American Natural Energy Corporation  - Exhibit 10.4 - Filed by newsfilecorp.com






Exhibit 10.4 

SECURITIES PURCHASE AGREEMENT 

          This
SECURITIES PURCHASE AGREEMENT (the “Agreement”) is dated as of the
29th day of December, 2011, by and between AMERICAN NATURAL ENERGY
CORPORATION, an Oklahoma corporation (the “Company”) and
TCA GLOBAL CREDIT MASTER FUND, LP, a Cayman Islands limited partnership
(the “Buyer”). 

RECITALS 

          WHEREAS,
Buyer desires to purchase from Company, and the Company desires to sell and
issue to Buyer, upon the terms and subject to the conditions contained herein,
up to Three Million Dollars ($3,000,000) of senior secured redeemable debentures
in the form attached hereto as Exhibit “A” (the
“Debentures”), of which One Million Dollars ($1,000,000) shall be
purchased on the date hereof (the “First Closing”), and up to Two
Million Dollars ($2,000,000) may be purchased in additional closings as set
forth in Section 4.2 below (the “Additional Closings”)(each of the
First Closing and the Additional Closings are sometimes hereinafter individually
referred to as a “Closing” and collectively as the
“Closings”), all for the total purchase price of up to Three
Million Dollars ($3,000,000) (the “Purchase
Price”), and all otherwise subject to the terms and provisions
hereinafter set forth; and 

          WHEREAS,
the Company has agreed to secure all of its “Obligations” (as hereinafter
defined) to Buyer under the Debentures by granting to the Buyer a continuing and
first priority security interest in all of the assets and properties of the
Company pursuant to a Security Agreement dated as of the date hereof (the
“Security Agreement”), a UCC-1 Financing Statement covering all of
the assets and properties of the Company (the “UCC-1”), a
Mortgage, Indenture, Security Agreement, Fixture Filing, Financing Statement and
Assignment of Production dated as of the date hereof (the
“Mortgage”), and Assignment of Payment Receivable in connection
with the payment rights under the Sunoco Contract (the “Receivables
Assignment”), and a Guaranty by certain principal of the Company (the
“Guaranty”); 

          NOW,
THEREFORE, in consideration of the premises and the mutual covenants of the
parties hereinafter expressed and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
each intending to be legally bound, agree as follows: 

ARTICLE I 
RECITALS, EXHIBITS, SCHEDULES 

          The
foregoing recitals are true and correct and, together with the Schedules and
Exhibits referred to hereafter, are hereby incorporated into this Agreement by
this reference. 

ARTICLE II 
DEFINITIONS 

          For
purposes of this Agreement, except as otherwise expressly provided or otherwise
defined elsewhere in this Agreement, or unless the context otherwise requires,
the capitalized terms in this Agreement shall have the meanings assigned to them
in this Article as follows: 

          2.1     
“Affiliate” means, with respect to a Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
such Person at any time during the period for which the determination of
affiliation is being made. For purposes of this definition, the term
“control,” “controlling,” “controlled” and
words of similar import, when used in this context, means, with respect to any
Person, the possession, directly or indirectly, of the power to direct, or cause
the direction of, management policies of such Person, whether through the
ownership of voting securities, by contract or otherwise. 




          2.2      “Assets”
means all of the properties and assets of the Company or used by the Company in
its business as presently conducted or as proposed to be conducted in the
future, whether real, personal or mixed, tangible or intangible, wherever
located. 

          2.3     
“Claims” means any Proceedings, Judgments, Obligations, threats,
losses, damages, deficiencies, settlements, assessments, charges, costs and
expenses of any nature or kind. 

          2.4     
“Common Stock” means the Company’s common stock, $0.001 par value
per share. 

          2.5     
“Consent” means any consent, approval, order or authorization of,
or any declaration, filing or registration with, or any application or report
to, or any waiver by, or any other action (whether similar or dissimilar to any
of the foregoing) of, by or with, any Person, which is necessary in order to
take a specified action or actions, in a specified manner and/or to achieve a
specific result. 

          2.6     
“Contract” means any written or oral contract, agreement, order or
commitment of any nature whatsoever, including, any sales order, purchase order,
lease, sublease, license agreement, services agreement, loan agreement,
mortgage, security agreement, guarantee, management contract, employment
agreement, consulting agreement, partnership agreement, shareholders agreement,
buy-sell agreement, option, warrant, debenture, subscription, call or put. 

          2.7     
“Effective Date” means the date set forth in the introductory
paragraph of this Agreement. 

          2.8     
“Encumbrance” means any lien, security interest, pledge, mortgage,
easement, leasehold, assessment, tax, covenant, restriction, reservation,
conditional sale, prior assignment, or any other encumbrance, claim, burden or
charge of any nature whatsoever. 

          2.9     
“Environmental Requirements” means all Laws and requirements
relating to human, health, safety or protection of the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or Hazardous Materials in the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata), or otherwise relating to the treatment, storage, disposal, transport or
handling of any Hazardous Materials. 

          2.10     
“Escrow Agent” shall mean David Kahan, P.A. 

          2.11     
“Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder. 

          2.12     
“GAAP” means generally accepted accounting principles, methods and
practices set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants, and
statements and pronouncements of the Financial Accounting Standards Board, the
SEC or of such other Person as may be approved by a significant segment of the
U.S. accounting profession, in each case as of the date or period at
issue, and as applied in the U.S. to U.S. companies. 

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          2.13     
“Governmental Authority” means any foreign, federal, state or
local government, or any political subdivision thereof, or any court, agency or
other body, organization, group, stock market or exchange exercising any
executive, legislative, judicial, quasi-judicial, regulatory or administrative
function of government. 

          2.14     
“Hazardous Materials” means: (i) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation and transformers or other equipment
that contain dielectric fluid containing levels of polychlorinated biphenyls
(PCB’s); (ii) any chemicals, materials, substances or wastes which are now or
hereafter become defined as or included in the definition of “hazardous
substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous
wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants”
or words of similar import, under any Law; and (iii) any other chemical,
material, substance, or waste, exposure to which is now or hereafter prohibited,
limited or regulated by any Governmental Authority. 

          2.15     
“Incentive Shares” means the shares of the Company’s Common Stock
to be issued by the Company to Buyer in accordance with Section 7.5 below. 

          2.16     
“Judgment” means any order, writ, injunction, fine, citation,
award, decree, or any other judgment of any nature whatsoever of any
Governmental Authority. 

          2.17     
“Law” means any provision of any law, statute, ordinance, code,
constitution, charter, treaty, rule or regulation of any Governmental Authority.


          2.18     
“Leases” means all leases for real or personal property, including
all oil, gas and mineral leases and leasehold rights associated with oil, gas
and mineral exploration. 

          2.19     
“Material Adverse Effect” means with respect to the event, item or
question at issue, that such event, item or question would not have or
reasonably be expected to result in: (i) a material adverse effect on the
legality, validity or enforceability of this Agreement or any of the Transaction
Documents; (ii) a material adverse effect on the results of operations, Assets,
business or condition (financial or otherwise) or prospects of the Company or
any of its subsidiaries, either individually or taken as a whole; or (iii) a
material adverse effect on the Company’s ability to perform, on a timely basis,
its Obligations under this Agreement or any Transaction Documents. 

          2.20     
“Material Contract” shall mean any Contract to which the Company
is a party or by which the Company or any of its Assets are bound and which: (i)
involves aggregate payments of Twenty-Five Thousand Dollars ($25,000) or more to
or from the Company; (ii) involves delivery, purchase, licensing or provision,
by or to the Company, of any goods, services, assets or other items having a
value (or potential value) over the term of such Contract of Twenty-five
Thousand Dollars ($25,000) or more or is otherwise material to the conduct of
the Company’s business as now conducted and as contemplated to be conducted in
the future; (iii) involves a Company Lease; (iv) imposes any guaranty, surety or
indemnification Obligations on the Company; or (v) prohibits the Company from
engaging in any business or competing anywhere in the world. The Sunoco Contract
shall, regardless of whether it meets any of the conditions of this Section, be
deemed a Material Contract.

