or distribution thereof in violation of applicable securities
laws. Buyer acknowledges that it can bear the economic risk of its investment in
the Property, Buyer has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of an investment
in the Property, and Buyer is sophisticated in the evaluation, purchase,
ownership and operation of oil and gas properties. Buyer is an “accredited
investor” as such term is defined in Regulation D under the Securities Act of
1933, as amended (the “Securities Act”). Buyer understands that none of the
Property will have been registered pursuant to the Securities Act or any
applicable state securities laws, that the Property will be characterized as
“restricted securities” under federal securities laws, and that the Property may
not be sold or otherwise disposed of without registration under the Securities
Act or an exemption therefrom.

 

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B.Buyer hereby acknowledges and affirms that (i) it has completed its own
independent investigation, analysis, and evaluation of the Property, (ii) it has
made all such reviews and inspections of the Leases, Lands and Wells, their
results of operation, their condition (financial or otherwise), and as to their
prospects as it has deemed necessary or appropriate and (iii) in making its
decision to enter into this Agreement and to consummate the transactions
contemplated hereby, Buyer has relied solely on the representations and
warranties set forth in this Agreement and its own independent investigation,
analysis and evaluation.

 

8.Due Diligence. From the date hereof through Closing, Seller will allow Buyer
full access to the Related Contracts and the Property Records. Buyer may
photocopy records at its sole expense and shall keep confidential all
information made available to it until the Closing. In the event that the
purchase/sale of the Property as contemplated by this Agreement does not close,
Buyer shall at its expense promptly return to Seller all original information
and certify that it has destroyed and retained no copies of all other
information it obtained from Seller.

 

9.Notice of Defect. For the purposes of this Agreement: (a) references to a
“Title Issue” shall be deemed to refer to any lien, encumbrance or other defect
that causes Seller to be entitled to receive a Net Revenue Interest with respect
to a Lease or Well less than the “Net Revenue Interest” set forth in Exhibit A
for such Lease or Well, or that causes Seller to be obligated to bear a Working
Interest with respect to a Lease or Well greater than the “Working Interest” set
forth in Exhibit A for such Lease or Well, except for any such excess Working
Interest accompanied by a proportionate increase in the Net Revenue Interest for
such Lease or Well, and (b) references to an “Environmental Issue” shall be
deemed to refer to any condition of the Leases, Lands, Wells or Lease Property
and Equipment that could reasonably be expected, under any applicable
environmental or other law, either to require remediation efforts or to expose
the owner of the Property to liability for any fine, penalty or other monetary
obligation. If Buyer becomes aware prior to Closing of any Title Issue or
Environmental Issue that Buyer reasonably deems sufficiently material as to
require curative action prior to Closing, Buyer shall promptly notify Seller in
writing of such Title Issue or Environmental Issue, and Buyer and Seller shall
attempt to reach agreement on curative action, Purchase Price adjustment, or
other appropriate steps. If agreement cannot be reached, Buyer or Seller may
elect to terminate this Agreement.

 

For purposes of this Agreement, “Working Interest” shall mean, with respect to a
Lease or Well, the percentage interest in such 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 Agreement, “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.

 

10.Closing. The actions and events described in Section 11 below are the
“Closing” of this transaction, which shall be held on at 1:00 p.m. local time on
December 28, 2012 or at such other date and time as to which Buyer and Seller
may hereafter mutually agree in writing. Closing will be held at Buyer’s offices
located at 2549 W. Main Street, Suite 202, Littleton, Colorado 80120, or at such
other place as the parties may mutually agree. All events of Closing shall be
deemed to have occurred simultaneously, and each shall be a condition precedent
to the others. The date of the Closing determined pursuant to this Section 9
shall herein be referred to as the “Closing Date.”

 

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11.Conditions to Closing.

 

A.Seller shall not be obligated to close the transaction described in this
Agreement, and will have the right to terminate this Agreement, if any of the
following conditions to its performance is not satisfied as of the Closing:

 

(i)If, as of the Closing Date, any matter represented or warranted in this
Agreement by Buyer is untrue in any material respect, or if Buyer has not
performed in all material respects the obligations under this Agreement that
Buyer is required to perform on or before Closing.

