ETERNAL ENERGY CORP.
June
9, 2010
▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
Littleton,
CO 80120
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
June 18,
2010
American
Eagle Energy Inc.
▇▇ ▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
Billings,
MT 59101
Attention: ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
Dear ▇▇.
▇▇▇▇▇▇▇:
|
Re:
|
▇▇▇▇▇
Assets; Spyglass Assets
|
This
letter sets out the agreement between the undersigned concerning the matters
described below:
Background
A. Eternal
Energy Corp. and its nominee, EERG Energy ULC, its wholly-owned Canadian
subsidiary (collectively, “Eternal”), own approximately
4,320 net acres located in Saskatchewan Province, Canada, and certain leases,
assets, interests, and rights related thereto, all as set forth and described in
Schedule “A” attached hereto (collectively, the “Hardy Assets”).
B. American
Eagle Energy Inc. and its nominee, AEE Canada Inc., its wholly-owned Canadian
subsidiary (collectively, “American Eagle”), own
approximately 5,990 net acres located in Divide County, North Dakota, and
certain leases, assets, interests, and rights related thereto, all as set forth
and described in Schedule “B” attached hereto (collectively, the “Spyglass
Assets”).
C. Eternal
has agreed to sell and American Eagle has agreed to purchase a 50% undivided
interest in the Hardy Assets in consideration of American Eagle’s sale to
Eternal of a 50% undivided interest in the Spyglass Assets, as described
below.
Agreement
Now,
therefore, the parties agree as follows:
|
1.
|
Schedules. The
following schedules are attached hereto and made a part of this
Agreement:
|
Schedule
“A” - ▇▇▇▇▇
Assets
Schedule
“B” - Spyglass
Assets
Schedule
“C” - Form
of Operating Agreement
|
2.
|
Sale
of Hardy
Assets; Sale of Spyglass Assets. Eternal, for the
consideration set out in Clause 3, agrees to sell, convey, transfer, and
assign to American Eagle 50% of Eternal’s right, title, estate, and
interest in and to the Hardy Assets. American Eagle, for the
consideration set out in Clause 3, agrees to sell, convey, transfer, and
assign to Eternal 50% of American Eagle’s right, title, estate, and
interest in and to the Spyglass
Assets.
|
2
|
3.
|
Consideration. In
consideration of these premises, the respective representations and
warranties of the parties, the sale, conveyance, transfer, and assignment
transactions contemplated herein, (i) American Eagle shall sell, convey,
transfer, and assign to Eternal 50% of American Eagle’s right, title,
estate, and interest in and to the Spyglass Assets and (ii) Eternal shall
sell, convey, transfer, and assign to American Eagle 50% of Eternal’s
right, title, estate, and interest in and to the Hardy
Assets.
|
|
4.
|
Management
and Operation of the Hardy Assets and the Spyglass
Assets. The management and operation of the Hardy Assets
and the Spyglass Assets shall be governed by an Operating Agreement, the
general form of which (subject to commercially reasonable modifications)
is attached hereto as Schedule “C” (the “Operating
Agreement”). Eternal and American Eagle shall each
execute the Operating Agreement as soon as commercially reasonable, but,
in any event, no later than 30 days, following Closing (as defined
below).
|
|
5.
|
Closing. The
closing shall take place on June 25, 2010 at such time, place, and manner
as the parties may mutually agree upon in writing (the “Closing”). On
Closing (a) Eternal shall execute and deliver such general and specific
conveyances, transfers, and assignments, and other documents, as American
Eagle may reasonably require to complete the sale, conveyance, transfer,
and assignment of the Hardy Assets, and (b) American Eagle shall
execute and deliver such general and specific conveyances, transfers, and
assignments, and other documents, as Eternal may reasonably require to
complete the sale, conveyance, transfer, and assignment of the Spyglass
Assets. Each party shall also deliver such further
documentation as the other party may reasonably request to complete the
transactions contemplated hereby, including, without limitation, officer’s
certificates in respect of each party’s representations and
warranties. All documentation delivered at Closing shall be in
form and substance satisfactory to the parties, acting
reasonably. Eternal shall make available to American Eagle all
of its lease and agreement files and other records pertaining to the Hardy
Assets as soon as commercially reasonable following Closing and American
Eagle, in turn, shall make available to Eternal all of its lease and
agreement files and other records pertaining to the Spyglass Assets as
soon as commercially reasonable following
Closing.