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          2.21     
“Obligation” means any debt, liability or obligation of any nature
whatsoever, whether secured, unsecured, recourse, nonrecourse, liquidated,
unliquidated, accrued, absolute, fixed, contingent, ascertained, unascertained,
known, unknown or obligations under executory Contracts. 

          2.22     
“Ordinary Course of Business” means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity, quality and frequency). 

          2.23     
“Permit” means any license, permit, approval, waiver, order,
authorization, right or privilege of any nature whatsoever, granted, issued,
approved or allowed by any Governmental Authority. 

          2.24      “Person”
means any individual, sole proprietorship, joint venture, partnership, company,
corporation, association, cooperation, trust, estate, Governmental Authority, or
any other entity of any nature whatsoever. 

          2.25     
“Principal Trading Market” shall mean the Nasdaq Global Select
Market, the Nasdaq Global Market, the Nasdaq Capital Market, the OTC Bulletin
Board, the OTC Markets, the NYSE Euronext, the New York Stock Exchange, or the
TSX Venture Exchange, whichever is at the time the principal trading exchange or
market for the Common Stock. 

          2.26      “Proceeding”
means any demand, claim, suit, action, litigation, investigation, audit, study,
arbitration, administrative hearing, or any other proceeding of any nature
whatsoever. 

          2.27     
“Project” means a project to be undertaken by the Company
involving the exploration, drilling or extracting of oil, gas or other minerals.


          2.28     
“Real Property” means any real estate, land, building, structure,
improvement, fixture or other real property of any nature whatsoever, including,
but not limited to, fee and leasehold interests. 

          2.29     
“SEC” means the United States Securities and Exchange Commission.


          2.30     
“Securities” means, collectively, the Debentures and the Incentive
Shares. 

          2.31     
“Securities Act” means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder. 

          2.32     
“Sunoco Contract” means that certain Purchase Agreement dated
January 5, 2012 under Sunoco Partners Reference No. 530201, Texon Contract No.
8652, between Sunoco Partners Marketing & Terminals, L.P. and the Company.


          2.33     
“Tax” means (i) any foreign, federal, state or local income,
profits, gross receipts, franchise, sales, use, occupancy, general property,
real property, personal property, intangible property, transfer, fuel, excise,
accumulated earnings, personal holding company, unemployment compensation,
social security, withholding taxes, payroll taxes, or any other tax of any
nature whatsoever, (ii) any foreign, federal, state or local organization fee,
qualification fee, annual report fee, filing fee, occupation fee, assessment,
rent, or any other fee or charge of any nature whatsoever, or (iii) any
deficiency, interest or penalty imposed with respect to any of the foregoing.


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          2.34      “Tax
Return” means any tax return, filing, declaration, information statement
or other form or document required to be filed in connection with or with
respect to any Tax. 

          2.35     
“Transaction Documents” means any documents or instruments to be
executed by Company in connection with this Agreement, including the Debentures,
the Security Agreement, the UCC-1, the Mortgage, the Receivables Assignment, the
Guaranty and an Irrevocable Transfer Agent Instruction and Acknowledgement
Agreement in form and substance required by the Buyer. 

ARTICLE III 
INTERPRETATION 

          In
this Agreement, unless the express context otherwise requires: (i) the words
“herein,” “hereof” and “hereunder” and words of similar import refer to this
Agreement as a whole and not to any particular provision of this Agreement; (ii)
references to the words “Article” or “Section” refer to the respective Articles
and Sections of this Agreement, and references to “Exhibit” or “Schedule” refer
to the respective Exhibits and Schedules annexed hereto; (iii) references to a
“party” mean a party to this Agreement and include references to such party’s
permitted successors and permitted assigns; (iv) references to a “third party”
mean a Person not a party to this Agreement; (v) the terms “dollars” and “$”
means U.S. dollars; (vi) wherever the word “include,” “includes” or “including”
is used in this Agreement, it will be deemed to be followed by the words
“without limitation.” 

ARTICLE IV 
PURCHASE AND SALE OF DEBENTURES 

          4.1      Purchase
and Sale of Debentures. Subject to the satisfaction (or waiver) of the terms
and conditions of this Agreement, Buyer agrees to purchase, at each Closing, and
Company agrees to sell and issue to Buyer, at each Closing, Debentures in the
amount of the Purchase Price applicable to each Closing as more specifically set
forth below. 

          4.2     
Closing Dates. The First Closing of the purchase and sale of the
Debentures shall be for One Million Dollars ($1,000,000), and shall take place
as of the Effective Date, subject to satisfaction of the conditions to the First
Closing set forth in this Agreement (the “First Closing Date”).
Additional Closings of the purchase and sale of the Debentures shall be at such
times and for such amounts as determined in accordance with this Article IV,
subject to satisfaction of the conditions to the Additional Closings set forth
in this Agreement (the “Additional Closing Dates”) (collectively
referred to as the “Closing Dates”). The Closings shall occur on
the respective Closing Dates through the use of overnight mails and subject to
customary escrow instructions from Buyer and its counsel, or in such other
manner as is mutually agreed to by the Company and the Buyer.

          4.3     
Form of Payment. Subject to the satisfaction of the terms and conditions
of this Agreement, on each Closing Date: (i) the Buyer shall deliver to the
Company, to a Company account designated by the Company, the aggregate proceeds
for the Debentures to be issued and sold to Buyer at each such Closing, minus
the fees to be paid directly from the proceeds of each such Closing as set forth
in this Agreement, in the form of wire transfers of immediately available U.S.
funds; and (ii) the Company shall deliver to Buyer the Securities which Buyer is
purchasing hereunder at each Closing, duly executed on behalf of the Company,
together with any other documents required to be delivered pursuant to this
Agreement. 

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          4.4     
Purpose of Closings and Use of Proceeds. Proceeds from any Closing
hereunder shall only be used by the Company to fund costs associated with a
given Company Project, which Project must first be approved by the Buyer. In
addition to approving the Project, the Buyer must also approve the budget of all
costs and expenses to be incurred by the Company in connection with the given
Project (the budget approved by Buyer for a particular Project is hereinafter
referred to as the “Approved Budget”). In that regard, prior to
any Closing hereunder, the Company shall submit to the Buyer a detailed
description of the Project to be undertaken with the proceeds from a given
Closing, an itemized budget, listing, in detail, all expenses and costs
anticipated to be incurred in such given Project, and any other information
relating to the Project that may be reasonably requested by the Buyer. Once a
budget submitted by the Company to the Buyer becomes an Approved Budget, such
Approved Budget for such Project shall not be materially modified, except upon
agreement and approval from Buyer. Any approval of a Project or its budget by
Buyer, or any approval required from Buyer to modify an Approved Budget, shall
not be unreasonably withheld by Buyer. Once a Project and its budget get
approved by Buyer, then the parties shall proceed to a Closing hereunder for
such Project, subject to all of the other covenants, agreements and conditions
contained in this Agreement. Approval of a Project or budget by Buyer shall not
mean or be construed to mean that the Company has met all other terms and
conditions of this Agreement or that Buyer has waived any requirements or
conditions that must be satisfied under this Agreement for a Closing to occur.


          4.5     
Funding for Project. Provided a given Project is approved by the Buyer,
and subject to the satisfaction of the terms and conditions of this Agreement,
the Buyer shall, at a Closing, fund only up to sixty-five (65%) of the total
costs for such Project as shown on the Approved Budget. The remaining
thirty-five percent (35%) of the total costs from the Approved Budget for a
Project shall be funded through capital that must come directly from the
Company. In this regard, in addition to all other covenants and conditions to a
Closing under this Agreement, it shall be a condition precedent to any Closing
hereunder that the Company evidence to the Buyer’s reasonable satisfaction that
the Company has, in Company accounts, an amount of cash representing at least
thirty-five percent (35%) of the total costs from the Approved Budget for any
given Project (such funds sometimes hereinafter referred to as the
“Company Project Funds”). The Company shall fund costs for an
approved Project substantially in accordance with the Approved Budget for any
given Project. To the extent any cost or expenditure required to be incurred in
connection with a given Project is materially different than the itemized amount
therefor in the Approved Budget, then the Company shall notify the Buyer in
writing of the required cost or expenditure and the reason why such cost or
expenditure is materially different than the Approved Budget. 