 

(ii)If, as of the Closing Date, any suit or other proceeding instituted by a
person or entity other than Buyer or Seller is pending or threatened before any
court or governmental agency seeking to restrain, prohibit, or declare illegal,
or seeking substantial damages in connection with, the transaction that is the
subject of this Agreement.

 

B.Buyer shall not be obligated to close the transaction described in this
Agreement, and will have the right to terminate this Agreement, if any of the
following conditions to its performance is not satisfied as of the Closing:

 

(i)If, as of the Closing Date, any matter represented or warranted in this
Agreement by Seller is untrue in any material respect, or if Seller has not
performed in all material respects the obligations under this Agreement that
Seller is required to perform on or before Closing.

 

(ii)If, as of the Closing Date, any suit or other proceeding instituted by a
person or entity other than Buyer or Seller is pending or threatened before any
court or governmental agency seeking to restrain, prohibit, or declare illegal,
or seeking substantial damages in connection with, the transaction that is the
subject of this Agreement.

 

12.Events of Closing. At Closing, the following events shall occur, the term
“delivery” to include all appropriate executions and acknowledgments:

 

A.Buyer and Seller will deliver the preliminary settlement statement, showing
adjustments to the Purchase Price.

 

B.Buyer will deliver thirty-percent (30%) of the Purchase Price by wire transfer
in immediately available funds to the account of Seller, as provided in account
and wire transfer instructions designated in writing by Seller at least 3
business days prior to Closing.

 

C.Seller will deliver to Buyer one or more assignments and conveyances of the
Property in the form attached as Exhibit B and, if the Property includes State
or Federal leases, the appropriate state or federal forms required for filing in
the applicable State or Federal records.

 

D.Seller will deliver to Buyer all other instruments necessary or advisable to
transfer the rights, obligations and interests in applicable Related Contracts
and other Property, including all third-party waivers, consents, approvals and
permits.

 

E.Buyer and Seller will each deliver to the other any additional assignments,
bills of sale, deeds or instruments necessary to transfer the Property to Buyer
or to otherwise effect and support the transaction contemplated in this
Agreement.

 

F.Buyer and Seller will each deliver to the other, a statement that, to the best
of its knowledge, all of its representations are true in all material respects
as of the Closing.

 

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13.Post-Closing Obligations and Other Agreements.

 

A.After the Closing, Buyer will have access, during normal business hours and
upon reasonable prior notice, to the Property Records at Seller’s offices. Buyer
shall have the right, at Buyer’s sole cost, risk and expense, to copy any or all
of such Property Records.

 

B.Within 15 days after Closing, Buyer will, at Buyer’s cost, record all
assignments and all other instruments that must be recorded to effect the
transfer of the Property and file for approval with any government agencies
required to effect the transfer of the Property.

 

C.The representations, warranties, and related covenants and agreements made in
this Agreement or any certificate, agreement or document delivered at the
Closing shall survive the Closing for a period of six months.

 

D.Each party will be responsible for its own state and federal income taxes, if
any, relating to this transaction. Buyer will be responsible for any transfer,
sales or similar taxes levied on the transfer of the Property to Buyer.

 

E.Effective as of the Closing, Buyer assumes and agrees to fully perform all of
Seller’s express or implied covenants under the Leases and other Property;
provided, however, Buyer shall not assume any obligations or liabilities to the
extent they are (i) costs allocated to Seller under this Agreement, or (ii)
attributable to the gross negligence or willful misconduct of Seller in
connection with the Properties (collectively, the “Seller Retained
Liabilities”).

 

F.Effective as of the Closing, Seller shall defend, indemnify and hold harmless
Buyer and its shareholders, directors, officers, managers, employees, agents and
representatives (collectively, “Buyer Indemnified Parties”) from and against any
and all claims, causes of actions, payments, charges, judgments, assessments,
liabilities, losses, damages, penalties, fines, costs and expenses, including
any attorneys’ fees and legal or other expenses incurred in connection therewith
and including liabilities, costs, losses and damages for personal injury or
death or property damage (all of the foregoing collectively known as
“Liabilities”), arising from, based upon, related to or associated with:

 

(a)any breach by Seller of its representations, warranties or covenants
contained in this Agreement; or

 

(b)the Seller Retained Liabilities.