|
|
6.
|
Representations
and Warranties.
|
|
|
(a)
|
Eternal: Eternal
makes the following representations and warranties to American Eagle, all
of which shall be true and accurate in all material respects as of the
Closing:
|
|
|
(i)
|
Organization and
Standing: Eternal Energy Corp. is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Nevada and EERG Energy ULC is a corporation duly organized,
validly existing and in good standing under the laws of Saskatchewan
Canada;
|
|
|
(ii)
|
Power and
Authority: Eternal has all requisite power and authority
to carry on its business as presently conducted, to enter into this
Agreement, and to perform its obligations hereunder. This
Agreement has been approved by all necessary corporate action on the part
of Eternal and the consummation of this Agreement will not violate, nor be
in conflict with, (A) any provision of the governing documents of Eternal,
(B) any agreements to which Eternal is a party, or (C) any judgment,
decree, ordinance, law, regulation, or
permit;
|
3
|
|
(iii)
|
Enforceability: This
Agreement and all other agreements and instruments executed in accordance
herewith shall constitute the valid and binding obligation of Eternal
enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
or similar laws affecting the rights of creditors generally and subject to
the general principles of equity;
|
|
|
(iv)
|
Sole Ownership and No
Encumbrances: Eternal is the sole owner of and has good
and marketable title to the Hardy Assets, free and clear of material
liens, claims, and encumbrances;
|
|
|
(v)
|
No Consents or Rights
of First Refusal: There are no consents required or
rights of first refusal or similar rights triggered as a result of the
contemplated sale and transfer of the Hardy Assets or the transactions
contemplated by the Closing;
|
|
|
(vi)
|
Compliance with
Laws: To the best of Eternal’s knowledge, all laws,
rules, regulations, ordinances, and orders of all local, provincial, and
federal governmental bodies having jurisdiction over the Hardy Assets have
been complied with; and
|
|
|
(vii)
|
Full
Disclosure: To the best of Eternal’s knowledge, none of
the above representations and warranties fails to state a material fact
necessary to make the statements contained therein not
misleading.
|
|
|
(b)
|
American
Eagle: American Eagle makes the
following representations and warranties to Eternal, all of
which shall be true and accurate in all material respects as of the
Closing:
|
|
|
(i)
|
Organization and
Standing: American Eagle Energy Inc. is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Nevada and AEE Canada Inc. is a corporation duly organized,
validly existing and in good standing under the laws of Saskatchewan
Canada;
|
|
|
(ii)
|
Power and
Authority: American Eagle has all requisite power and
authority to carry on its business as presently conducted, to enter into
this Agreement, and to perform its obligations hereunder. This
Agreement has been approved by all necessary corporate action on the part
of American Eagle and the consummation of this Agreement will not violate,
nor be in conflict with, (A) any provision of the governing documents of
American Eagle, (B) any agreements to which American Eagle is a party, or
(C) any judgment, decree, ordinance, law, regulation, or
permit;
|
|
|
(iii)
|
Enforceability: This
Agreement and all other agreements and instruments executed in accordance
herewith shall constitute the valid and binding obligation of American
Eagle enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
or similar laws affecting the rights of creditors generally and subject to
the general principles of equity;
|
4
|
|
(iv)
|
Sole Ownership and No
Encumbrances: American Eagle is the sole owner of and
has good and marketable title to the Spyglass Assets, free and clear of
material liens, claims, and
encumbrances.
|
|
|
(v)
|
No Consents or Rights
of First Refusal: There are no consents required or
rights of first refusal or similar rights triggered as a result of the
contemplated sale and transfer of the Spyglass Assets or the transactions
contemplated by the Closing;
|
|
|
(vi)
|
Compliance with
Laws: To the best of American Eagle’s knowledge, all
laws, rules, regulations, ordinances and orders of all local, state, and
federal governmental bodies having jurisdiction over the Spyglass Assets
have been complied with; and
|
|
|
(vii)
|
Full
Disclosure: To the best of American Eagle’s knowledge,
none of the above representations and warranties fails to state a material
fact necessary to make the statements contained therein not
misleading.