          4.6     
  Escrow Of Project Funds. The parties acknowledge that as of date of the
  First Closing, the Company has not provided to the Buyer the required opinion
  of title (the “Title Opinion”) that insures Buyer that
  the Mortgage to be granted by the Company in favor of Buyer upon certain real
  property interests of the Company, including the Company’s leasehold interests
  in all of its oil, gas and mineral leases, is a valid, first lien Mortgage upon
  such real property interests of the Company, subject to no other Encumbrances,
  other than Encumbrances which are reasonably acceptable to the Buyer, and which
  do not or would not, in Buyer’s reasonable discretion, have a Material
  Adverse Effect, or adversely affect the prospect for Buyer to fully and punctually
  realize the full benefits of the security rights conferred upon Buyer by any
  of the Transaction Documents. The Company shall provide such a Title Opinion
  to Buyer within thirty (30) from the date of the First Closing. In this regard,
  notwithstanding anything contained herein to the contrary, as a condition to
  the First Closing, the Company shall deposit with Escrow Agent, Company Project
  Funds for the Project to be funded from the proceeds of the First Closing in
  the amount of Three Hundred Fifty Thousand Dollars ($350,000) (the “Company
  Escrow Funds”), which Company Escrow Funds shall be held
in escrow by Escrow Agent subject to the terms of this Agreement and be
disbursed only in accordance with the terms set forth in this Agreement. The
Company Escrow Funds shall remain in escrow and shall only be released upon the
following conditions: (i) the Company has provided the Title Opinion to Buyer
within the time frame set forth above, and Buyer has reviewed same and accepted
same as confirming that the Mortgage to be granted by the Company in favor of
Buyer upon certain real property interests of the Company, including the
Company’s leasehold interests in all of its oil, gas and mineral leases, is a
valid, first lien Mortgage upon such real property interests of the Company,
subject to no other Encumbrances, other than Encumbrances which are reasonably
acceptable to the Buyer, and which do not or would not, in Buyer’s reasonable
discretion, have a Material Adverse Effect, or adversely affect the prospect for
Buyer to fully and punctually realize the full benefits of the security rights
conferred upon Buyer by any of the Transaction Documents; and (ii) no default or
“Event of Default” (as such term is defined in any of the Transaction Documents)
shall have occurred or be continuing under this Agreement or any other
Transaction Documents, and no event shall have occurred that, with the giving of
notice, the passage of time, or both, would constitute a default or Event of
Default under this Agreement or any other Transaction Documents. Once the
foregoing conditions are met and satisfied, the Buyer shall issue a written
authorization and directive to the Escrow Agent, authorizing and directing the
Escrow Agent to disburse the Company Escrow Funds to the Company. In the even
the Title Opinion is provided, but same fails to confirm that the Mortgage to be
granted by the Company in favor of Buyer upon certain real property interests of
the Company, including the Company’s leasehold interests in all of its oil, gas
and mineral leases, is a valid, first lien Mortgage upon such real property
interests of the Company, or such Title Opinion reveals that there are certain
Encumbrances which are not reasonably acceptable to the Buyer, and which, in
Buyer’s reasonable discretion, have a Material Adverse Effect, or adversely
affect the prospect for Buyer to fully and punctually realize the full benefits
of the security rights conferred upon Buyer by any of the Transaction Documents,
then the Company shall diligently and in good faith (but in all events within a
time frame no longer than ninety (90) days from the date the Title Opinion is
first delivered) pursue and undertake any required action to clean up any such
adverse matters on the Title Opinion so that the title shown thereunder to the
Company’s real property interests meets the standard set forth in this Section
4.6(i) . All Company Escrow Funds held in escrow by Escrow Agent shall be
“Collateral” (as such term is defined in the Security Agreement) securing the
Company’s Obligations to the Buyer under this Agreement and the other
Transaction Documents. In that regard, upon the occurrence of any default or
“Event of Default” (as such term is defined in any of the Transaction Documents)
under this Agreement or any other Transaction Documents, or in the event the
Company fails to provide the Title Opinion insuring the Buyer’s Mortgage as a
valid first lien as hereby provided within the time frame set forth above (or to
clean up the Title Opinion as hereby provided within the time frame set forth
for same), then in addition to all other rights and remedies that the Buyer may
have, at law or in equity, upon such a default or Event of Default, or failure
to timely provide the Title Opinion as required hereby, the Buyer shall have the
absolute right to authorize and direct the Escrow Agent to deliver all Company
Escrow Funds in its possession to the Buyer, to be applied against Obligations
due and owing by the Company to Buyer in accordance with this Agreement and the
other Transaction Documents. 

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          4.7      Additional
Closings. After the First Closing, but prior to the maturity date of any of
the Debentures issued in the First Closing, the Company may request that Buyer
purchase additional Debentures hereunder in Additional Closings, provided,
however, that no such request may be made within forty-five (45) days from any
prior Closing. Subject to satisfaction of all other terms and conditions of this
Agreement (including the conditions set forth below in this Section 4.7), Buyer
shall purchase such additional Debentures at Additional Closings in such amounts
and at such times as Buyer and the Company may mutually agree, so long as the
following conditions have been satisfied for each of such Additional Closings, in Buyer’s sole and absolute
discretion: (i) no default or “Event of Default” (as such term is defined in any
of the Transaction Documents) shall have occurred or be continuing under this
Agreement or any other Transaction Documents, and no event shall have occurred
that, with the giving of notice, the passage of time, or both, would constitute
a default or Event of Default under this Agreement or any other Transaction
Documents; and (ii) any additional purchase of Debentures beyond the purchase of
Debentures at the First Closing shall have been approved by Buyer, which
approval may be given or withheld in Buyer’s sole and absolute discretion. 

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          4.8     
Matters Relating to Escrow Agent.

                    (a)      The
Escrow Agent undertakes to perform only such duties as are expressly set forth
herein and no implied duties or obligations shall be read into this Agreement
against the Escrow Agent. Escrow Agent agrees to hold any Company Escrow Funds
held by it hereunder (the “Escrowed
Property”) in a non-interest bearing account and to release
same only in accordance with the terms and conditions set forth in this
Agreement and only upon a written direction from Buyer. 

                    (b)     
The Escrow Agent may act in reliance upon any writing or instrument or signature
which it, in good faith, believes to be genuine, may assume the validity and
accuracy of any statement or assertion contained in such a writing or
instrument, and may assume that any Person purporting to give any writing,
notice, advice or instructions in connection with the provisions hereof has been
duly authorized to do so. The Escrow Agent shall not be liable in any manner for
the sufficiency or correctness as to form, manner, and execution, or validity of
any instrument deposited in this escrow or given to Escrow Agent under this
Agreement, nor as to the identity, authority, or right of any Person executing
the same; and its duties hereunder shall be limited to the safekeeping of the
Escrowed Property, and for the disposition of the same in accordance with this
Agreement. Escrow Agent shall not be deemed to have knowledge of any matter or
thing unless and until Escrow Agent has actually received written notice of such
matter or thing and Escrow Agent shall not be charged with any constructive
notice whatsoever. 

                    (c)      Escrow
Agent shall hold in escrow, pursuant to this Agreement, the Escrowed Property
actually delivered and received by Escrow Agent hereunder, and Escrow Agent
shall not be obligated to ascertain the existence of (or initiate recovery of)
any other property other than property actually received by Escrow Agent, or to
become or remain informed with respect to the possibility or probability of
additional Escrowed Property being realized upon or collected at any time in the
future, or to inform any parties to this Agreement or any third party with
respect to the nature and extent of any Escrowed Property realized and received
by Escrow Agent (except upon the written request of such party), or to monitor
current market values of the Escrowed Property, if applicable. Further, Escrow
Agent shall not be obligated to proceed with any action or inaction based on
information with respect to market values of any of the Escrowed Property which
Escrow Agent may in any manner learn, nor shall Escrow Agent be obligated to
inform the parties hereto or any third party with respect to market values of
any of the Escrowed Property at any time, Escrow Agent having no duties with
respect to investment management or information, all parties hereto
understanding and intending that Escrow Agent’s responsibilities are purely
ministerial in nature. Any reduction in the market value or other value of the
Escrowed Property while deposited with Escrow Agent shall be at the sole risk of
the Buyer and the Company. If all or any portion of the Escrowed Property is in
the form of a check or in any other form other than cash, Escrow Agent shall
deposit same as required but shall not be liable for the nonpayment thereof, nor
responsible to enforce collection thereof. 