 

G.Effective as of the Closing, Buyer shall defend, indemnify and hold harmless
Seller and its members, directors, officers, employees, agents and
representatives (collectively, “Seller Indemnified Parties”) from and against
any and all any and all Liabilities arising from, based upon, related to or
associated with:

 

(a)any breach by Buyer of its representations, warranties or covenants contained
in this Agreement; or

 

(b)the ownership or operation of the Property after the Effective Time.

 

H.Notwithstanding anything to the contrary in this Agreement, (i) no Buyer
Indemnified Party shall be entitled to assert any right to indemnification under
Section 13.F., (A) with respect to any individual claim unless the Liabilities
resulting from such individual claim exceed $25,000 (each such individual claim
that exceeds $25,000, a “Qualified Claim”), and then only to the extent such
Liabilities exceed $25,000, and (B) until the aggregate amount of all
Liabilities actually suffered by the Buyer Indemnified Parties in respect of
Qualified Claims exceeds an amount equal to four percent of the Purchase Price,
and then only to the extent such Liabilities exceed such amount, and (ii) in no
event shall Seller’s aggregate liability under this Agreement or in respect of
the transactions contemplated exceed an amount equal to 20 percent of the
Adjusted Purchase Price.

 

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I.All disputes arising from or relating to this Agreement shall be adjudicated
in the federal and state courts sitting in Harris County, Texas, and each party
hereby consents to such courts’ jurisdiction and to such venue.

 

J.Buyer and Seller agree to execute and deliver from time to time such further
instruments and do such other acts as may be reasonably requested to effectuate
the purposes of this Agreement.

 

K.NO PARTY NOR ANY OF ITS AFFILIATES SHALL BE LIABLE UNDER THIS AGREEMENT OR ANY
OTHER DOCUMENT ENTERED INTO OR OTHERWISE RELATED TO THIS TRANSACTION FOR
EXEMPLARY, SPECIAL, PUNITIVE, INDIRECT, REMOTE, SPECULATIVE, OR CONSEQUENTIAL
DAMAGES (INCLUDING LOST PROFITS, OPPORTUNITY COSTS, OR DAMAGES BASED UPON
MULTIPLES OF EARNINGS), WHETHER IN TORT (INCLUDING NEGLIGENCE OR GROSS
NEGLIGENCE), STRICT LIABILITY, BY CONTRACT OR STATUTE, AND WHETHER FORESEEABLE
OR UNFORESEEABLE.

 

L.Notwithstanding anything to the contrary contained in this Agreement,
indemnification pursuant to this Section 13 is the Parties’ exclusive remedy
against each other with respect to breaches of the representations and
warranties of the Parties contained in this Agreement.

 

M.EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY ACTION, SUIT, OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT.

 

14.Disclaimers.

 

A.EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN SECTION 5 (AS TO SELLER),
SECTION 6 OR THE SPECIAL WARRANTIES OF TITLE CONTAINED IN THE ASSIGNMENTS PER
SECTION 12, (I) SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS,
STATUTORY OR IMPLIED AND (II) SELLER EXPRESSLY DISCLAIMS ALL LIABILITY AND
RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION MADE
OR COMMUNICATED (ORALLY OR IN WRITING) TO BUYER OR ANY OF ITS AFFILIATES,
EMPLOYEES, AGENTS, CONSULTANTS OR REPRESENTATIVES (INCLUDING ANY OPINION,
INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE BEEN PROVIDED TO BUYER BY ANY OF
SELLER’S REPRESENTATIVES, INCLUDING WITH RESPECT TO ANY SEISMIC DATA AND
INFORMATION).

 

