Document:

EXHIBIT
D

     

    SECURITY
AGREEMENT

     

    This SECURITY AGREEMENT, dated as of
April 15, 2010 (this “Agreement”), is among
American Eagle Energy, Inc., a Nevada corporation (the “Company” or the
“Debtor”) and
the holders of the Company’s 8% Secured Convertible Debentures due April 15,
2011 and issued on April 15, 2010 in the original aggregate principal amount of
$[2,000,000] (collectively, the “Debentures”)
signatory hereto, their endorsees, transferees and assigns (collectively, the
“Secured
Parties”).

     

    WITNESSETH:

     

    WHEREAS, pursuant to the Purchase
Agreement (as defined in the Debentures), the Secured Parties have severally
agreed to extend the loans to the Company evidenced by the Debentures;
and

     

    WHEREAS, in order to induce the Secured
Parties to extend the loans evidenced by the Debentures, the Debtor has agreed
to execute and deliver to the Secured Parties this Agreement and to grant the
Secured Parties, pari passu with each other
Secured Parties, a security interest in certain property of the Debtor to secure
the prompt payment, performance, and discharge in full of all of the Company’s
obligations under the Debentures.

     

    NOW, THEREFORE, in consideration of the
agreements herein contained and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:

     

    1.           Certain
Definitions.  As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1.  Terms used but
not otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as “account”, “chattel paper”, “commercial tort claim”, “deposit account”,
“document”, “equipment”, “fixtures”, “general intangibles”, “goods”,
“instruments”, “inventory”, “investment property”, “letter-of-credit rights”,
“proceeds” and “supporting obligations”) shall have the respective meanings
given such terms in Article 9 of the UCC.

     

    (a)           “Collateral” means the
collateral in which the Secured Parties are granted a security interest by this
Agreement and which shall include all of the assets of the Company, including,
but not limited to, the following personal property and real property of the
Debtor, whether presently owned or existing or hereafter acquired or coming into
existence, wherever situated, and all additions and accessions thereto and all
substitutions and replacements thereof, and all proceeds, products and accounts
thereof, including, without limitation, all proceeds from the sale or transfer
of the Collateral and of insurance covering the same and of any tort claims in
connection therewith:

     

    (i)           All
goods, including, without limitation, (A) all machinery, equipment, computers,
motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special and
general tools, fixtures, test and quality control devices, and other equipment
of every kind and nature and wherever situated, together with all documents of
title and documents representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes for any of the
foregoing and all other items used and useful in connection with the Debtor’s
businesses and all improvements thereto; and (B) all inventory;

    
      
         

      

      
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    (ii)          All
contract rights and other general intangibles, including, without limitation,
all licenses, distribution and other agreements, computer software, leases,
franchises, customer lists, quality control procedures, grants and rights,
goodwill, trademarks, service marks, trade styles, trade names, patents, patent
applications, copyrights, and income tax refunds;

     

    (iii)         All
accounts, together with all instruments, all documents of title representing any
of the foregoing, all rights in any merchandising, goods, equipment, motor
vehicles and trucks which any of the same may represent, and all right, title,
security, and guaranties with respect to each account;

     

    (iv)        All
documents, letter-of-credit rights, instruments, and chattel paper;

     

    (v)         All
commercial tort claims;

     

    (vi)        All
deposit accounts and all cash (whether or not deposited in such deposit
accounts);

     

    (vii)       All
investment property;

     

    (viii)      All
supporting obligations;

     

    (ix)         All
real and immovable property, both freehold and leasehold, and all of the
Debtor’s right, title, and interest in mineral rights and claims, now owned or
held or hereafter acquired by the Debtor;

     

    (ix)         All
files, records, books of account, and business papers; and

     

    (x)          the
products and proceeds of all of the foregoing Collateral set forth in clauses
(i)-(ix) above.

     

    Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of any
asset which, in the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise prohibited by applicable
law (in each case to the extent that such applicable law is not overridden
by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable
law); provided,
however, that
to the extent permitted by applicable law, this Agreement shall create a valid
security interest in such asset and, to the extent permitted by applicable law,
this Agreement shall create a valid security interest in the proceeds of such
asset.

     

    (b)           “Majority-in-Interest” means, at any
time of determination, the majority-in-interest (based on then-outstanding
principal amounts of Debentures at the time
of such determination) of the Secured Parties.

    
      
         

      

      
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    (c)           “Obligations” means
all of the liabilities and obligations (primary, secondary, direct, contingent,
sole, joint or several) due or to become due, or that are now or may be
hereafter contracted or acquired, or owing to, of the Debtor to the Secured
Parties, including, without limitation, all obligations under this Agreement,
the Debentures, and any other instruments, agreements or other documents
executed and/or delivered in connection herewith or therewith, in each case,
whether now or hereafter existing, voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from any of the Secured Parties as a
preference, fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to
time.  Without limiting the generality of the foregoing, the term
“Obligations” shall include, without limitation:  (i) principal
of, and interest on the Debentures and the loans extended pursuant thereto;
(ii) any and all other fees, indemnities, costs, obligations and
liabilities of the Debtor from time to time under or in connection with this
Agreement, the Debentures, and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or therewith; and
(iii) all amounts (including but not limited to post-petition interest) in
respect of the foregoing that would be payable but for the fact that the
obligations to pay such amounts are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding involving the
Debtor.

     

    (d)           “Organizational
Documents” means the articles of incorporation and bylaws of the
Debtor.

     

    (e)           “UCC” means the
Uniform Commercial Code of the State of New York and or any other applicable law
of any state or states which has jurisdiction with respect to all, or any
portion of, the Collateral or this Agreement, from time to time.  It
is the intent of the parties that defined terms in the UCC should be construed
in their broadest sense so that the term “Collateral” will be construed in its
broadest sense.  Accordingly if there are, from time to time, changes
to defined terms in the UCC that broaden the definitions, they are
incorporated herein and if existing definitions in the UCC are broader than the
amended definitions, the existing ones shall be controlling.

     

    2.           Grant of Security Interest in
Collateral.  As an inducement for the Secured Parties to extend
the loans as evidenced by the Debentures and to secure the complete and timely
payment, performance, and discharge in full, as the case may be, of all of the
Obligations, the Debtor hereby unconditionally and irrevocably pledges, grants,
and hypothecates to the Secured Parties a security interest in and to, a lien
upon, and a right of set-off against all of their respective right, title, and
interest of whatsoever kind and nature in and to, the Collateral (a “Security Interest” and
collectively, the “Security Interests”).

     

    3.           Representations, Warranties,
Covenants, and Agreements of the Debtor.  Except as set forth
under the corresponding section of the disclosure schedules delivered to the
Secured Parties concurrently herewith (the “Disclosure
Schedules”), which Disclosure Schedules shall be deemed a part hereof,
the Debtor represents and warrants to, and covenants and agrees with, the
Secured Parties as follows:

    
      
         

      

      
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    (a)           The
Debtor has the requisite corporate power and authority to enter into this
Agreement and otherwise to carry out its obligations hereunder.  The
execution, delivery, and performance by the Debtor of this Agreement and the
filings contemplated therein have been duly authorized by all necessary action
on the part of the Debtor and no further action is required by the
Debtor.  This Agreement has been duly executed by the
Debtor.  This Agreement constitutes the legal, valid, and binding
obligation of the Debtor, enforceable against the Debtor in accordance with its
terms except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, and similar laws of general application relating to
or affecting the rights and remedies of creditors and by general principles of
equity.

     

    (b)           The
Debtor has no place of business or offices where its books of account and
records are kept (other than temporarily at the offices of its attorneys or
accountants) or places where Collateral is stored or located, except as set
forth on Schedule
A attached hereto.  Except as specifically set forth on Schedule A, the
Debtor is the record owner of the real property where such Collateral is
located, and there exist no mortgages or other liens on any such real property
except for Permitted Liens (as defined in the Debentures).  Except as
disclosed on Schedule
A, none of such Collateral is in the possession of any consignee, bailee,
warehouseman, agent, or processor.

