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Exhibit 10.4
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
 
[DANSVILLE PROSPECT]
 
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT (this “Amendment”) is made
effective as of September 19, 2011 (the “Effective Date”), by and between RANGE
MICHIGAN LLC, a Wyoming limited liability company with a mailing address of P.O.
Box 726, 504 Fremont, Thermopolis, WY 82443-2913 (“Range”), and AMERICAN ENERGY
DEVELOPMENT CORP. (F/K/A LJM ENERGY CORP.), a Nevada corporation with a mailing
address of 9190 Double Diamond Parkway, Reno NV 89521, (“AED”).
 
RECITALS:
 
WHEREAS, Range and AED entered into that certain Participation Agreement dated
effective as of June 14, 2011 (the “Participation Agreement”),regarding the
development of certain wells within the Participation Area (as defined therein);
and
 
WHEREAS, Range and AED now desire to amend the Participation Agreement as set
forth herein.
 
NOW, THEREFORE, for and in consideration of the mutual covenants and agreements
contained herein and in the Participation Agreement, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties hereto agree as follows:
 
1. References to LJM.  All references to LJM in the Participation Agreement
shall be deleted and replaced with AED.
 
2. Amendments to Specific Sections of the Participation Agreement.
 
a.  
The definition of Required Wells in Section 1.2 of the Participation Agreement
is hereby deleted in its entirety and replaced with the following definition:

 
“Required Wells” means those three wells in which AED is required to participate
pursuant to this Agreement and which will be spudded by 1 July, 2012 as provided
herein.
 
b.  
The last sentence of Section 3.1(a) of the Participation Agreement is hereby
deleted in its entirety and replaced with the following sentence:

 
It is anticipated that each of the remaining two of the Required Wells will be
spudded by 1 July, 2012.
 
c.  
A new section 3.1(c) (iv) is hereby added to the Participation Agreement as
follows:

 
(iv)           Range is hereby authorized to withhold the first ONE HUNDRED
THOUSAND DOLLARS ($100,000) from AED’s share of the proceeds from the production
of the First Required Well for the payment of the Option Fee as set forth in
that certain Option Agreement by and between Range and AED dated June 14, 2011,
as amended (the “Option Fee”).  Range’s authorization to withhold proceeds from
AED’s share of the production from the First Required Well shall terminate upon
the full payment of the Option Fee.  The authorization to withhold proceeds from
AED’s share of the First Required Well pursuant to this Section 3.1(c)(iv) shall
be in addition to any other payment required to be made by AED in this
Agreement.
 
 
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d.  
Section 3(d) of the Participation Agreement is hereby deleted in its entirety
and replaced with the following provisions:

 
(d) The following procedures relate to the development of the Second and Third
Required Wells:
 
i.  
Until the Second Required Well has been spudded, commencing on February 1, 2012,
on the first day of each succeeding calendar month, AED shall pay to Range ONE
HUNDRED THOUSAND DOLLARS ($100,000) as an advance on other payments required to
be made by AED to Range pursuant to this Section 3.1(d) (the “Advance
Payments”).  The sum of the Advance Payments paid by AED to Range pursuant to
this Section 3.1(d)(i) are referred to herein collectively as the “Drilling
Advance”.  The Drilling Advance shall be used to offset any amounts which would
otherwise be due and payable to Range under this Section 3.1(d).

 
ii.  
No less than thirty (30) days nor more than sixty (60) days prior to the planned
spudding of the remaining two Required Wells within the Participation Area,
Range shall deliver to AED an AFE containing the information referenced in
Section 3.1(b) above for such Required Wells and in form similar to the draft
AFE attached hereto as Exhibit C.

 
iii.  
Within ten (10) Business Days after AED’s receipt of an AFE for the Second
Required Well, AED shall pay to Range the First AFE and the Second AFE Payment
for such Second Required Well.  Upon spudding of the Second Required Well, AED
shall pay Range the First AFE Payment for the Third Required Well (i.e., fifty
percent (50%) of AED’s seventy percent (70%) share of the estimated AFE Dry Hole
Amount for the Third Required Well).

 
iv.  
Within ten (10) Business Days after AED’s receipt of an AFE for the Second or
Third Required Well, as applicable, AED shall pay Range the Second AFE Payment
for such Well (i.e., the balance of its seventy percent (70%) share of the AFE
Dry Hole Amount and the Prospect Fee for such Well).  Within 5 days after
reaching total depth of the Second or Third Required Well is complete, as
applicable, AED will make the Final AFE Payment for such Well to Range.

 
v.  
Thereafter, AED shall promptly pay any Additional Development Costs in
connection with the drilling, completing and equipping of each of the remaining
Required Wells as such costs may be billed by Range.

 
vi.  
If AED’s share of the actual costs incurred for drilling, completing and
equipping either of the remaining Required Wells is less than the payments
theretofore made by AED for such Well, Range shall refund any such overpayment
to AED.

 
e.  
A new section 3.1 (g) is hereby added to the Participation Agreement as follows:

 
(g) Subject to Section 3.4, below, in addition to any other remedies set forth
herein, it is understood and agreed by the Parties that in the event AED
breaches its obligation to participate in the development of any of the Required
Wells, each and every Drilling Advance, First AFE Payment, Second AFE Payment,
and Final AFE Payment previously paid to Range by AED in connection with a
Required Well shall be non-refundable.
 
f.  
Section 3.2 is hereby deleted in its entirety and replaced with the following
provisions:

 
(a)  Assignment of Well Interests in the First Required Well.  Within three (3)
business days following Range’s receipt of the both the First and Second AFE
Payment for the First Required Well, Range will assign to AED fifteen and five
eighths percent (15.625%) of Range’s interest in the First Required Well (the
“Initial First Required Well Assignment”) by executing a Bill of Sale and
Assignment in form substantially similar to the document attached hereto as
Exhibit E.  At such time as the Second Required Well is spudded; and, provided
that Range has received from AED the First AFE Payment and the Second AFE
Payment for the Second Required Well; Range shall assign to AED an interest in
the First Required Well equal to twenty eight and one eighth percent (28.125%)
of Range’s original interest in the First Required Well (the “Final First
Required Well Assignment”) such that following the Initial First Required Well
Assignment and the Final First Required Well Assignment, Range shall have
assigned to AED forty-three and seventy-five hundredths percent (43.75%) of its
original interest in the First Required Well.  In the event that AED fails to
perform any one of its obligations pursuant to Section 3.1 of this Agreement,
upon request from Range, AED shall promptly re-convey to Range any interests it
received pursuant to the Final First Required Well Assignment.
 
 
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(b)  Assignment of Well Interests in the Second and Third Required Wells. Within
three (3) business days following Range’s receipt of the both the First and
Second AFE Payment for each of the Second and Third Required Well, Range will
assign to AED forty three and seventy-five hundredths percent (43.75%) of
Range’s interest in that Required Well by executing a Bill of Sale and
Assignment in form substantially similar to the document attached hereto as
Exhibit E.
 
g.  
Section 3.4 is hereby deleted in its entirety and replaced with the following
provision:

 
Undrilled Wells.  If a Well is proposed for which AED has advanced funds to
Range, and that well is not drilled or is drilled but not completed and/or
equipped, Range will return any unused funds to AED within twenty (20) Business
Days following notice from Range that the proposed well will not be drilled or
will be abandoned; provided that, in the case of a Required Well, the decision
to not drill or abandon the well is unrelated to AED’s failure to perform any of
its obligations hereunder, including without limitation, the obligation to make
any payment to Range as required by this Agreement.
 
h.  
Section 8.4 is hereby deleted in its entirety and replaced with the following
provision:

 
Amendment.  No amendment of any provision of this Agreement shall be effective
unless it is in writing and signed by all parties hereto and no waiver of any
provision of this Agreement, and no consent to any departure by any party hereto
therefrom, shall be effective unless it is in writing and signed by the other
parties hereto, and then such waiver or consent shall be effective only in the
specific and for the specific purpose for which given
 
i.  
Section 8.5 shall be deleted in its entirety and replaced with the following
provision:

 
8.5 [Reserved]
 
3. Remaining Provisions Unchanged.  The Participation Agreement, as amended by
this Amendment, is and shall remain in full force and effect.  Except as amended
hereby, the provisions of the Participation Agreement are unchanged.
 
4. Counterparts. This Amendment may be executed in one or more counterparts,
which when executed shall constitute but one and the same instrument.
 
5. Authority to Execute.  The person executing this Amendment on behalf of each
of the Parties warrants and represents that such person is duly authorized and
empowered to execute this Agreement on behalf of such Party.
 
6. Severability.  This Amendment and the Participation Agreement is intended to
be performed in accordance with and only to the extent permitted by all legal
requirements.  If any provision of this Amendment or the Participation Agreement
or the application thereof to any person or circumstance shall, for any reason
and to any extent, be invalid or unenforceable, but the extent of the invalidity
or unenforceability does not destroy the basis of the bargain between the
Parties as contained herein, the remainder of the Participation Agreement, as
amended, and the application of such provision to other persons and
circumstances shall not be affected thereby, but rather shall be enforced to the
greatest extent permitted by law.
 
[End of Text; Signature Pages Follow]
 

 
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IN WITNESS WHEREOF the parties hereby execute and deliver this Amendment
effective as of the Effective Date.

 
 

 
RANGE MICHIGAN LLC
 
By its Manager: Range Exploration Partners LLC
           
By:
/s/ Frode Aschim      
Frode Aschim
   
Its:
Manager
 

 

 
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IN WITNESS WHEREOF the parties hereby execute and deliver this Amendment
effective as of the Effective Date.

 
 
 

 
AED
 
American Energy Development Corp.
           
By:
/s/ Herold Ribsskog      
Herold Ribsskog
   
Its:
Chief Executive Officer
 

 
 
 
 
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