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B.EXCEPT AS EXPRESSLY SET FORTH IN SECTION 5 (AS TO SELLER), SECTION 6 OR THE
SPECIAL WARRANTIES OF TITLE CONTAINED IN THE ASSIGNMENTS PER SECTION 12, AND
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLER EXPRESSLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO (I) TITLE TO
ANY OF THE PROPERTIES, (II) THE CONTENTS, CHARACTER OR NATURE OF ANY REPORT OF
ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY ENGINEERING, GEOLOGICAL OR SEISMIC
DATA OR INTERPRETATION, INCLUDING THE SEISMIC DATA AND INFORMATION, RELATING TO
THE PROPERTY, (III) THE QUANTITY, QUALITY OR RECOVERABILITY OF HYDROCARBONS IN
OR FROM THE PROPERTY, (IV) ANY ESTIMATES OF THE VALUE OF THE PROPERTY OR FUTURE
REVENUES GENERATED BY THE PROPERTY, (V) THE PRODUCTION OF HYDROCARBONS FROM THE
PROPERTY, (VI) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN
OR MARKETABILITY OF THE PROPERTY, (VII) THE CONTENT, CHARACTER OR NATURE OF ANY
INFORMATION, MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY
SELLER OR THIRD PARTIES WITH RESPECT TO THE PROPERTY, (VIII) ANY OTHER MATERIALS
OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE TO BUYER OR ITS AFFILIATES, OR
ITS OR THEIR EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY
DISCUSSION OR PRESENTATION RELATING THERETO AND (IX) ANY IMPLIED OR EXPRESS
WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT. EXCEPT AS EXPRESSLY
REPRESENTED OTHERWISE IN SECTION 5 (AS TO SELLER) AND SECTION 6, SELLER FURTHER
DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, OF
MERCHANTABILITY, FREEDOM FROM LATENT VICES OR DEFECTS, FITNESS FOR A PARTICULAR
PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY PROPERTIES,
RIGHTS OF A PURCHASER UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF
CONSIDERATION OR RETURN OF THE PURCHASE PRICE, IT BEING EXPRESSLY UNDERSTOOD AND
AGREED BY THE PARTIES THAT BUYER SHALL BE DEEMED TO BE OBTAINING THE PROPERTY IN
ITS PRESENT STATUS, CONDITION, AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH
ALL FAULTS OR DEFECTS (KNOWN OR UNKNOWN, LATENT, DISCOVERABLE OR
UNDISCOVERABLE), AND THAT BUYER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS
OF THE PROPERTY AS BUYER DEEMS APPROPRIATE.

 

C.OTHER THAN THOSE REPRESENTATIONS SET FORTH IN SECTION 6.H, SELLER HAS NOT AND
WILL NOT MAKE ANY REPRESENTATION OR WARRANTY REGARDING ANY MATTER OR
CIRCUMSTANCE RELATING TO ENVIRONMENTAL LAWS, THE RELEASE OF MATERIALS INTO THE
ENVIRONMENT OR THE PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE
ENVIRONMENT OR ANY OTHER ENVIRONMENTAL CONDITION OF THE PROPERTIES, AND NOTHING
IN THIS AGREEMENT OR OTHERWISE SHALL BE CONSTRUED AS SUCH A REPRESENTATION OR
WARRANTY, AND BUYER SHALL BE DEEMED TO BE TAKING THE PROPERTY “AS IS” AND “WHERE
IS” WITH ALL FAULTS FOR PURPOSES OF ITS ENVIRONMENTAL CONDITION AND THAT BUYER
HAS MADE OR CAUSED TO BE MADE SUCH ENVIRONMENTAL INSPECTIONS AS BUYER DEEMS
APPROPRIATE.

 

D.SELLER AND BUYER AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE
EFFECTIVE, THE DISCLAIMERS OF CERTAIN REPRESENTATIONS AND WARRANTIES CONTAINED
IN THIS SECTION 14 ARE “CONSPICUOUS” DISCLAIMERS FOR THE PURPOSE OF ANY
APPLICABLE LAW.

 

15.Notices. All notices under this Agreement must be in writing and may be given
by personal delivery, facsimile or electronic transmission, U.S. Mail (postage
prepaid), or commercial delivery service, and will be deemed duly given when
received by the party charged with such notice and addressed as follows:

 

9

 

 

If to Seller:            USG Properties Bakken I, LLC

601 Travis Street, Suite 1900

Houston, Texas 77002 

Attention: Michael Jessop

Facsimile: (713) 751-0375

Email: michael.jessop@nee.com

 

If to Buyer:          American Eagle Energy Corporation

2549 W. Main Street, Suite 202

Littleton, Colorado 80120

Attention: Steve Dille

Facsimile: 303 798 5767

Email: stevedille@amzgcorp.com

 

16.Entire Agreement and Amendment. This Agreement constitutes the entire
understanding between the parties, replacing and superseding all prior
negotiations, discussions, arrangements, agreements and understandings between
the parties regarding the subject transaction and subject matter hereof. This
Agreement can be supplemented, amended or revoked only in writing, signed by the
parties.