     

    (c)           Except
for Permitted Liens (as defined in the Debentures) and except as set forth on
Schedule B
attached hereto, the Debtor is the sole owner of the Collateral (except for
non-exclusive licenses granted by the Debtor in the ordinary course of
business), free and clear of any liens, security interests, encumbrances, rights
or claims, and is fully authorized to grant the Security
Interests.  Except as set forth on Schedule B attached
hereto, there is not on file in any governmental or regulatory authority, agency
or recording office an effective financing statement, security agreement,
license or transfer or any notice of any of the foregoing (other than those that
will be filed in favor of the Secured Parties pursuant to this Agreement)
covering or affecting any of the Collateral.  Except as set forth on
Schedule B
attached hereto and except pursuant to this Agreement, as long as this Agreement
shall be in effect, the Debtor shall not execute and shall not knowingly permit
to be on file in any such office or agency any other financing statement or
other document or instrument (except to the extent filed or recorded in favor of
the Secured Parties pursuant to the terms of this Agreement).

     

    (d)           No
written claim has been received that any Collateral or Debtor’s use of any
Collateral violates the rights of any third party.  There has been no
adverse decision to the Debtor’s claim of ownership rights in or exclusive
rights to use the Collateral in any jurisdiction or to the Debtor’s right to
keep and maintain such Collateral in full force and effect, and there is no
proceeding involving said rights pending or, to the best knowledge of the
Debtor, threatened before any court, judicial body, administrative or regulatory
agency, arbitrator or other governmental authority.

     

    (e)           The
Debtor shall at all times maintain its books of account and records relating to
the Collateral at its principal place of business and its Collateral at the
locations set forth on Schedule A attached
hereto and may not relocate such books of account and records or tangible
Collateral unless it delivers to the Secured Parties at least 30 days prior to
such relocation (i) written notice of such relocation and the new location
thereof (which must be within the United States) and (ii) evidence that
appropriate financing statements under the UCC and other necessary documents
have been filed and recorded and other steps have been taken to perfect the
Security Interests to create in favor of the Secured Parties a valid, perfected
and continuing perfected first priority lien in the Collateral.

    
      
         

      

      
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    (f)           This
Agreement creates in favor of the Secured Parties a valid security interest in
the Collateral, subject only to Permitted Liens (as defined in the Debentures)
securing the payment and performance of the Obligations.  Upon making
the filings described in the immediately following paragraph, all security
interests created hereunder in any Collateral which may be perfected by filing
Uniform Commercial Code financing statements shall have been duly
perfected.  Except for the filing of the Uniform Commercial Code
financing statements referred to in the immediately following paragraph, the
execution and delivery of deposit account control agreements satisfying the
requirements of Section 9-104(a)(2) of the UCC with respect to each deposit
account of the Debtor, and the delivery of the
certificates and other instruments provided
in Section 3, no action is necessary to create, perfect or protect the
security interests created hereunder.  Without limiting the generality
of the foregoing, except for the filing of said financing statements and the
execution and delivery of said deposit account control agreements, no consent of
any third parties and no authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for (i) the execution, delivery and performance of this Agreement, (ii)
the creation or perfection of the Security Interests created hereunder in the
Collateral or (iii) the enforcement of the rights of the Secured Parties
hereunder.

     

    (g)           The
Debtor hereby authorizes the Secured Parties to file one or more financing
statements under the UCC, with respect to the Security Interests, with the
proper filing and recording agencies in any jurisdiction deemed proper by
it.  The Debtor will also promptly take such steps and file such
documents as the Secured Parties may from time to time reasonably
request.

     

    (h)           The
execution, delivery and performance of this Agreement by the Debtor does not (i)
violate any of the provisions of any Organizational Documents of the Debtor or
any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to the Debtor or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing the Debtor’s debt or otherwise) or other understanding to
which the Debtor is a party or by which any property or asset of the Debtor is
bound or affected. If any, all required consents (including, without limitation,
from stockholders or creditors of the Debtor) necessary for the Debtor to enter
into and perform its obligations hereunder have been obtained.

     

    (i)           Except
for Permitted Liens (as defined in the Debentures), the Debtor shall at all
times maintain the liens and Security Interests provided for hereunder as valid
and perfected first priority liens and security interests in the Collateral in
favor of the Secured Parties until this Agreement and the Security Interests
hereunder shall be terminated pursuant to Section 11 hereof.  The
Debtor hereby agrees to defend the same against the claims of any and all
persons and entities.  The Debtor shall safeguard and protect all
Collateral for the account of the Secured Parties.  At the request of
the Secured Parties, the Debtor will sign and deliver to the Secured Parties at
any time or from time to time one or more financing statements pursuant to
the UCC in form reasonably satisfactory to the Secured Parties and will pay the
cost of filing the same in all public offices wherever filing is, or is deemed
by the Secured Parties to be, necessary or desirable to effect the rights and
obligations provided for herein.  Without limiting the generality of
the foregoing, the Debtor shall pay all fees, taxes and other amounts necessary
to maintain the Collateral and the Security Interests hereunder, and the Debtor
shall obtain and furnish to the Secured Parties from time to time, upon demand,
such releases and/or subordinations of claims and liens which may be required to
maintain the priority of the Security Interests hereunder.

    
      
         

      

      
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    (j)           The
Debtor shall not transfer, pledge, hypothecate, encumber, license, sell or
otherwise dispose of any of the Collateral (except for non-exclusive licenses
granted by the Debtor in its ordinary course of business and sales of inventory
by the Debtor in its ordinary course of business) without the prior written
consent of a Majority-in-Interest.

     

    (k)           The
Debtor shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate
any such Collateral (or cause to be operated or located) in any area excluded
from insurance coverage.

     

    (l)           The Debtor shall maintain with financially sound and
reputable insurers, insurance with respect to the Collateral, including
Collateral hereafter acquired, against loss or damage of the kinds and in the amounts customarily insured against by
entities of established reputation having similar properties similarly situated
and in such amounts as are customarily carried under similar circumstances by
other such entities and otherwise as is prudent for entities
engaged in similar businesses but in any event sufficient to cover the full
replacement cost thereof.  The Debtor shall cause each insurance
policy issued in connection herewith to provide, and the insurer issuing such
policy to certify to the Secured Parties, that (a) the Secured Parties will be
named as lender loss payee and additional insured under each such insurance
policy; (b) if such insurance be proposed to be cancelled or materially changed
for any reason whatsoever, such insurer will promptly notify
the Secured Parties and such cancellation or change shall not be effective
as to the Secured Parties for at least thirty (30) days after receipt by
the Secured Parties of such notice, unless the effect of such change is to
extend or increase coverage under the
policy; and (c) the Secured
Parties will have the right (but no
obligation) at its election to remedy any default in the payment of premiums
within thirty (30) days of notice from the insurer of such
default.  If no Event of Default (as defined in the Debentures) exists and if the
proceeds arising out of any claim or series of related claims do not exceed
$100,000, loss payments in each instance will be applied by the Debtor to the
repair and/or replacement of property with respect to which the loss
was incurred to the extent reasonably feasible, and any loss payments or the
balance thereof remaining, to the extent not so applied, shall be payable to the
Debtor; provided, however, that payments received by the Debtor after an Event of
Default occurs and is continuing or in
excess of $100,000 for any occurrence or series of related occurrences shall be
paid to the Secured Parties and, if received by the Debtor, shall be held in trust
for the Secured Parties and immediately paid over to the Secured Parties
unless otherwise directed in writing by the
Secured Parties.   Copies of
such policies or the related certificates, in each case, naming the Secured Parties
as lender loss payee and additional insured shall be delivered to the Secured Parties
at least annually and at the time any new policy of insurance is
issued.

    
      
         

      

      
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    (m)           The
Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the Secured Parties promptly, in sufficient
detail, of any material adverse change in the Collateral, and of the occurrence
of any event which would have a material adverse effect on the value of the
Collateral or on the Secured Parties’ security interest therein.

     

    (n)           The
Debtor shall promptly execute and deliver to the
Secured Parties such further deeds, mortgages, assignments, security
agreements, financing statements or other instruments, documents, certificates
and assurances and take such further action as the
Secured Parties may from time to time request and may in its sole
discretion deem necessary to perfect, protect or enforce the Secured Parties’ security interest in the
Collateral.