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                    (d)     
In the event instructions from Buyer, the Company, or any other party would
require Escrow Agent to expend any monies or to incur any cost, Escrow Agent
shall be entitled to refrain from taking any action until it receives payment
for such costs. It is agreed that the duties of Escrow Agent are purely
ministerial in nature and shall be expressly limited to the safekeeping of the
Escrowed Property and for the disposition of same in accordance with this
Agreement. Buyer and the Company, jointly and severally, each hereby indemnifies
Escrow Agent and holds it harmless from and against any and all Claims which it
may incur or with which it may be threatened, directly or indirectly, arising
from or in any way connected with this Agreement or which may result from Escrow
Agent’s following of instructions from Buyer in accordance with this Agreement,
and in connection therewith, each of Buyer and the Company indemnifies Escrow
Agent against any and all Obligations, including attorneys’ fees and the cost of
defending or resisting any Claim, whether or not litigation is instituted,
unless any such Claims arise as a result of Escrow Agent’s gross negligence or
willful misconduct. Escrow Agent shall be vested with a lien on all Escrowed
Property under the terms of this Agreement, for indemnification, attorneys’
fees, court costs and all other costs and expenses arising from any Claim,
interpleader or otherwise, or other expenses, fees or charges of any character
or nature, which may be incurred by Escrow Agent by reason of disputes arising
between the Buyer and the Company, or any third party as to the correct
interpretation of this Agreement, and instructions given to Escrow Agent
hereunder, or otherwise, with the right of Escrow Agent, regardless of the
instruments aforesaid and without the necessity of instituting any Proceeding,
to hold any property hereunder until and unless said additional expenses, fees
and charges shall be fully paid. Any fees and costs charged by the Escrow Agent
for serving hereunder shall be paid by the Company. 

                    (e)     
In the event Escrow Agent shall be uncertain as to its duties or rights
hereunder or shall receive instructions, claims or demands from Buyer, the
Company or from third persons with respect to the Escrowed Property, which, in
Escrow Agent’s sole opinion, are in conflict with each other or with any
provision of this Agreement, Escrow Agent shall be entitled to refrain from
taking any action until it shall be directed otherwise in writing by Buyer and
the Company and said third persons, if any, or by a final order or judgment of a
court of competent jurisdiction. If any of the parties shall be in disagreement
about the interpretation of this Agreement, or about the rights and obligations,
or the propriety of any action contemplated by the Escrow Agent hereunder, the
Escrow Agent may, at its sole discretion, deposit the Escrowed Property with a
court having jurisdiction over this Agreement, and, upon notifying all parties
concerned of such action, all liability on the part of the Escrow Agent shall
fully cease and terminate. The Escrow Agent shall be indemnified by the Buyer
and the Company for all costs, including reasonable attorneys’ fees, in
connection with the aforesaid proceeding, and shall be fully protected in
suspending all or a part of its activities under this Agreement until a final
decision or other settlement in the proceeding is received. In the event Escrow
Agent is joined as a party to a lawsuit by virtue of the fact that it is holding
the Escrowed Property, Escrow Agent shall, at its sole option, either: (i)
tender the Escrowed Property in its possession to the registry of the
appropriate court; or (ii) disburse the Escrowed Property in its possession in
accordance with the court’s ultimate disposition of the case, and Buyer and the
Company hereby, jointly and severally, indemnify and hold Escrow Agent harmless
from and against any damages or losses in connection therewith including, but
not limited to, reasonable attorneys’ fees and court costs at all trial and
appellate levels. 

                    (f)      The
Escrow Agent may consult with counsel of its own choice (and the costs of such
counsel shall be paid by the Company and the Buyer) and shall have full and
complete authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such counsel. The
Escrow Agent shall not be liable for any mistakes of fact or error of judgment, or for any actions or omissions of any kind, unless
caused by its willful misconduct or gross negligence. 

9 




                    (g)      The
Escrow Agent may resign upon ten (10) days’ written notice to the parties in
this Agreement. If a successor Escrow Agent is not appointed by the Company and
Buyer within this ten (10) day period, the Escrow Agent may petition a court of
competent jurisdiction to name a successor. 

                    (h)      Conflict
Waiver. The Company hereby acknowledges that the Escrow Agent is
counsel to the Buyer in connection with the transactions contemplated and
referred herein. The Company agrees that in the event of any dispute arising in
connection with this Agreement or otherwise in connection with any transaction
or agreement contemplated and referred herein, the Escrow Agent shall be
permitted to continue to represent the Buyer and the Company will not seek to
disqualify such counsel and waives any objection the Company might have with
respect to the Escrow Agent acting as the Escrow Agent pursuant to this
Agreement. The Buyer and the Company acknowledge and agree that nothing in this
Agreement shall prohibit Escrow Agent from: (i) serving in a similar capacity on
behalf of others; or (ii) acting in the capacity of attorneys for one or more of
the parties hereto in connection with any matter. 

ARTICLE V 
BUYER’S REPRESENTATIONS AND WARRANTIES 

                    Buyer
represents and warrants to the Company, that: 

          5.1      Investment
Purpose. Buyer is acquiring the Securities for its own account for
investment only and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, except pursuant to sales registered or
exempted under the Securities Act; provided, however, that by making the
representations herein, Buyer reserves the right to dispose of the Securities at
any time in accordance with or pursuant to an effective registration statement
covering such Securities or an available exemption under the Securities Act.


          5.2     
Accredited Investor Status. Buyer is an “accredited investor” as that
term is defined in Rule 501(a) (3) of Regulation D, as promulgated under the
Securities Act. 

          5.3     
Reliance on Exemptions. Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and Buyer’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of Buyer to acquire the
Securities. 

          5.4      Information.
Buyer and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and information Buyer
deemed material to making an informed investment decision regarding its purchase
of the Securities, which have been requested by Buyer. Buyer and its advisors,
if any, have been afforded the opportunity to ask questions of the Company and
its management. Neither such inquiries, nor any other due diligence
investigations conducted by Buyer or its advisors, if any, or its
representatives, shall modify, amend or affect Buyer’s right to rely on the
Company’s representations and warranties contained in Article VI below. Buyer
understands that its investment in the Securities involves a high degree of
risk. Buyer is in a position regarding the Company, which, based upon
employment, family relationship or economic bargaining power, enabled and enables Buyer to obtain information from the
Company in order to evaluate the merits and risks of this investment. Buyer has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Securities. 

10 




          5.5      No
Governmental Review. Buyer understands that no United States federal or
state Governmental Authority has passed on or made any recommendation or
endorsement of the Securities, or the fairness or suitability of the investment
in the Securities, nor have such Governmental Authorities passed upon or
endorsed the merits of the offering of the Securities. 

          5.6     
Authorization, Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of Buyer and is a valid and binding
agreement of Buyer, enforceable in accordance with its terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies. 

ARTICLE VI 
REPRESENTATIONS AND WARRANTIES OF THE
SELLER 

                    Except
as set forth and disclosed in the disclosure schedule attached to this Agreement
and made a part hereof, the Company hereby makes the following representations
and warranties to the Buyer: 

          6.1      Subsidiaries.
Except as set forth in Schedule 6.1, the Company has no
subsidiaries and the Company does not own, directly or indirectly, any
outstanding voting securities of or other interests in, or have any control
over, any other Person. To the extent the Company has any subsidiaries disclosed
in Schedule 6.1, for purposes of the representations and
warranties of the Company set forth in this Article VI, all representations and
warranties from or related to the Company, its business, Assets, operations or
prospects shall be deemed to mean and be construed to include the same
representation and warranty from and with respect to each subsidiary of the
Company, as applicable, regardless of whether each of such representations and
warranties in Article VI specifically refers to subsidiaries or not. 