 

17.Assignment; Binding Effect. Prior to the Closing Date, neither party may
assign its rights or obligations under this Agreement without the prior written
consent of the other, which consent may not be unreasonably withheld or delayed;
provided that no consent shall be required for Buyer to assign its rights to any
subsidiary, affiliate or other entity so long as Buyer remains liable to Seller
for the payment and performance of any and all of Buyer’s obligations hereunder.
If Buyer sells, transfers or assigns all or a portion of its rights hereunder,
in addition to Buyer remaining liable to Seller for the payment and performance
of any and all related obligations as set forth above, Buyer shall require its
successors and assigns to expressly assume its obligations under this Agreement,
to the extent related or applicable to the Property or portion thereof acquired
by them, and Seller shall be considered a third party beneficiary under any such
assumption. This Agreement shall be binding upon the parties hereto and their
permitted successors and assigns.

 

18.Interpretation. This Agreement shall be considered for all purposes to have
been jointly prepared by the parties, and shall not be construed against any one
party (nor shall any inference or presumption be made) on the basis of who
drafted this Agreement or any other event of the negotiation, drafting or
execution of this Agreement. The omission of provisions of this Agreement from
the assignment documents described in Section 12 is not a conflict or
inconsistency with this Agreement and will not effect a merger of the omitted
provisions. To the fullest extent permitted by law, all provisions of this
Agreement are hereby incorporated into such assignment documents by reference.
Headings and titles in this Agreement are for convenience only and shall have no
significance in interpreting this Agreement. The plural shall be deemed to
include the singular, and vice versa. The word “including” shall be construed
not as a limitation, but as the phrase “including, but not limited to.”

 

19.Severability. If any provision of this Agreement is found by a court of
competent jurisdiction to be invalid or unenforceable, that provision will be
deemed modified to the extent necessary to make it valid and enforceable, and if
it cannot be so modified, it shall be deemed deleted and the remainder of the
Agreement shall continue and remain in full force and effect.

 

20.Governing Law. This Agreement shall be governed, construed and enforced in
accordance with the laws of Texas without regard to conflicts of law.

 

21.Exhibits and Schedules. The Exhibits and Schedules attached to this Agreement
are incorporated into and made a part of this Agreement.

 

22.Waiver. No provision of this Agreement may be waived except by written
instrument executed by the party charged with such waiver. Except as otherwise
expressly provided, the failure of any party to require performance of any
provision hereof shall not affect such party’s right to enforce the same. Waiver
by a party of a provision in this Agreement in one or more instances shall not
be deemed to be or construed as a further or continuing waiver of such
provision.

 

10

 

 

23.               Execution. This Agreement may be executed in counterparts,
each of which will constitute an original and all of which will constitute one
document. This Agreement 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
above. 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 Agreement 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:     By:       Brad Colby, President

 

11

 

 

EXHIBIT “A”

 

LEASES AND WELLS

 

 

 

 

EXHIBIT “B”

 

ASSIGNMENT, BILL OF SALE AND CONVEYANCE

 

THIS ASSIGNMENT, BILL OF SALE AND CONVEYANCE (this “Assignment”), effective as
of November 1, 2012 at 12:01 a.m., local time in Divide County, North Dakota
(the “Effective Time”), is from USG Properties Bakken I, LLC a Delaware limited
liability company (“ASSIGNOR”), with an address at 601 Travis Street, Suite
1900, Houston, Texas 77002 to American Eagle Energy Corporation, a Nevada
corporation (“ASSIGNEE”), with an address at 2549 W. Main Street, Suite 202,
Littleton, Colorado 80120.

 

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 sell, convey, assign and transfer to
ASSIGNEE, all of Seller’s right, title and interest in and to the following
(such right, title and interest, 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”);

 

(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”).

 

ASSIGNOR warrants that it has not granted, created or reserved any burden, claim
or title defect that would cause its 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 its 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. 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
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 Assignment, “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, 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.

 

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 Texas 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:     USG Properties Bakken I, LLC     By:           ,              
        ASSIGNEE:             American Eagle Energy Corporation             By:
          ,          

 

STATE OF     §         § ss.   COUNTY OF     §  

 

This instrument was acknowledged before me on _____________, 2012, 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 _____________, 2012, 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 ASSIGNMENT, BILL OF SALE AND CONVEYANCE

 

LEASES AND WELLS

 

See attached

 

 

 

 

SCHEDULE 2A

 

PURCHASE PRICE ALLOCATIONS