     

    (o)           The
Debtor shall permit the Secured Parties and
its representatives and agents to inspect the Collateral during normal business
hours and upon reasonable prior notice, and to make copies of records pertaining
to the Collateral as may be reasonably requested by the Secured Parties from time to
time.

     

    (p)           The
Debtor shall take all steps reasonably necessary to diligently pursue and seek
to preserve, enforce, and collect any rights, claims, causes of action and
accounts receivable in respect of the Collateral.

     

    (q)           The
Debtor shall promptly notify the Secured
Parties in sufficient detail upon becoming aware of any attachment,
garnishment, execution or other legal process levied against any Collateral and
of any other information received by the Debtor that may materially affect the
value of the Collateral, the Security Interests or the rights and remedies of
the Secured Parties hereunder.

     

    (r)           All
information heretofore, herein, or hereafter supplied to the Secured Parties by or on behalf of the Debtor
with respect to the Collateral is accurate and complete in all material respects
as of the date furnished.

     

    (s)           The
Debtor shall at all times preserve and keep in full force and effect its valid
existence and good standing and any rights and franchises material to its
business.

     

    (t)           The
Debtor shall not change its name, type of organization, jurisdiction of
organization, organizational identification number (if it has one), legal or
corporate structure, or identity, or add any new fictitious name unless it
provides at least 30 days prior written notice to the Secured Parties of such change and, at the
time of such written notification, the Debtor provides any financing statements
or fixture filings necessary to perfect and continue the perfection of the
Security Interests granted and evidenced by this Agreement.

     

    (u)           Except
in the ordinary course of business, the Debtor may not consign any of its
inventory nor sell any of its inventory on bill and hold, sale or return, sale
on approval, or other conditional terms of sale without the consent of a Majority-in-Interest, which shall not be
unreasonably withheld.

     

    (v)           The
Debtor may not relocate its chief executive office to a new location without
providing 30 days prior written notification thereof to the Secured Parties and so long as, at the time
of such written notification, the Debtor provides any financing statements or
fixture filings necessary to perfect and continue the perfection of the Security
Interests granted and evidenced by this Agreement.

    
      
         

      

      
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    (w)         The
Debtor was organized and remains organized solely under the laws of the state
set forth next to the Debtor’s name in Schedule D attached
hereto, which Schedule
D sets forth the Debtor’s organizational identification
number.

     

    (x)           (i)
The actual name of the Debtor is the name set forth in Schedule D attached
hereto; (ii) the Debtor has no trade names except as set forth on Schedule E attached
hereto; (iii) the Debtor has not used any name other than that stated in the
preamble hereto or as set forth on Schedule E for the
preceding five years; and (iv) no entity has merged into the Debtor or been
acquired by the Debtor within the past five years except as set forth on Schedule
E.

     

    (y)           At
any time and from time to time that any Collateral consists of instruments,
certificated securities, or other items that require or permit possession by the
Secured Parties to perfect the Security Interests created hereby, the Debtor
shall deliver such Collateral to the Secured Parties.

     

    (z)           The
Debtor shall cause all tangible chattel paper constituting Collateral to be
delivered to the Agent, or, if such delivery is not possible, then to cause such
tangible chattel paper to contain a legend noting that it is subject to the
Security Interests created by this Agreement.  To the extent that any
Collateral consists of electronic chattel paper, the applicable Debtor shall
cause the underlying chattel paper to be “marked” within the meaning of Section
9-105 of the UCC (or successor section thereto).

     

    (aa)        
If there is any investment property or deposit account included as Collateral
that can be perfected by “control” through an account control agreement, the
applicable Debtor shall cause such an account control agreement, in form and
substance in each case satisfactory to the Agent, to be entered into and
delivered to the Agent for the benefit of the Secured Parties.

     

    (bb)        To
the extent that any Collateral consists of letter-of-credit rights, the Debtor
shall cause the issuer of each underlying letter of credit to consent to an
assignment of the proceeds thereof to the Secured Parties.

     

    (cc)         To
the extent that any Collateral is in the possession of any third party, the
Debtor shall notify such third party of the Secured Parties’ Security Interests
in such Collateral and shall use its best efforts to obtain an acknowledgement
and agreement from such third party with respect to the Collateral, in form and
substance reasonably satisfactory to the Secured Parties.

     

    (dd)        If
the Debtor shall at any time hold or acquire a commercial tort claim, the Debtor
shall promptly notify the Secured Parties in a writing signed by the Debtor of
the particulars thereof and grant to the Secured Parties in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
the Secured Parties.

     

    (ee)         The
Debtor shall immediately provide written notice to the Secured Parties of any
and all accounts which arise out of contracts with any governmental authority
and, to the extent necessary to perfect or continue the perfected status of the
Security Interest in such accounts and proceeds thereof, shall execute and
deliver to the Secured Parties an assignment of claims for such accounts and
cooperate with the Secured Parties in taking any other steps required, in its
judgment, under the Federal Assignment of Claims Act or any similar federal,
state or local statute or rule to perfect or continue the perfected status of
the Security Interests in such accounts and proceeds thereof.

    
      
         

      

      
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    (ff)          The
Debtor will from time to time, at its expense, promptly execute and deliver all
such further instruments and documents, and take all such further action as may
be necessary or desirable, or as the Secured Parties may reasonably request, in
order to perfect and protect any Security Interest granted or purported to be
granted hereby or to enable the Secured Parties to exercise and enforce their
rights and remedies hereunder and with respect to any Collateral or to otherwise
carry out the purposes of this Agreement.

     

    (gg)        Schedule F attached
hereto lists all of the patents, patent applications, trademarks, trademark
applications, registered copyrights, and domain names owned by the Debtor as of
the date hereof.  Schedule F lists all
material licenses in favor of the Debtor for the use of any patents, trademarks,
copyrights and domain names as of the date hereof.  All material
patents and trademarks of the Debtor have been duly recorded at the United
States Patent and Trademark Office and all material copyrights of the Debtor
have been duly recorded at the United States Copyright Office.

     

    (hh)        Except
as set forth on Schedule G attached
hereto, none of the account debtors or other persons or entities obligated on
any of the Collateral is a governmental authority covered by the Federal
Assignment of Claims Act or any similar federal, state or local statute or rule
in respect of such Collateral.

     

    4.           Defaults.  The
following events shall be “Events of
Default”:

     

    (a)           The
occurrence of an Event of Default (as defined in the Debentures) under the
Debentures;

     

    (b)           Any
representation or warranty of the Debtor in this Agreement shall prove to have
been incorrect in any material respect when made;

     

    (c)           The
failure by the Debtor to observe or perform any of its obligations hereunder for
five (5) days after delivery to the Debtor of notice of such failure by or on
behalf of a Secured Party unless such default is capable of cure but cannot be
cured within such time frame and the Debtor is using best efforts to cure same
in a timely fashion; or

     

    (d)           If
any provision of this Agreement shall at any time for any reason be declared to
be null and void, or the validity or enforceability thereof shall be contested
by the Debtor, or a proceeding shall be commenced by the Debtor, or by any
governmental authority having jurisdiction over the Debtor, seeking to establish
the invalidity or unenforceability thereof, or the Debtor shall deny that the
Debtor has any liability or obligation purported to be created under this
Agreement.

    
      
         

      

      
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    5.           Duty To Hold In
Trust.  Upon the occurrence of any Event of Default and at any
time thereafter, the Debtor shall, upon receipt of any revenue, income, dividend, interest, or other sums subject to
the Security Interests, whether payable pursuant to the Debentures or otherwise,
or of any check, draft, note, trade acceptance, or other instrument evidencing
an obligation to pay any such sum, hold the same in trust for the Secured
Parties and shall forthwith endorse and transfer any such sums or instruments,
or both, to the Secured Parties, pro rata in proportion to their respective
then-currently outstanding principal amount of Debentures for application to the
satisfaction of the Obligations (and if any Debenture is not outstanding, pro
rata in proportion to the initial purchases of the remaining
Debentures).