          6.2      Organization.
The Company and its subsidiaries are corporations, duly organized, validly
existing and in good standing under the Laws of the jurisdiction in which they
are incorporated. The Company has the full corporate power and authority and all
necessary certificates, licenses, approvals and Permits to: (i) enter into and
execute this Agreement and the Transaction Documents and to perform all of its
Obligations hereunder and thereunder; and (ii) own and operate its Assets and
properties and to conduct and carry on its business as and to the extent now
conducted. The Company is duly qualified to transact business and is in good
standing as a foreign corporation in each jurisdiction where the character of
its business or the ownership or use and operation of its Assets or properties
requires such qualification. Schedule 6.2 contains a correct and
complete list of the jurisdictions in which the Company is qualified to do
business as a foreign corporation. 

          6.3      Authority
and Approval of Agreement; Binding Effect. The execution and delivery by
Company of this Agreement and the Transaction Documents, and the performance by
Company of all of its Obligations hereunder and thereunder, including the
issuance of the Securities, have been duly and validly authorized and approved
by Company and its board of directors pursuant to all applicable Laws and no
other corporate action or Consent on the part of Company, its board of
directors, stockholders or any other Person is necessary or required by the
Company to execute this Agreement and the Transaction Documents, consummate the transactions contemplated herein and
therein, perform all of Company’s Obligations hereunder and thereunder, or to
issue the Securities. This Agreement and each of the Transaction Documents have
been duly and validly executed by Company (and the officer executing this
Agreement and all such other Transaction Documents is duly authorized to act and
execute same on behalf of Company) and constitute the valid and legally binding
agreements of Company, enforceable against Company in accordance with their
respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors’ rights and remedies. 

11 




          6.4     
Capitalization. The authorized capital stock of the Company consists of
250,000,000 shares of Common Stock and 5,000,000 shares of preferred stock
(“Preferred Stock”), of which 13,431,954 shares of Common Stock
are issued and outstanding as of the date hereof, and no shares of Preferred
Stock are issued and outstanding. All of such outstanding shares have been
validly issued and are fully paid and nonassessable. The Common Stock is
currently quoted on the TSX Venture Exchange under the trading symbol “ANR.U.”
The Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for quotation on the Principal Trading
Market, and the Company has maintained all requirements on its part for the
continuation of such quotation. Except as disclosed in the “SEC Documents” (as
hereinafter defined), no shares of Common Stock are subject to preemptive rights
or any other similar rights or any Encumbrances suffered or permitted by the
Company. Except as disclosed in the SEC Documents, as of the date hereof: (i)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, or Contracts, commitments, understandings or arrangements by which
the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries, or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries; (ii) there
are no outstanding debt securities, notes, credit agreements, credit facilities
or other Contracts or instruments evidencing indebtedness of the Company or any
of its subsidiaries, or by which the Company or any of its subsidiaries is or
may become bound; (iii) there are no outstanding registration statements with
respect to the Company or any of its securities; (iv) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of their securities under the Securities Act (except
pursuant to this Agreement); (v) there are no financing statements securing
obligations filed in connection with the Company or any of its Assets; (vi)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by this Agreement or any related agreement or
the consummation of the transactions described herein or therein; and (vii)
there are no outstanding securities or instruments of the Company which contain
any redemption or similar provisions, and there are no Contracts by which the
Company is or may become bound to redeem a security of the Company. The Company
has furnished to the Buyer true, complete and correct copies of: (I) the
Company’s Certificate of Incorporation, as amended and as in effect on the date
hereof (the “Certificate of Incorporation”); and (II) the
Company’s Bylaws, as in effect on the date hereof (the “Bylaws”).
Except for the Certificate of Incorporation and the Bylaws, there are no other
shareholder agreements, voting agreements or other Contracts of any nature or
kind that restrict, limit or in any manner impose Obligations on the governance
of the Company. 

          6.5     
No Conflicts; Consents and Approvals. The execution, delivery and
performance of this Agreement and the Transaction Documents, and the
consummation of the transactions contemplated hereby and thereby, including the
issuance of any of the Securities, will not: (i) constitute a violation of or conflict with the Certificate of Incorporation, Bylaws or any
other organizational or governing documents of Company; (ii) constitute a
violation of, or a default or breach under (either immediately, upon notice,
upon lapse of time, or both), or conflicts with, or gives to any other Person
any rights of termination, amendment, acceleration or cancellation of, any
provision of any Contract to which Company is a party or by which any of its
Assets or properties may be bound; (iii) constitute a violation of, or a default
or breach under (either immediately, upon notice, upon lapse of time, or both),
or conflicts with, any Judgment; (iv) constitute a violation of, or conflict
with, any Law (including United States federal and state securities Laws and the
rules and regulations of any market or exchange on which the Common Stock is
quoted); or (v) result in the loss or adverse modification of, or the imposition
of any fine, penalty or other Encumbrance with respect to, any Permit granted or
issued to, or otherwise held by or for the use of, Company or any of Company’s
Assets. The Company is not in violation of its Certificate of Incorporation,
Bylaws or other organizational or governing documents and the Company is not in
default or breach (and no event has occurred which with notice or lapse of time
or both could put the Company in default or breach) under, and the Company has
not taken any action or failed to take any action that would give to any other
Person any rights of termination, amendment, acceleration or cancellation of,
any Contract to which the Company is a party or by which any property or Assets
of the Company are bound or affected. The businesses of the Company are not
being conducted, and shall not be conducted so long as Buyer owns any of the
Securities, in violation of any Law. Except as specifically contemplated by this
Agreement, the Company is not required to obtain any Consent of, from, or with
any Governmental Authority, or any other Person, in order for it to execute,
deliver or perform any of its Obligations under this Agreement or the
Transaction Documents in accordance with the terms hereof or thereof, or to
issue and sell the Securities in accordance with the terms hereof. Except as
disclosed in Schedule 6.5, all Consents which the Company is
required to obtain pursuant to the immediately preceding sentence have been
obtained or effected on or prior to the date hereof. The Company is not aware of
any facts or circumstances which might give rise to any of the foregoing.


12 




          6.6      Issuance
of Securities. The Securities are duly authorized and, upon issuance in
accordance with the terms hereof, shall be duly issued, fully paid and
non-assessable, and free from all Encumbrances with respect to the issue
thereof, and will be issued in compliance with all applicable United States
federal and state securities Laws. Assuming the accuracy of the representations
and warranties of the Buyer set forth in Article V above, the offer and sale by
the Company of the Securities is exempt from: (i) the registration and
prospectus delivery requirements of the Securities Act; and (ii) the
registration and/or qualification provisions of all applicable state and
provincial securities and “blue sky” laws. 

          6.7     
SEC Documents; Financial Statements. The Common Stock is registered
pursuant to Section 12 of the Exchange Act and the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC under the Exchange Act (all of the foregoing filed within the
two (2) years preceding the date hereof or amended after the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein, being hereinafter referred to as
the “SEC Documents”). The Company is current with its filing
obligations under the Exchange Act and all SEC Documents have been filed on a
timely basis or the Company has received a valid extension of such time of
filing and has filed any such SEC Document prior to the expiration of any such
extension. The Company represents and warrants that true and complete copies of
the SEC Documents are available on the SEC’s website (www.sec.gov) at no charge to Buyer, and Buyer
acknowledges that it may retrieve all SEC Documents from such website and
Buyer’s access to such SEC Documents through such website shall constitute
delivery of the SEC Documents to Buyer; provided, however, that if Buyer is
unable to obtain any of such SEC Documents from such website at no charge, as result of such website not
being available or any other reason beyond Buyer’s control, then upon request
from Buyer, the Company shall deliver to Buyer true and complete copies of such
SEC Documents. The Buyer shall also deliver to Buyer true and complete copies of
all draft filings, reports, schedules, statements and other documents required
to be filed with the SEC that have been prepared but not filed with the SEC as
of the date hereof. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act, and none of the
SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. None of the
statements made in any such SEC Documents is, or has been, required to be
amended or updated under applicable Law (except as set forth in Schedule
6.7 or such statements as have been amended or updated in subsequent
filings prior the date hereof, which amendments or updates are also part of the
SEC Documents). As of their respective dates, except as set forth in
Schedule 6.7, the financial statements of the Company included in
the SEC Documents (“Financial Statements”) complied in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. All of the Financial
Statements have been prepared in accordance with GAAP, consistently applied,
during the periods involved (except: (i) as may be otherwise indicated in such
Financial Statements or the notes thereto; or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements), and fairly present in all material respects the
consolidated financial position of the Company as of the dates thereof and the
consolidated results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyer which is not included in the SEC Documents contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading. 