|
|
7.
|
Survival. The
representations and covenants of Eternal and American Eagle shall survive
the Closing for a period of 6 months and shall be deemed to apply to all
agreements and instruments executed in accordance herewith, it being the
express intention of the parties that there shall not be any merger of the
aforesaid representations and covenants notwithstanding any rule of law,
equity, or statute to the contrary, all such rules being
waived. Each of Eternal and American Eagle shall indemnify the
other from and against all claims arising within the aforesaid survival
period that are occasioned by reason of a representation being untrue or
inaccurate.
|
|
8.
|
No
Consequential Damages. No party shall be liable to the
other hereunder for indirect, consequential, special, or punitive damages,
including, without limitation, loss of future revenue, income or profits,
diminution of value, or loss of business reputation or
opportunity.
|
|
9.
|
Press
Releases; SEC Reports. The parties each acknowledge that
the other is a publicly traded entity and that each shall be required to
issue a press release and to file with the Securities and Exchange
Commission a Current Report on Form 8-K concerning this Agreement and the
transactions contemplated hereunder. Nothing herein shall
prevent a party from furnishing any information to any governmental agency
or regulatory authority or to the public insofar and to the extent such
disclosure is required by applicable law (including, without limitation,
securities laws or the rules or regulations of any stock exchange or other
trading medium applicable to such party), provided that a party that
proposes to make such a public disclosure shall, to the extent reasonably
possible, provide the other party with a draft of such statement in
sufficient time prior to its release to enable such other party to review
such draft and advise the disclosing party of any comments it may have
with respect thereto.
|
|
10.
|
Amendment. This
Agreement may only be amended by a formal written instrument executed by
proper signing officers for the
parties.
|
5
|
11.
|
Waiver. The
parties acknowledge and agree that any waiver of the provisions of this
Agreement shall only be binding upon the waiving party if evidenced in
writing and signed on behalf of the waiving party; any such waiver shall
apply only to the particular breach, default, obligation, or provision
specifically identified and waived and not to any other breaches,
defaults, obligations, or provisions, whether or not similar; any such
waiver shall not constitute a continuing waiver unless expressly stated;
and any delay or omission on the part of a party in exercising any right
or power under this Agreement shall not impair the ability of such party
to exercise such right or power or be considered to be a waiver of, or
acquiescence to, any breach or
default.
|
|
12.
|
Notices. Any
notices which may be required to be given under the terms of this
Agreement shall be in writing and shall be considered duly delivered if
personally delivered or sent by facsimile to the addresses of the parties
as set out below:
|
|
If to Eternal:
|
If to American Eagle:
|
|
|
American
Eagle Energy Inc.
|
||
|
▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
|
▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
|
|
|
Littleton,
Colorado 80120
|
Billings,
Montana 59101
|
|
|
Facsimile: 303.798.5767
|
Facsimile:
|
|
|
Attn: ▇▇▇▇
▇▇▇▇▇
|
Attn: ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
|
|
|
Chief Executive Officer
|
|
President
|
|
13.
|
Non-Assignable. This
Agreement is not assignable by either party without the prior written
consent of the other party, such consent not to be unreasonably withheld,
delayed, or denied.
|
|
14.
|
Inurement. This
Agreement shall be binding upon and inure to the benefit of the parties
and their respective successors and/or
assigns.
|
|
15.
|
Headings. The
headings utilized in this Agreement are inserted for convenience of
reference only and shall not affect the construction of the provisions
hereof.
|
|
16.
|
Gender
and Number. This Agreement shall be read with all
changes in gender and number as may be required by the
context.
|
|
17.
|
Conflict. Wherever
any provision, whether express or implied, of any schedule conflicts or is
at variance with any provision of the main body of this Agreement, the
provision in the main body shall prevail. Wherever any
provision, whether express or implied, of this Agreement conflicts or is
at variance with any documentation issued in furtherance thereof, the
provision of this Agreement shall
prevail.
|
|
18.
|
Governing
Laws/Courts.