     

    6.           Rights and Remedies Upon
Default.

     

    (a)           Upon
the occurrence of any Event of Default and at any time thereafter, the Secured
Parties shall have the right to exercise all of the remedies conferred hereunder
and under the Debentures, and the Secured Parties shall have all the rights and
remedies of a secured party under the UCC.  Without limitation, the
Secured Parties shall have the following rights and powers:

     

    (i)         
The Secured Parties shall have the right to take possession of the Collateral
and, for that purpose, enter, with the aid and assistance of any person, any
premises where the Collateral, or any part thereof, is or may be placed and
remove the same, and the Debtor shall assemble the Collateral and make it
available to the Secured Parties at places which the Secured Parties shall
reasonably select, whether at the Debtor’s premises or elsewhere, and make
available to the Secured Parties, without rent, all of the Debtor’s respective
premises and facilities for the purpose of the Secured Parties taking possession
of, removing or putting the Collateral in saleable or disposable
form.

     

    (ii)          Upon notice to the Debtor by the Secured
Parties, all rights of the Debtor to exercise the
voting and other consensual rights which it would otherwise be entitled to
exercise and all rights of the Debtor to receive the dividends and interest
which it would otherwise be authorized to receive and retain, shall cease.  Upon such notice, the
Secured Parties shall have the right to
receive any interest, cash dividends, or other payments on the Collateral and,
at the option of the Secured Parties, to
exercise in such Secured Parties’ discretion all
voting rights pertaining
thereto.  Without limiting the generality of the foregoing, the
Secured Parties shall have the right (but
not the obligation) to exercise all rights with respect to the Collateral as it
were the sole and absolute owner thereof, including, without limitation, to vote and/or to exchange, at
its sole discretion, any or all of the Collateral in connection with a merger,
reorganization, consolidation, recapitalization or other readjustment concerning
or involving the Collateral or the Debtor.

     

    (iii)         The
Secured Parties shall have the right to operate the business of the Debtor using
the Collateral and shall have the right to assign, sell, lease, or otherwise
dispose of and deliver all or any part of the Collateral, at public or private
sale or otherwise, either with or without special conditions or stipulations,
for cash or on credit or for future delivery, in such parcel or parcels and at
such time or times and at such place or places, and upon such terms and
conditions as the Secured Parties may deem commercially reasonable, all without
(except as shall be required by applicable statute and cannot be waived)
advertisement or demand upon or notice to the Debtor or right of redemption of
the Debtor, which are hereby expressly waived.  Upon each such sale,
lease, assignment, or other transfer of Collateral, the Secured Parties may,
unless prohibited by applicable law which cannot be waived, purchase all or any
part of the Collateral being sold, free from and discharged of all trusts,
claims, right of redemption, and equities of the Debtor, which are hereby waived
and released.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    (iv)        The
Secured Parties shall have the right (but not the obligation) to notify any
account debtors and any obligors under instruments or accounts to make payments
directly to the Secured Parties and to enforce the Debtor’s rights against such
account debtors and obligors.

     

    (v)         The
Secured Parties may (but is not obligated to) direct any financial intermediary
or any other person or entity holding any investment property to transfer the
same to the Secured Parties or its designee.

     

    (b)           The Secured Parties
shall comply with any applicable law in connection with a disposition of
Collateral and such compliance will not be considered adversely to affect the
commercial reasonableness of any sale of
the Collateral.  The Secured Parties may sell the Collateral without giving any warranties
and may specifically disclaim such warranties.  If the Secured
Parties sells any of the Collateral on credit, the
Debtor will only be credited with payments
actually made by the purchaser.  In addition, the Debtor waives any
and all rights that it may have to a judicial hearing in advance of the
enforcement of any of the Secured Parties’ rights and
remedies hereunder, including, without limitation, its right following an Event of Default to take immediate
possession of the Collateral and to exercise its rights and remedies with
respect thereto.

     

    7.           Applications of
Proceeds.  The proceeds of any such sale, lease or other
disposition of the Collateral hereunder or from payments made on account of any
insurance policy insuring any portion of the Collateral shall be applied first,
to the expenses of retaking, holding, storing, processing and preparing for
sale, selling, and the like (including, without limitation, any taxes, fees and
other costs incurred in connection therewith) of the Collateral, to the
reasonable attorneys’ fees and expenses incurred by the Secured Parties in
enforcing their rights hereunder and in connection with collecting, storing, and
disposing of the Collateral, and then to satisfaction of the Obligations pro
rata among the Secured Parties (based on then outstanding principal amounts of
Debentures at the time of any such determination), and to the payment of any
other amounts required by applicable law, after which the Secured Parties shall
pay to the Debtor any surplus proceeds. If, upon the sale, license or other
disposition of the Collateral, the proceeds thereof are insufficient to pay all
amounts to which the Secured Parties are legally entitled, the Debtor will be
liable for the deficiency, together with interest thereon, at the rate of 12%
per annum or the lesser amount permitted by applicable law (the “Default Rate”),
and the reasonable fees of any attorneys employed by the Secured Parties to
collect such deficiency.  To the extent permitted by applicable law,
the Debtor waives all claims, damages and demands against the Secured Parties
arising out of the repossession, removal, retention or sale of the Collateral,
unless due solely to the gross negligence or willful misconduct of the Secured
Parties as determined by a final judgment (not subject to further appeal) of a
court of competent jurisdiction.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    8.           Costs and
Expenses.  The Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Secured Parties.  The Debtor shall also pay
all other claims and charges which in the reasonable opinion of the Secured
Parties is reasonably likely to prejudice, imperil, or otherwise affect the
Collateral or the Security Interests therein.  The Debtor will also,
upon demand, pay to the Secured Parties the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its counsel and of any
experts and agents, which the Secured Parties, for the benefit of the Secured
Parties, may incur in connection with (i) the enforcement of this Agreement,
(ii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, or (iii) the exercise or enforcement of
any of the rights of the Secured Parties under the Debentures. Until so paid,
any fees payable hereunder shall be added to the principal amount of the
Debentures and shall bear interest at the Default Rate.

     

    9.           Responsibility for
Collateral.  The Debtor
assumes all liabilities and responsibility in connection with all Collateral,
and the Obligations shall in no way be affected or diminished by reason of the
loss, destruction, damage, or theft of any of the Collateral or its
unavailability for any reason.  Without limiting the generality of the
foregoing, (a) none of the Secured Parties (i) has any duty (either before or
after an Event of Default) to collect any amounts in respect of the Collateral
or to preserve any rights relating to the Collateral, or (ii) has any obligation
to clean-up or otherwise prepare the Collateral for sale, and (b) the Debtor
shall remain obligated and liable under each contract or agreement included in
the Collateral to be observed or performed by such Debtor
thereunder.  None of the Secured Parties shall have any obligation or
liability under any such contract or agreement by reason of or arising out of
this Agreement or the receipt by any Secured Party of any payment relating to
any of the Collateral, nor shall any Secured Party be obligated in any manner to
perform any of the obligations of the Debtor under or pursuant to any such
contract or agreement, to make inquiry as to the nature or sufficiency of any
payment received by any Secured Party in respect of the Collateral or as to
the sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to any Secured Party or to which any Secured Party may be entitled at
any time or times.

     

    10.         Security Interests
Absolute.  All rights of the Secured Parties and all
obligations of the Debtor hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement,
the Debentures, or any agreement entered into in connection with the foregoing,
or any portion hereof or thereof; (b) any change in the time, manner, or place
of payment or performance of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Debentures or any other agreement entered into in connection with the
foregoing; (c) any exchange, release, or unperfection of any of the
Collateral, or any release or amendment or waiver of or consent to departure
from any other collateral for, or any guarantee, or any other security, for all
or any of the Obligations; (d) any action by the Secured Parties to obtain,
adjust, settle, and cancel in its sole discretion any insurance claims or
matters made or arising in connection with the Collateral; or (e) any other
circumstance which might otherwise constitute any legal or equitable defense
available to the Debtor, or a discharge of all or any part of the Security
Interests granted hereby.  Until the Obligations shall have been paid
and performed in full, the rights of the Secured Parties shall continue even if
the Obligations are barred for any reason, including, without limitation, the
running of the statute of limitations or bankruptcy.  The Debtor
expressly waives presentment, protest, notice of protest, demand, notice of
nonpayment, and demand for performance.  In the event that at any time
any transfer of any Collateral or any payment received by the Secured Parties
hereunder shall be deemed by final order of a court of competent jurisdiction to
have been a voidable preference or fraudulent conveyance under the bankruptcy or
insolvency laws of the United States, or shall be deemed to be otherwise due to
any party other than the Secured Parties, then, in any such event, the Debtor’s
obligations hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation enforceable
in accordance with the terms and provisions hereof.  The Debtor waives
all right to require the Secured Parties to proceed against any other person or
entity or to apply any Collateral which the
Secured Parties may hold at any time, or to marshal assets, or to pursue any
other remedy.  The Debtor waives any defense arising by reason of the
application of the statute of limitations to any obligation secured
hereby.