13 




          6.8      Absence
of Certain Changes. Since the date the last of the SEC Documents was filed
with the SEC, none of the following have occurred: 

                    (a)      There
has been no event or circumstance of any nature whatsoever that has resulted in,
or could reasonably be expected to result in, a Material Adverse Effect; or 

                    (b)      Any
transaction, event, action, development, payment, or any other matter of any
nature whatsoever entered into by the Company other than in the Ordinary Course
of Business. 

          6.9      Absence
of Litigation or Adverse Matters. Except as set forth in Schedule
6.9: (i) there is no Proceeding before or by any Governmental Authority
or any other Person, pending, or the best of Company’s knowledge, threatened or
contemplated by, against or affecting the Company, its business or Assets; (ii)
there is no outstanding Judgments against or affecting the Company, its business
or Assets; (iii) the Company is not in breach or violation of any Contract; and
(iv) the Company has not received any material complaint from any customer,
supplier, vendor or employee. 

          6.10     
Liabilities and Indebtedness of the Company. The Company does not have
any Obligations of any nature whatsoever, except: (i) as disclosed in
Schedule 6.10; (ii) as disclosed in the Financial Statements; or
(iii) Obligations incurred in the Ordinary Course of Business since the date of
the last Financial Statements filed by the Company with the SEC which do not or
would not, individually or in the aggregate, exceed Ten Thousand Dollars
($10,000) or otherwise have a Material Adverse Effect. 

14 




          6.11     
Title to Assets. The Company has good and marketable title to, or a valid
leasehold interest in, all of its Assets which are material to the business and
operations of the Company as presently conducted, free and clear of all
Encumbrances or restrictions on the transfer or use of same. Except as set forth
in Schedule 6.11 and except as would not have a Material Adverse
Effect, the Company’s Assets are in good operating condition and repair,
ordinary wear and tear excepted, and are free of any latent or patent defects
which might impair their usefulness, and are suitable for the purposes for which
they are currently used and for the purposes for which they are proposed to be
used. 

          6.12     
Real Estate.

                    (a)     
Real Property Ownership. The Company does not own any Real Property. 

                    (b)      Real
Property Leases. Except for the Leases described in Schedule
6.12(b) (the “Company Leases”), the Company does not lease
any other Real Property. With respect to each of the Company Leases: (i) the
Company has been in peaceful possession of the property leased thereunder and
neither the Company nor the landlord is in default thereunder; (ii) no waiver,
indulgence or postponement of any of the Obligations thereunder has been granted
by the Company or landlord thereunder; (iii) there exists no event, occurrence,
condition or act known to the Company which, upon notice or lapse of time or
both, would be or could become a default thereunder or which could result in the
termination of the Company Leases, or any of them, or have a Material Adverse
Effect on the business of the Company, its Assets or its operations or financial
results; and (iv) the Company has clear and marketable title to its leasehold
interest for any such Leases, free and clear of all Encumbrances. The Company
has not violated nor breached any provision of any such Company Leases, and all
Obligations required to be performed by the Company under any of such Company
Leases have been fully, timely and properly performed. The Company has delivered
to the Buyer true, correct and complete copies of all Company Leases, including
all modifications and amendments thereto, whether in writing or otherwise. The
Company has not received any written or oral notice to the effect that any of
the Company Leases will not be renewed at the termination of the term of such
Company Leases, or that any of such Company Leases will be renewed only at
higher rents. 

          6.13     
Material Contracts. An accurate, current and complete copy of each of the
Material Contracts has been furnished to Buyer and each of the Material
Contracts constitutes the entire agreement of the respective parties thereto
relating to the subject matter thereof. There are no outstanding offers, bids,
proposals or quotations made by Company which, if accepted, would create a
Material Contract with Company. Each of the Material Contracts is in full force
and effect and is a valid and binding Obligation of the parties thereto in
accordance with the terms and conditions thereof. All Obligations required to be
performed under the terms of each of the Material Contracts by any party thereto
have been fully performed by all parties thereto, and no party to any Material
Contracts is in default with respect to any term or condition thereof, nor has
any event occurred which, through the passage of time or the giving of notice,
or both, would constitute a default thereunder or would cause the acceleration
or modification of any Obligation of any party thereto or the creation of any
Encumbrance upon any of the Assets of the Company. Further, the Company has
received no notice, nor does the Company have any knowledge, of any pending or
contemplated termination of any of the Material Contracts and, no such
termination is proposed or has been threatened, whether in writing or orally.


          6.14      Compliance
with Laws. The Company is and at all times has been in full compliance with
all Laws. The Company has not received any notice that it is in violation of,
has violated, or is under investigation with respect to, or has been threatened
to be charged with, any violation of any Law. 

15 




          6.15     
Intellectual Property. The Company owns or possesses adequate and legally
enforceable rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and all other intellectual property rights necessary to conduct its
business as now conducted. The Company does not have any knowledge of any
infringement by the Company of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
mark registrations, trade secret or other intellectual property rights of
others, and, to the knowledge of the Company, there is no Claim being made or
brought against, or to the Company’s knowledge, being threatened against, the
Company regarding trademark, trade name, patents, patent rights, invention,
copyright, license, service names, service marks, service mark registrations,
trade secret or other intellectual property infringement; and the Company is
unaware of any facts or circumstances which might give rise to any of the
foregoing. 

          6.16     
Labor and Employment Matters. The Company is not involved in any labor
dispute or, to the knowledge of the Company, is any such dispute threatened.
None of the Company’s employees is a member of a union and the Company believes
that its relations with its employees are good. The Company has complied in all
material respects with all Laws relating to employment matters, civil rights and
equal employment opportunities. 

          6.17     
Employee Benefit Plans. Except as set forth in Schedule
6.17, the Company does not have and has not ever maintained, and has no
Obligations with respect to any employee benefit plans or arrangements,
including employee pension benefit plans, as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), multiemployer plans, as defined in Section 3(37) of
ERISA, employee welfare benefit plans, as defined in Section 3(1) of ERISA,
deferred compensation plans, stock option plans, bonus plans, stock purchase
plans, hospitalization, disability and other insurance plans, severance or
termination pay plans and policies, whether or not described in Section 3(3) of
ERISA, in which employees, their spouses or dependents of the Company
participate (collectively, the “Employee Benefit Plans”). To the
Company’s knowledge, all Employee Benefit Plans meet the minimum funding
standards of Section 302 of ERISA, where applicable, and each such Employee
Benefit Plan that is intended to be qualified within the meaning of Section 401
of the Internal Revenue Code of 1986 is qualified. No withdrawal liability has
been incurred under any such Employee Benefit Plans and no “Reportable Event” or
“Prohibited Transaction” (as such terms are defined in ERISA), has occurred with
respect to any such Employee Benefit Plans, unless approved by the appropriate
Governmental Authority. To the Company’s knowledge, the Company has promptly
paid and discharged all Obligations arising under ERISA of a character which if
unpaid or unperformed might result in the imposition of an Encumbrance against
any of its Assets or otherwise have a Material Adverse Effect. 

          6.18      Tax
Matters. The Company has made and timely filed all Tax Returns required by
any jurisdiction to which it is subject, and each such Tax Return has been
prepared in compliance with all applicable Laws, and all such Tax Returns are
true and accurate in all respects. Except and only to the extent that the
Company has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported Taxes, the Company has timely paid all
Taxes shown or determined to be due on such Tax Returns, except those being
contested in good faith, and the Company has set aside on its books provision
reasonably adequate for the payment of all Taxes for periods subsequent to the
periods to which such Tax Returns apply. There are no unpaid Taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.

16 




The Company has withheld and paid all Taxes to the appropriate
Governmental Authority required to have been withheld and paid in connection
with amounts paid or owing to any Person. There is no Proceeding or Claim for
refund now in progress, pending or threatened against or with respect to the
Company regarding Taxes. 