|
|
|
(a)
|
Governing
Laws: This Agreement shall, in all respects, be subject
to, interpreted, construed, and enforced in accordance with and under the
laws of the State of North Dakota, without regard to principals of
conflicts of law. To the extent that the location of the Hardy
Assets in the Province of Saskatchewan requires the application of the
laws in force in the Province of Saskatchewan, such laws shall be adduced
as evidence in the North Dakota courts having jurisdiction in respect of a
dispute arising
hereunder.
|
6
|
|
(b)
|
Courts: The
parties irrevocably attorn and submit to the exclusive jurisdiction of the
courts of the State of North Dakota and courts of appeal therefrom in
respect of all matters arising out of this
Agreement.
|
|
19.
|
Invalidity
of Provisions. If any provision of this Agreement or the
application thereof to any party or circumstance shall to any extent be
held invalid, illegal, or unenforceable by a court of competent
jurisdiction, the remainder of this Agreement, the application of such
provision to parties or circumstances other than those to which it is held
invalid, illegal, or unenforceable, or the validity, legality, or
enforceability of such provision in any other jurisdiction shall not in
any way be affected or impaired thereby and such provision shall be
severable from this Agreement to the extent of such invalidity,
illegality, or unenforceability.
|
|
20.
|
Negotiated
Transaction. The parties have participated jointly in
the negotiation and drafting of this Agreement and, in the event an
ambiguity or question of intent or interpretation arises, this Agreement
shall be construed as jointly drafted by the parties and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of
the authorship of any provision of this
Agreement.
|
|
21.
|
Intent;
Further Assurances. It is Eternal’s intent to convey,
transfer, and assign to American Eagle 50% of Eternal’s right, title,
estate, and interest in and to the Hardy Assets, legal, beneficial, or
equitable; and it is likewise American Eagle’s intent to convey, transfer,
and assign to Eternal 50% of American Eagle’s right, title, estate, and
interest in and to the Spyglass Assets, legal, beneficial, or
equitable. In this regard, both parties agree to execute and
deliver all such instruments, conveyances, and other documents and do such
other acts not inconsistent with the terms of this Agreement as may be
necessary or advisable to carry out each party’s intent as stated
herein.
|
|
22.
|
Complete
Agreement. This Agreement constitutes the complete
agreement between the parties regarding the matters addressed herein and
shall supercede all prior agreements between the parties in relation
thereto, whether written or oral.
|
|
23.
|
Counterpart
Execution/Delivery. This Agreement may be executed in
one or more counterparts, each of which shall be considered an original
but all of which together shall constitute one and the same
instrument. In addition, facsimile or scanned email copies of
executed counterparts shall be conclusively regarded for all purposes as
originally executed counterparts pending the delivery of the
originals.
|
Please
confirm your agreement to the foregoing by signing and returning a copy of this
Agreement to the attention of the undersigned prior to 4:30 p.m. MDT on June
1, 2010.
Sincerely,
|
Per:
|
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
|
|
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
|
||
|
Chief
Executive Officer
|
7
AGREED to
and ACCEPTED this 18th day of
June, 2010.
|
AMERICAN
EAGLE ENERGY INC.
|
||
|
Per:
|
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
|
|
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
|
||
|
President
|
||
SCHEDULE
“A”
HARDY
ASSETS
|
Title
Documents
|
Lands
|
|
|
Lease
PN62328
Converted
from EL 00795
(Block
4067)
|
4-21
W2M: W/2 5 & All 6
PNG
Surface To The Top of the Precambrian
|
|
|
Lease
PN62329
Converted
from EL 00795
(Block
4071)
|
4-21
W2M: N/2 & SE 9, LSDs 5 & 6, 16, 17, 18 and W/2 21
PNG
Surface To The Top of the Precambrian
|
|
|
Lease
PN61691
(Parcel
227)
|
4-21
W2M: NE & S/2 4
PNG
Surface To The Top of the Precambrian
|
|
|
Lease
PN61692
(Parcel
228)
|
4-21
W2M: NE 5
PNG
To The Top Of The Precambrian
|
|
|
Lease
PN61693
(Parcel
229)
|
|
4-21
W2M: 9 LSDs 3 & 4
PNG
From The Top Of The Watrous Formation to the Top of the
Precambrian
|
SCHEDULE
“B”
SPYGLASS
ASSETS
SCHEDULE
“C”
FORM OF OPERATING
AGREEMENT