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    11.         Term of Agreement.  This
Agreement and the Security Interests shall terminate on the date on which all
payments under the Debentures have been indefeasibly paid in full and all other
Obligations have been paid or discharged; provided, however, that all
indemnities of the Debtor contained in this Agreement shall survive and remain
operative and in full force and effect regardless of the termination of this
Agreement.

     

    12.         Power of Attorney; Further
Assurances.

     

    (a)           The
Debtor authorizes each of the Secured Parties, and does hereby make, constitute
and appoint each of the Secured Parties and their officers, agents, successors
or assigns with full power of substitution, as the Debtor’s true and lawful
attorney-in-fact, with power, in the name of the Secured Parties or the
Debtor, to, after the occurrence and during the continuance of an Event of
Default, (i) endorse any note, checks, drafts, money orders, or other
instruments of payment (including payments payable under or in respect of any
policy of insurance) in respect of the Collateral that may come into possession
of the Secured Parties; (ii) to sign and endorse any financing statement
pursuant to the UCC or any invoice, freight or express bill, bill of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts, and other documents
relating to the Collateral; (iii) to pay or discharge taxes, liens, security
interests, or other encumbrances at any time levied or placed on or threatened
against the Collateral; (iv) to demand, collect, receipt for, compromise,
settle, and sue for monies due in respect of the Collateral; and (v) generally,
at the option of the Secured Parties, and at the expense of the Debtor, at any
time, or from time to time, to execute and deliver any and all documents and
instruments and to do all acts and things which the Secured Parties deem
necessary to protect, preserve, and realize upon the Collateral and the Security
Interests granted therein in order to effect the intent of this Agreement and
the Debentures all as fully and effectually as the Debtor might or could do; and
the Debtor hereby ratifies all that said attorney shall lawfully do or cause to
be done by virtue hereof.  This power of attorney is coupled with an
interest and shall be irrevocable for the term of this Agreement and thereafter
as long as any of the Obligations shall be outstanding.  The designation set forth herein shall be deemed to
amend and supersede any inconsistent provision in the Organizational
Documents or other documents or agreements
to which the Debtor is subject or to which the Debtor is a
party.

     

    (b)           On
a continuing basis, the Debtor will make, execute, acknowledge, deliver, file,
and record, as the case may be, with the proper filing and recording agencies in
any jurisdiction, including, without limitation, the jurisdictions indicated on
Schedule C
attached hereto, all such instruments, and take all such action as may
reasonably be deemed necessary or advisable, or as reasonably requested by the
Secured Parties, to perfect the Security Interests granted hereunder and
otherwise to carry out the intent and purposes of this Agreement, or for
assuring and confirming to the Secured Parties the grant or perfection of a
perfected security interest in all the Collateral under the
UCC.

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    (c)           The
Debtor hereby irrevocably appoints each of the Secured Parties as the Debtor’s
attorney-in-fact, with full authority in the place and instead of the Debtor and
in the name of the Debtor, from time to time in the Secured Parties’ discretion,
to take any action and to execute any instrument which the Secured Parties may
deem necessary or advisable to accomplish the purposes of this Agreement,
including the filing, in its sole discretion, of one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of the Debtor where permitted by law, which
financing statements may (but need not) describe the Collateral as “all assets”
or “all personal property” or words of like import, and ratifies all such
actions taken by the Secured Parties.  This power of attorney is
coupled with an interest and shall be irrevocable for the term of this Agreement
and thereafter as long as any of the Obligations shall be
outstanding.

     

    13.         Notices.  All
notices, requests, demands and other communications hereunder shall be subject
to the notice provision of the Purchase Agreement (as such term is defined in
the Debentures).

     

    14.         Other Security.  To
the extent that the Obligations are now or hereafter  secured by
property other than the Collateral, then the Secured Parties shall have the
right, in its sole discretion, to pursue, relinquish, subordinate, modify or
take any other action with respect thereto, without in any way modifying or
affecting any of the Secured Parties’ rights and remedies
hereunder.

     

    15.         Miscellaneous.

     

    (a)           No
course of dealing between the Debtor and the Secured Parties, nor any failure to
exercise, nor any delay in exercising, on the part of the Secured Parties, any
right, power or privilege hereunder or under the Debentures shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.

     

    (b)           All
of the rights and remedies of the Secured Parties with respect to the
Collateral, whether established hereby or by the Debentures or by any other
agreements, instruments or documents or by law shall be cumulative and may be
exercised singly or concurrently.

     

    (c)           This
Agreement, together with the exhibits and schedules hereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into this
Agreement and the exhibits and schedules hereto.  No provision of this
Agreement may be waived, modified, supplemented, or amended except in a written
instrument signed, in the case of an amendment, by the Debtor and the Secured
Parties or, in the case of a waiver, by the party against whom enforcement of
any such waived provision is sought.

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    (d)           If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

     

    (e)           No
waiver of any default with respect to any provision, condition, or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition,
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such
right.

     

    (f)           This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns.  The Company may not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of each Secured Party (other than by merger).  Any Secured
Party may assign any or all of its rights under this Agreement to any Person to
whom such Secured Party assigns or transfers any securities, provided such
transferee agrees in writing to be bound, with respect to the transferred
securities, by the provisions of this Agreement that apply to the “Secured
Parties.”

     

    (g)           Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.

     

    (h)           All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof.  The Debtor agrees that all
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and the Debentures (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan.  The Debtor hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City
of New York, Borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such proceeding is improper.  Each party hereto
hereby irrevocably waives personal service of process and consents to process
being served in any such proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law.  Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of
or relating to this Agreement or the transactions contemplated
hereby.  If any party shall commence a proceeding to enforce any
provisions of this Agreement, then the prevailing party in such proceeding shall
be reimbursed by the other party for its reasonable attorney’s fees and other
costs and expenses incurred with the investigation, preparation, and prosecution
of such proceeding.

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    (i)           This
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement.  In the event that any
signature is delivered by facsimile transmission, such signature shall create
a valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

     

    (j)           The
Debtor shall indemnify, reimburse, and hold harmless the Secured Parties and
their respective partners, members, shareholders, officers, directors,
employees, and agents (and any other persons with other titles that have similar
functions) (collectively, “Indemnitees”) from
and against any and all losses, claims, liabilities, damages, penalties, suits,
costs, and expenses, of any kind or nature, (including fees relating to the cost
of investigating and defending any of the foregoing) imposed on, incurred by, or
asserted against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs, and expenses which result
from the gross negligence or willful misconduct of the Indemnitee as determined
by a final, nonappealable decision of a court of competent
jurisdiction.  This indemnification provision is in addition to, and
not in limitation of, any other indemnification provision in the Debentures, the
Purchase Agreement (as such term is defined in the Debentures), or any other
agreement, instrument, or other document executed or delivered in connection
herewith or therewith.

     

    (k)           To the extent that the grant of the security interest in
the Collateral and the enforcement of the terms hereof require the consent, approval, or action of the Debtor
or compliance with any provisions of any of the Organizational Documents, the
Debtor hereby grants such consent and approval and waives any such noncompliance
with the terms of said documents.

     

    [SIGNATURE
PAGES FOLLOW]

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the parties hereto
have caused this Security Agreement to be duly executed on the day and year
first above written.

    

    
      
        
          
            	
                    AMERICAN
      EAGLE ENERGY, INC.