          6.19     
Insurance. The Company is covered by valid, outstanding and enforceable
policies of insurance which were issued to it by reputable insurers of
recognized financial responsibility, covering its properties, Assets and
businesses against losses and risks normally insured against by other
corporations or entities in the same or similar lines of businesses as the
Company is engaged and in coverage amounts which are prudent and typically and
reasonably carried by such other corporations or entities (the “Insurance
Policies”). Such Insurance Policies are in full force and effect, and
all premiums due thereon have been paid. None of the Insurance Policies will
lapse or terminate as a result of the transactions contemplated by this
Agreement. The Company has complied with the provisions of such Insurance
Policies. The Company has not been refused any insurance coverage sought or
applied for and the Company does not have any reason to believe that it will not
be able to renew its existing Insurance Policies as and when such Insurance
Policies expire or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company. 

          6.20      Permits.
The Company possesses all Permits necessary to conduct its business, and the
Company has not received any notice of, or is otherwise involved in any
Proceedings relating to, the revocation or modification of any such Permits. All
such Permits are valid and in full force and effect and the Company is in full
compliance with the respective requirements of all such Permits. 

          6.21     
Bank Accounts; Business Location. Schedule 6.21 sets forth,
with respect to each account of the Company with any bank, broker or other
depository institution: (i) the name and account number of such account; (ii)
the name and address of the institution where such account is held; (iii) the
name of any Person(s) holding a power of attorney with respect to such account,
if any; and (iv) the names of all authorized signatories and other Persons
authorized to withdraw funds from each such account. The Company has no office
or place of business other than as identified on Schedule 6.21 and
the Company's principal places of business and chief executive offices are
indicated on Schedule 6.21. All books and records of the Company
and other material Assets of the Company are held or located at the principal
offices of the Company indicated on Schedule 6.21. 

          6.22     
Environmental Laws. The Company is and has at all times been in
compliance with any and all applicable Environmental Requirements, and there are
no pending Claims against the Company relating to any Environmental
Requirements, nor to the best knowledge of the Company, is there any basis for
any such Claims. 

          6.23      Illegal
Payments. Neither the Company, nor any director, officer, agent, employee or
other Person acting on behalf of the Company has, in the course of his actions
for, or on behalf of, the Company: (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee. 

17 




          6.24     
Related Party Transactions. Except for arm’s length transactions pursuant
to which the Company makes payments in the Ordinary Course of Business upon
terms no less favorable than the Company could obtain from third parties, none
of the officers, directors or employees of the Company, nor any stockholders who
own, legally or beneficially, five percent (5%) or more of the issued and
outstanding shares of any class of the Company’s capital stock (each a
“Material Shareholder”), is presently a party to any transaction
with the Company (other than for services as employees, officers and directors),
including any Contract providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise
requiring payments to or from, any officer, director or such employee or
Material Shareholder or, to the best knowledge of the Company, any other Person
in which any officer, director, or any such employee or Material Shareholder has
a substantial or material interest in or of which any officer, director or
employee of the Company or Material Shareholder is an officer, director, trustee
or partner. There are no Claims or disputes of any nature or kind between the
Company and any officer, director or employee of the Company or any Material
Shareholder, or between any of them, relating to the Company and its business.


          6.25     
Internal Accounting Controls. The Company and each of its subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that: (i) transactions are executed in accordance with
management’s general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability; (iii) access to Assets is permitted
only in accordance with management’s general or specific authorization; and (iv)
the recorded accountability for Assets is compared with the existing Assets at
reasonable intervals and appropriate action is taken with respect to any
differences. 

          6.26     
Acknowledgment Regarding Buyer’s Purchase of the Securities. The Company
acknowledges and agrees that Buyer is acting solely in the capacity of an arm’s
length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that Buyer is not acting
as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and any
advice given by Buyer or any of its representatives or agents in connection with
this Agreement and the transactions contemplated hereby is merely incidental to
Buyer’s purchase of the Securities. The Company further represents to Buyer that
the Company’s decision to enter into this Agreement has been based solely on the
independent evaluation by the Company and its representatives. 

          6.27     
Seniority. No indebtedness or other equity or security of the Company is
senior to the Debentures in right of payment, whether with respect to interest
or upon liquidation or dissolution, or otherwise, except only purchase money
security interests (which are senior only as to underlying Assets covered
thereby). 

          6.28     
Brokerage Fees. There is no Person acting on behalf of the Company who is
entitled to or has any claim for any brokerage or finder’s fee or commission in
connection with the execution of this Agreement or the consummation of the
transactions contemplated hereby. 

          6.29     
Full Disclosure. All the representations and warranties made by Company
herein or in the Schedules hereto, and all of the statements, documents or other
information pertaining to the transaction contemplated herein made or given by
Company, its agents or representatives, are complete and accurate, and do not
omit any information required to make the statements and information provided,
in light of the transaction contemplated herein and in light of the
circumstances under which they were made, not misleading, accurate and
meaningful. 

18 




ARTICLE VII 
COVENANTS 

          7.1     
Negative Covenants. 

                    (a)     
Indebtedness. So long as Buyer owns, legally or beneficially, any of the
Debentures, neither the Company, nor any of its subsidiaries shall, either
directly or indirectly, create, assume, incur or have outstanding any
indebtedness for borrowed money of any nature or kind (including purchase money
indebtedness), or become liable, whether as endorser, guarantor, surety or
otherwise, for any Obligation of any other Person, except for: (i) the
Debentures; (ii) Obligations for accounts payable, other than for money
borrowed, incurred in the Ordinary Course of Business; and (iii) indebtedness
existing on the date hereof and set forth in the Company Financial Statements,
provided such indebtedness is subordinated to the Obligations owed to Buyer
under the Debentures pursuant to a subordination agreement, in form and content
acceptable to Buyer in its sole discretion, which shall include an indefinite
standstill on remedies and payment blockage rights during any default hereunder.


                    (b)      Encumbrances.
So long as Buyer owns, legally or beneficially, any of the Debentures, neither
the Company, nor any of its subsidiaries shall, either directly or indirectly,
create, assume, incur or suffer or permit to exist any Encumbrance upon any
Asset of the Company or any of its subsidiaries, whether owned at the date
hereof or hereafter acquired. 

                    (c)     
Investments. So long as Buyer owns, legally or beneficially, any of the
Debentures, neither the Company, nor any of its subsidiaries shall, either
directly or indirectly, make or have outstanding any new investments (whether
through purchase of stocks, obligations or otherwise) in, or loans or advances
to, any other Person, or acquire all or any substantial part of the Assets,
business, stock or other evidence of beneficial ownership of any other Person,
except: (i) investments in direct obligations of the United States or any state
in the United States; (ii) trade credit extended by the Company in the Ordinary
Course of Business; and (iii) investments existing as of the Effective Date and
set forth in the Company Financial Statements. In addition, So long as Buyer
owns, legally or beneficially, any of the Debentures, neither the Company, nor
any of its subsidiaries shall, either directly or indirectly, allow any other
Person to make or have outstanding any investments (whether equity investments,
debt investments or otherwise) in the Company or any of its securities, except
for investments existing as of the Effective Date and set forth in the Company
Financial Statements.

                    (d)      Transfer;
Merger. So long as Buyer owns, legally or beneficially, any of the
Debentures, neither the Company, nor any of its subsidiaries shall, either
directly or indirectly, permit or enter into any transaction involving a “Change
in Control” (as hereinafter defined), or any other merger, consolidation, sale,
transfer, license, lease, encumbrance or other disposition of all or any part of
its properties or business or all or any substantial part of its Assets, except
for the sale, lease or licensing of property or Assets of the Company in the
Ordinary Course of Business. For purposes of this Agreement, the term
“Change of Control” shall mean any sale, conveyance, assignment or
other transfer, directly or indirectly, of any ownership interest of the Company
or any of its subsidiaries which results in any change in the identity of the
individuals or entities previously having the power to direct, or cause the
direction of, the management and policies of the Company or any of its
subsidiaries, or the grant of a security interest in any ownership interest of
any Person directly or indirectly controlling the Company, which could result in
a change in the identity of the individuals or entities previously having the
power to direct, or cause the direction of, the management and policies of the
Company or any of its subsidiaries. 