                  	 
      	
                    Address for Notice:

                  
	 
      	 
      	
                    27
      North 27th
      Street, Suite 21G

                  
	 
      	 
      	
                    Billings,
      Montana 59101

                  
	
                    By:

                  	
                    Richard Findley

                  	 
      	
                    Fax:

                  
	 
      	
                    Name:
      Richard Findley

                  	 
      	 
      
	 
      	
                    Title:
      President

                  	 
      	 
      

          

        

      

    

    

    With a
copy to (which shall not constitute notice):

    Baker
& Hostetler LLP

    Attn:  Randolf
W. Katz

    600 Anton
Boulevard, Suite 900

    Costa
Mesa, California 92626

    Fax:  (714)
754-8802

    

    [SIGNATURE
PAGES OF HOLDERS FOLLOW]

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    [SIGNATURE
PAGE OF HOLDERS TO SECURITY AGREEMENT]

    

    
      
        	
                Name
      of Investing Entity:

              	
                Cat Brokerage
AG

              

      

    

    

    
      
        	
                Signature of Authorized
      Signatory of Investing entity:

              	
                /s/ C. Balmelli

              

      

    

    

    
      
        	
                Name
      of Authorized Signatory:

              	
                C.
Balmelli

              

      

    

    

    
      
        	
                Title
      of Authorized Signatory:

              	
                Managing
Director

              

      

    

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    SCHEDULE
A

    

    Principal
Place of Business of Debtor:

    Debtor
maintains a leased office location at 27 North 27th Street, Suite 21G, Billings,
Montana 59101.

    

    Locations
Where Collateral is Located or Stored:

    Mississippi
(working interest in an oil and gas lease)

    Willacy
County, Texas (12.5% working interest in an oil and gas lease)

    

    Other
than the above, there are no locations.

    

    SCHEDULE
B

    

    The
Debtor does not have any material payment obligations other than those in
respect of the purchase of additional working interests, leases, or related fee
simple ownership.

    

    SCHEDULE
C

    

    The
jurisdictions in which the Debtor presently operates are
___________________.

    

    SCHEDULE
D

    Legal
Names and Organizational Identification Numbers

    

    American
Eagle Energy, Inc., a Nevada corporation, IRS Tax ID Number
_____________.

    

    SCHEDULE
E

    Names;
Mergers and Acquisitions

    

    On
October 5, 2009, documents were filed with the Nevada Secretary of State to
effect a change of name from “Yellow Hill Energy Inc.” to “American Eagle
Energy, Inc. “ by way of a merger with a wholly owned subsidiary, American
Eagle Energy Inc., which was formed solely for the change of name.”

    

    SCHEDULE
F

    Intellectual
Property

    

    The
Company has no intellectual property, has no patents, and has not filed a
trademark on its name.

    

    SCHEDULE
G

    Account
Debtor

    None

    
      
         

      

      
        19NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

    

    COMMON
STOCK PURCHASE WARRANT

    

    AMERICAN
EAGLE ENERGY, INC.

     

    Warrant
Shares:     625,000                                                               Initial
Exercise Date: April 15, 2010

     

    THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies
that, for value received, [CAT Brokerage AG] (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise
Date”) and on or prior to the close of business on the 2 year anniversary
of the Initial Exercise Date (the “Termination Date”)
but not thereafter, to subscribe for and purchase from American Eagle Energy,
Inc., a Nevada corporation (the “Company”), up to
[625,000] shares (the “Warrant Shares”) of
Common Stock.  The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in Section
2(b).

     

    Section
1.        
   Definitions.  Capitalized
terms used and not otherwise defined herein shall have the meanings set forth in
that certain Securities Purchase Agreement (the “Purchase Agreement”),
dated April 15, 2010, among the Company and the purchasers signatory
thereto.

     

    
      
         

      

      
        1

        
          

        

      

      
         

    

     

    Section
2.            Exercise.

    

    a)           Exercise of
Warrant.  Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by delivery to the
Company of a duly executed facsimile copy of the Notice of Exercise Form annexed
hereto (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of the Holder
appearing on the books of the Company); and, within 3 Trading Days of the date
said Notice of Exercise is delivered to the Company, the Company shall have
received  payment of the aggregate Exercise Price of the shares
thereby purchased by wire transfer or cashier’s check drawn on a United States
bank.  Notwithstanding anything herein to the contrary, the Holder
shall not be required to physically surrender this Warrant to the Company until
the Holder has purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall surrender
this Warrant to the Company for cancellation within 3 Trading Days of the date
the final Notice of Exercise is delivered to the Company.  Partial
exercises of this Warrant resulting in purchases of a portion of the total
number of Warrant Shares available hereunder shall have the effect of lowering
the outstanding number of Warrant Shares purchasable hereunder in an amount
equal to the applicable number of Warrant Shares purchased.  The
Holder and the Company shall maintain records showing the number of Warrant
Shares purchased and the date of such purchases.  The Company shall
deliver any objection to any Notice of Exercise Form within 1 Business Day of
receipt of such notice.  In the event of any dispute or discrepancy,
the records of the Holder shall be controlling and determinative in the absence
of manifest error.  The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following the purchase of a portion of the Warrant
Shares hereunder, the number of Warrant Shares available for purchase hereunder
at any given time may be less than the amount stated on the face
hereof.

     

    b)           Exercise
Price.  The exercise price per share of the Common Stock under
this Warrant shall be $0.80, subject to adjustment
hereunder (the “Exercise
Price”).

     

    c)           Cashless
Exercise.  If at any time after the earlier of (i) the one year
anniversary of the date of the Purchase Agreement and (ii) the completion of the
then-applicable holding period required by Rule 144, or any successor provision
then in effect, there is no effective Registration Statement registering, or no
current prospectus available for, the resale of the Warrant Shares by the
Holder, then this Warrant may also be exercised at such time by means of a
“cashless exercise” in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:

     

    
       (A) = the
VWAP on the Trading Day immediately preceding the date of such
election;

    

    

    
      (B) = the
Exercise Price of this Warrant, as adjusted; and

    

    

    
      (X) = the
number of Warrant Shares issuable upon exercise of this Warrant in accordance
with the terms of this Warrant by means of a cash exercise rather than a
cashless exercise.

    

    

    Notwithstanding
anything herein to the contrary, on the Termination Date, this Warrant shall be
automatically exercised via cashless exercise pursuant to this Section
2(c).

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    d)           Exercise
Limitations.

     

    
      	
               
      

            	
              i.

            	
              Holder’s
      Restrictions.  The Company shall not effect any exercise
      of this Warrant, and a Holder shall not have the right to exercise any
      portion of this Warrant, pursuant to Section 2 or otherwise, to the extent
      that, after giving effect to such issuance after exercise as set forth on
      the applicable Notice of Exercise, the Holder (together with the Holder’s
      Affiliates, and any other person or entity acting as a group together with
      the Holder or any of the Holder’s Affiliates), would beneficially own in
      excess of the Beneficial Ownership Limitation (as defined below). 
      For purposes of the foregoing sentence, the number of shares of Common
      Stock beneficially owned by the Holder and its Affiliates shall include
      the number of shares of Common Stock issuable upon exercise of this
      Warrant with respect to which such determination is being made, but shall
      exclude the number of shares of Common Stock which would be issuable upon
      (A) exercise of the remaining, unexercised portion of this Warrant
      beneficially owned by the Holder or any of its Affiliates and (B) exercise
      or conversion of the unexercised or unconverted portion of any other
      securities of the Company (including, without limitation, any
      other  Common Stock Equivalents) subject to a limitation on
      conversion or exercise analogous to the limitation contained herein
      beneficially owned by the Holder or any of its affiliates.  Except as
      set forth in the preceding sentence, for purposes of this Section 2(d)(i),
      beneficial ownership shall be calculated in accordance with Section 13(d)
      of the Exchange Act and the rules and regulations promulgated thereunder,
      it being acknowledged by the Holder that the Company is not representing
      to the Holder that such calculation is in compliance with Section 13(d) of
      the Exchange Act and the Holder is solely responsible for any schedules
      required to be filed in accordance therewith.  To the extent
      that the limitation contained in this Section 2(d)(i) applies, the
      determination of whether this Warrant is exercisable (in relation to other
      securities owned by the Holder together with any Affiliates) and of which
      portion of this Warrant is exercisable shall be in the sole discretion of
      the Holder, and the submission of a Notice of Exercise shall be deemed to
      be the Holder’s determination of whether this Warrant is exercisable (in
      relation to other securities owned by the Holder together with any
      Affiliates) and of which portion of this Warrant is exercisable, in each
      case subject to the Beneficial Ownership Limitation, and the Company shall
      have no obligation to verify or confirm the accuracy of such
      determination.   In addition, a determination as to any
      group status as contemplated above shall be determined in accordance with
      Section 13(d) of the Exchange Act and the rules and regulations
      promulgated thereunder.  For purposes of this Section 2(d)(i),
      in determining the number of outstanding shares of Common Stock, a Holder
      may rely on the number of outstanding shares of Common Stock as reflected
      in (x) the Company’s most recent periodic or annual report, as the case
      may be, (y) a more recent public announcement by the Company or (z) any
      other notice by the Company or the Company’s Transfer Agent setting forth
      the number of shares of Common Stock outstanding.  Upon the written
      or oral request of a Holder, the Company shall within two Trading Days
      confirm orally and in writing to the Holder the number of shares of Common
      Stock then outstanding.  In any case, the number of outstanding
      shares of Common Stock shall be determined after giving effect to the
      conversion or exercise of securities of the Company, including this
      Warrant, by the Holder or its Affiliates since the date as of which such
      number of outstanding shares of Common Stock was reported.  The
      “Beneficial
      Ownership Limitation” shall be 4.99% of the number of shares of the
      Common Stock outstanding immediately after giving effect to the issuance
      of shares of Common Stock issuable upon exercise of this
      Warrant.  The Holder, upon not less than 61 days’ prior notice
      to the Company, may increase or decrease the Beneficial Ownership
      Limitation provisions of this Section 2(d)(i), provided that the
      Beneficial Ownership Limitation in no event exceeds 9.99% of the number of
      shares of the Common Stock outstanding immediately after giving effect to
      the issuance of shares of Common Stock upon exercise of this Warrant held
      by the Holder and the provisions of this Section 2(d)(i) shall continue to
      apply.  Any such increase or decrease will not be effective
      until the 61st
      day after such notice is delivered to the Company.  The
      provisions of this paragraph shall be construed and implemented in a
      manner otherwise than in strict conformity with the terms of this Section
      2(d)(i) to correct this paragraph (or any portion hereof) which may be
      defective or inconsistent with the intended Beneficial Ownership
      Limitation herein contained or to make changes or supplements necessary or
      desirable to properly give effect to such limitation.  The
      limitations contained in this paragraph shall apply to a successor holder
      of this Warrant.

            

    

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    e)           Mechanics of
Exercise.

     

    i.      Delivery of Certificates
Upon Exercise.  Certificates for shares purchased hereunder
shall be transmitted by the transfer agent of the Company to the Holder by
crediting the account of the Holder’s prime broker with the Depository Trust
Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the
Company is a participant in such system and there is an effective Registration
Statement permitting the resale of the Warrant Shares by the Holder, and
otherwise by physical delivery to the address specified by the Holder in the
Notice of Exercise within 3 Trading Days from the delivery to the Company of the
Notice of Exercise Form, surrender of this Warrant (if required) and payment of
the aggregate Exercise Price as set forth above (“Warrant Share Delivery
Date”).  This Warrant shall be deemed to have been exercised on
the date the aggregate Exercise Price is received by the Company.  The
Warrant Shares shall be deemed to have been issued, and Holder or any other
person so designated to be named therein shall be deemed to have become a holder
of record of such shares for all purposes, as of the date the Warrant has been
exercised by payment to the Company of the aggregate Exercise Price (or by
cashless exercise, if permitted) and all taxes required to be paid by the
Holder, if any, pursuant to Section 2(e)(vi) prior to the issuance of such
shares, have been paid.

     

    ii.     Delivery of New Warrants
Upon Exercise.  If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon surrender of this
Warrant certificate, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant.

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    iii.    Rescission
Rights.  If the Company fails to cause its transfer agent to
transmit to the Holder a certificate or certificates representing the Warrant
Shares pursuant to Section 2(e)(i) by the Warrant Share Delivery Date, then the
Holder will have the right to rescind such exercise.

     

    iv.    Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Exercise.  In
addition to any other rights available to the Holder, if the Company fails to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise on or before the Warrant
Share Delivery Date, and if after such date the Holder is required by its broker
to purchase (in an open market transaction or otherwise) or the Holder’s
brokerage firm otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver to the Holder
in connection with the exercise at issue times (B) the price at which the sell
order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored or deliver to
the Holder the number of shares of Common Stock that would have been issued had
the Company timely complied with its exercise and delivery obligations
hereunder.  For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Company shall be required to pay the Holder
$1,000.  The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In and, upon
request of the Company, evidence of the amount of such loss.  Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

     

    v.     No Fractional Shares or
Scrip.  No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant.  As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall, at its election, either pay a cash adjustment
in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share.

    

    
      
        
           

        

        
          5

          
            

          

        

        
           

        

      

    

     

    vi.    Charges, Taxes and
Expenses.  Issuance of certificates for Warrant Shares shall be
made without charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of which
taxes and expenses shall be paid by the Company, and such certificates shall be
issued in the name of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the
event certificates for Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder;
and the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.

     

    vii.   Closing of
Books.  The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.

     

    Section
3.             Certain
Adjustments.

     

    a)           
Stock Dividends and
Splits.  If the Company, at any time while this Warrant is
outstanding: (A) pays a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company upon
exercise of this Warrant), (B) subdivides outstanding shares of Common Stock
into a larger number of shares, (C) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of shares, or
(D) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding immediately before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event and the number of shares issuable
upon exercise of this Warrant shall be proportionately adjusted such that the
aggregate Exercise Price of this Warrant shall remain unchanged.  Any
adjustment made pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.

     

    

    
      
        
           

        

        
          6

          
            

          

        

        
           

        

      

    

    

    b)           
Subsequent Equity
Sales.  If the Company or any Subsidiary thereof, as
applicable, at any time while this Warrant is outstanding, shall sell or grant
any option to purchase, or sell or grant any right to reprice, or otherwise
dispose of or issue (or announce any offer, sale, grant or any option to
purchase or other disposition) any Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock, at an effective price
per share less than the then Exercise Price (such lower price, the “Base Share Price” and
such issuances collectively, a “Dilutive Issuance”)
(if the holder of the Common Stock or Common Stock Equivalents so issued shall
at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which are issued in connection with
such issuance, be entitled to receive shares of Common Stock at an effective
price per share which is less than the Exercise Price, such issuance shall be
deemed to have occurred for less than the Exercise Price on such date of the
Dilutive Issuance), then the Exercise Price shall be reduced and only reduced to
equal the Base Share Price and the number of Warrant Shares issuable hereunder
shall be increased such that the aggregate Exercise Price payable hereunder,
after taking into account the decrease in the Exercise Price, shall be equal to
the aggregate Exercise Price prior to such adjustment.  Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued.  Notwithstanding the foregoing, no adjustments shall be
made, paid, or issued under this Section 3(b) in respect of an Exempt
Issuance.  The Company shall notify the Holder in writing, no later
than the Trading Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this Section 3(b), indicating therein the applicable
issuance price, or applicable reset price, exchange price, conversion price and
other pricing terms (such notice the “Dilutive Issuance
Notice”).  For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon
the occurrence of any Dilutive Issuance, after the date of such Dilutive
Issuance the Holder is entitled to receive a number of Warrant Shares based upon
the Base Share Price regardless of whether the Holder accurately refers to the
Base Share Price in the Notice of Exercise.

     

    c)        
   Fundamental
Transaction.  If, at any time while this Warrant is
outstanding, (A) the Company effects any merger or consolidation of the Company
with or into another Person, (B) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions, (C)
any tender offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (each “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate
Consideration”) receivable as a result of such merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. For purposes
of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration.  If holders of Common Stock are given any choice as to
the securities, cash, or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction.  To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder’s right to exercise such warrant
into Alternate Consideration.  The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms requiring any
such successor or surviving entity to comply with the provisions of this Section
3(c) and insuring that this Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.

    

    
      
        
           

        

        
          7

          
            

          

        

        
           

        

      

    

     

    d)
           Calculations.  All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be.  For purposes of this
Section 3, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding treasury shares, if any) issued and
outstanding.

     

    e)  
         Voluntary Adjustment By
Company.  The Company may at any time during the term of this
Warrant reduce the then current Exercise Price to any amount and for any period
of time deemed appropriate by the Board of Directors of the
Company.

     

    f)    
       Notice to
Holder.

     

    i.      Adjustment to Exercise
Price.  Whenever the Exercise Price is adjusted pursuant to any
provision of this Section 3, the Company shall promptly mail to the Holder a
notice setting forth the Exercise Price after such adjustment and setting forth
a brief statement of the facts requiring such adjustment.  If the
Company enters into a Variable Rate Transaction (as defined in the Purchase
Agreement), despite the prohibition thereon in the Purchase Agreement, the
Company shall be deemed to have issued Common Stock or Common Stock Equivalents
at the lowest possible conversion or exercise price at which such securities may
be converted or exercised.

     

    ii.     Notice to Allow Exercise by
Holder.  If, at any time while this Warrant is outstanding, (A)
the Company shall declare a dividend (or any other distribution in whatever
form) on the Common Stock; (B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class or of any
rights; (D) the approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any consolidation or
merger to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property;
(E) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company; then, in each case, the
Company shall cause to be mailed to the Holder at its last address as it shall
appear upon the Warrant Register of the Company, at least 20 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.  The Holder is entitled to exercise this Warrant
during the period commencing on the date of such notice to the effective date of
the event triggering such notice.

    

    
      
        
           

        

        
          8

          
            

          

        

        
           

        

      

    

     

    Section
4.            
Transfer of
Warrant.

     

    a)
           Transferability.  Subject
to compliance with any applicable securities laws and the conditions set forth
in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
Agreement, this Warrant and all rights hereunder (including, without limitation,
any registration rights) are transferable, in whole or in part, upon surrender
of this Warrant at the principal office of the Company or its designated agent,
together with a written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such
transfer.  Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled.  A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.

     

    b) 
          New
Warrants.  This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or
attorney.  Subject to compliance with Section 4(a), as to any transfer
which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.  All Warrants
issued on transfers or exchanges shall be dated the Initial Exercise Date and
shall be identical with this Warrant except as to the number of Warrant Shares
issuable pursuant thereto.

     

    c)   
        Warrant
Register.  The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the “Warrant Register”),
in the name of the record Holder hereof from time to time.  The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the
contrary.

    

    
      
        
           

        

        
          9

          
            

          

        

        
           

        

      

    

    

     

    d)
           Transfer
Restrictions.  If, at the
time of the surrender of this Warrant in
connection with any transfer of this Warrant, the transfer of this Warrant shall
not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such transfer, that the Holder
or transferee of this Warrant, as the case may be, comply with the provisions of
Section 5.7 of the Purchase Agreement.

     

    Section
5.             Miscellaneous.

     

    a)           
No Rights as
Shareholder Until Exercise.  This Warrant does not entitle the
Holder to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof as set forth in Section 2(e)(i).

     

    b)          
Loss, Theft,
Destruction, or Mutilation of Warrant.  The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction, or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft, or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.

     

    c)           
Saturdays, Sundays,
Holidays, etc.  If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not
be a Business Day, then such action may be taken or such right may be exercised
on the next succeeding Business Day.

     

    d)           
Authorized
Shares.

     

    The
Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant.  The Company further covenants
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant.  The Company will
take all such reasonable action as may be necessary to assure that such Warrant
Shares may be issued as provided herein without violation of any applicable law
or regulation, or of any requirements of the Trading Market upon which the
Common Stock may be listed.  The Company covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this
Warrant, be duly authorized, validly issued, fully paid and nonassessable, and
free from all taxes, liens, and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).

    

    
      
        
           

        

        
          10

          
            

          

        

        
           

        

      

    

     

    Except
and to the extent as waived or consented to by the Holder, the Company shall not
by any action, including, without limitation, amending its articles of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid, or seek to avoid the observance or performance of any of the terms of
this Warrant, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment.  Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use
commercially reasonable efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this
Warrant.

     

    Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.

     

    e)      
     Jurisdiction.  All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be determined in accordance with the provisions of the
Purchase Agreement.

     

    f)      
     Restrictions.  The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed by state
and federal securities laws.

     

    g)     
      Nonwaiver and
Expenses.  No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder’s rights, powers, or remedies,
notwithstanding the fact that all rights hereunder terminate on the Termination
Date.  If the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the Holder,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers,
or remedies hereunder.

     

    h)   
        Notices.  Any
notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered in accordance with the notice
provisions of the Purchase Agreement.

     

    i)      
      Limitation of
Liability.  No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.

    

    
      
        
           

        

        
          11

          
            

          

        

        
           

        

      

    

    

    j)    
       Remedies.  Holder,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant.  The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Warrant and hereby agrees to waive and not to assert
the defense in any action for specific performance that a remedy at law would be
adequate.

     

    k)       
    Successors and
Assigns.  Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and
permitted assigns of Holder.  The provisions of this Warrant are
intended to be for the benefit of all holders from time to time of this Warrant
and shall be enforceable by the Holder or holder of Warrant Shares.

     

    l)         
   Amendment.  This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.

     

    m)           Severability.  Wherever
possible, each provision of this Warrant shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Warrant shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Warrant.

     

    n)       
    Headings.  The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.

     

    ********************

    

    
      
        
           

        

        
          12

          
            

          

        

        
           

        

      

    

    

    IN WITNESS WHEREOF, the Company has
caused this Warrant to be executed by its officer thereunto duly authorized as
of the date first above indicated.

    

    
      
        
          	
                  AMERICAN
      EAGLE ENERGY, INC.

                
	 
      	 
      
	
                  By:

                	
                  /s/ Richard Findley

                
	 
      	
                  Name:
      Richard Findley

                
	 
      	
                  Title:
      President

                

        

      

    

    

    
      
        
           

        

        
          13

          
            

          

        

        
           

        

      

    

    

    NOTICE
OF EXERCISE

    

    TO:           AMERICAN
EAGLE ENERGY, INC.

    

    (1)  The
undersigned hereby elects to purchase ________ Warrant
Shares of the Company pursuant to the terms of the attached Warrant (only if
exercised in full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.

     

    (2)  Payment
shall take the form of (check applicable box):

     

    [  ]
in lawful money of the United States; or

     

    [ ] [if
permitted] the cancellation of such number of Warrant Shares as is necessary, in
accordance with the formula set forth in subsection 2(c), to exercise this
Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in subsection
2(c).

     

    (3)  Please
issue a certificate or certificates representing said Warrant Shares in the name
of the undersigned or in such other name as is specified below:

    _______________________________

    

    The
Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:

    

    _______________________________

    

    _______________________________

    

    _______________________________

    

    (4)  Accredited
Investor.  The undersigned is an “accredited investor” as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.

    

    [SIGNATURE
OF HOLDER]

    

    Name of
Investing Entity:
________________________________________________________

    Signature of Authorized Signatory of
Investing Entity: __________________________________

    Name of
Authorized Signatory:
____________________________________________________

    Title of
Authorized Signatory:
_____________________________________________________

    Date:
_________________________________________________________________________

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    ASSIGNMENT
FORM

    

    (To
assign the foregoing warrant, execute

    this form
and supply required information.

    Do not
use this form to exercise the warrant.)

    

    FOR VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to

    

    _______________________________________________
whose address is

    

    _______________________________________________________________

    

    

    _______________________________________________________________

    
Dated:  ______________,
______

    

    

    
      
        	
              	
                Holder’s
      Signature:

              	
                ____________________________

              

      

      

      
        	
              	
                Holder’s
      Address:

              	
                ____________________________

              

      

      

      
        	
              	 	
                ____________________________

              

      

    

    

    Signature
Guaranteed:  ______________________________________________

    

    

    NOTE:  The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust
company.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.

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