19 




                    (e)      Capital
Expenditures. So long as Buyer owns, legally or beneficially, any of the
Debentures, neither the Company, nor any of its subsidiaries shall, either
directly or indirectly, make or incur Obligations or undertake expenditures for
the acquisition or lease of any fixed Assets or other Obligations or
expenditures which are required to be capitalized under GAAP. 

                    (f)     
Distributions; Restricted Payments. So long as Buyer owns, legally or
beneficially, any of the Debentures, neither the Company, nor any of its
subsidiaries shall, either directly or indirectly: (i) purchase or redeem any
shares of its capital stock; (ii) declare or pay any dividends or distributions,
whether in cash or otherwise, or set aside any funds for any such purpose; (iii)
make any loans, advances or extensions of credit to, or investments in, any
Person, including, without limitation, any Affiliates of the Company or its
subsidiaries, or the Company’s officers, directors, employees or Material
Shareholders, or the officers, directors, employees of any subsidiary of the
Company; or (iv) increase the annual cash salary paid to any officers or
directors of the Company or any of its subsidiaries as of the Effective Date,
provided, however, this restriction in Section 7.1(f)(iv) shall not restrict the
Company from making or increasing any salary components of any officers or
directors payable in Common Stock. 

                    (g)     
Use of Proceeds. The proceeds from the purchase and sale of the
Debentures shall be used by the Company only for the payment of costs for an
approved Project in accordance with Article IV hereof. 

                    (h)     
Business Activities; Change of Legal Status and Organizational Documents.
Neither the Company, nor any of its subsidiaries, shall: (i) engage in any line
of business other than the businesses engaged in as of the Effective Date and
business reasonably related thereto; (ii) change its respective name,
organizational identification number, its type of organization, its jurisdiction
of organization or other legal structure; or (iii) permit its Certificate of
Incorporation, Bylaws or other organizational documents to be amended or
modified in any way which could reasonably be expected to have a Material
Adverse Effect. 

                    (i)     
Transactions with Affiliates. Neither the Company, nor any of its
subsidiaries, shall enter into any transaction with any of its Affiliates,
officers, directors, employees, Material Shareholders or other insiders, except
in the Ordinary Course of Business and upon fair and reasonable terms that are
no less favorable to the Company or its subsidiaries, as applicable, than it
would obtain in a comparable arm’s length transaction with a Person not an
Affiliate of the Company or any of its subsidiaries. 

          7.2     
Affirmative Covenants. 

                    (a)     
Corporate Existence. The Company and each of its subsidiaries shall at
all times preserve and maintain their respective: (i) existence and good
standing in the jurisdiction of its and their organization; and (ii) its and
their qualification to do business and good standing in each jurisdiction where
the nature of its and their business makes such qualification necessary, and
shall at all times continue as a going concern in the business which the Company
is presently conducting. 

                    (b)     
Tax Liabilities. The Company and each of its subsidiaries shall at all
times pay and discharge all Taxes upon, and all Claims (including claims for
labor, materials and supplies) against the Company and each of its subsidiaries
or any of its or their properties or Assets, before the same shall become
delinquent and before penalties accrue thereon, unless and to the extent that
the same are being contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP are being maintained. 

20 




                    (c)     
Notice of Proceedings. The Company shall, promptly, but not more than
five (5) days after knowledge thereof shall have come to the attention of any
officer of the Company, give written notice to the Buyer of all threatened or
pending Proceedings before any Governmental Authority which may have a Material
Adverse Effect. 

                    (d)      Material
Adverse Effect. The Company shall, promptly, but not more than five (5) days
after knowledge thereof shall have come to the attention of any officer of the
Company, give written notice to the Buyer of any event, circumstance, fact or
other matter that could in any way have or be reasonably expected to have a
Material Adverse Effect. 

                    (e)      Notice
of Default. The Company shall, promptly, but not more than five (5) days
after the commencement thereof, give notice to the Buyer in writing of the
occurrence of any “Event of Default” (as such term is defined in any of the
Transaction Documents) or of any event which, with the lapse of time, the giving
of notice or both, would constitute an Event of Default hereunder or under any
other Transaction Documents. 

                    (f)     
Reporting Status; Listing. So long as Buyer owns, legally or
beneficially, any of the Securities, the Company shall: (i) file in a timely
manner all reports required to be filed under the Securities Act, the Exchange
Act or any securities Laws and regulations thereof applicable to the Company of
any state of the United States, or by the rules and regulations of the Principal
Trading Market, and, to provide a copy thereof to the Buyer promptly after such
filing; (ii) not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would otherwise permit such termination; (iii) if required by the
rules and regulations of the Principal Trading Market, promptly secure the
listing of the Incentive Shares upon the Principal Trading Market (subject to
official notice of issuance) and, take all reasonable action under its control
to maintain the continued listing, quotation and trading of its Common Stock
(including, without limitation, the Incentive Shares) on the Principal Trading
Market, and the Company shall comply in all respects with the Company’s
reporting, filing and other Obligations under the bylaws or rules of the
Principal Trading Market, the Financial Industry Regulatory Authority, Inc. and
such other Governmental Authorities, as applicable. The Company shall promptly
provide to Buyer copies of any notices it receives from the SEC or any Principal
Trading Market. 

                    (g)     
Rule 144. With a view to making available to Buyer the benefits of Rule
144 under the Securities Act (“Rule 144”), so long as Buyer owns,
legally or beneficially, any of the Securities, the Company shall, at its sole
expense: 

                              (i)     
Make, keep and ensure that adequate current public information with respect to
the Company, as required in accordance with Rule 144, is publicly available;


                              (ii)      furnish
to the Buyer, promptly upon reasonable request: (A) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act; and (b) such other information as may be
reasonably requested by Buyer to permit the Buyer to sell any of the Securities
pursuant to Rule 144 without limitation or restriction; and 

21 




                              (iii)      promptly
at the request of the Buyer, give the Company’s transfer agent instructions to
the effect that, upon the transfer agent’s receipt from the Buyer of a
certificate (a “Rule 144 Certificate”)
certifying that the Buyer’s holding period (as determined in accordance with the
provisions of Rule 144) for any portion of the Incentive Shares which the Buyer
proposes to sell (the “Securities Being Sold”) is not less than
six (6) months, and receipt by the transfer agent of the “Rule 144 Opinion” (as
hereinafter defined) from the Company or its counsel, the transfer agent is to
effect the transfer of the Securities Being Sold and issue to the Buyer(s) or
transferee(s) thereof one or more stock certificates representing the
transferred Securities Being Sold without any restrictive legend and without
recording any restrictions on the transferability of such shares on the transfer
agent’s books and records. In this regard, upon Buyer’s request, the Company
shall have an affirmative obligation to cause its counsel to promptly issue to
the transfer agent a legal opinion providing that, based on the Rule 144
Certificate, the Securities Being Sold may be sold pursuant to the provisions of
Rule 144, even in the absence of an effective registration statement (the
“Rule 144 Opinion”). If the transfer agent requires any additional
documentation in connection with any proposed transfer by the Buyer of any
Securities being Sold, the Company shall promptly deliver or cause to be
delivered to the transfer agent or to any other Person, all such additional
documentation as may be necessary to effectuate the transfer of the Securities
being Sold and the issuance of an unlegended certificate to any transferee
thereof, all at the Company’s expense. 

          7.3     
Reporting Requirements. The Company shall furnish to the Buyer the
following: 

                    (a)      Annual
Audited Financial Statements. Within ninety (90) days after the close of
each fiscal year of the Company, a copy of the annual audited financial
statements of the Company, including balance sheet, statement of income and
retained earnings, statement of cash flows for the fiscal year then ended, in
reasonable detail, prepared and reviewed by an independent certified public
accountant reasonably acceptable to Buyer, containing an unqualified opinion of
such accountant; 

                    (b)      Monthly
Financial Statements. Within thirty (30) days following the end of each
month, a copy of the financial statements of the Company regarding such month,
including balance sheet, statement of income and retained earnings, statement of
cash flows for the month then ended, in reasonable detail, prepared and
certified as accurate in all material respects by the an officer of the Company;
and 

                    (c)      Monthly
Cash Flow Analysis. Within thirty (30) days following the end of each month,
a cash flow analysis in form and content reasonably acceptable to the Buyer,
showing in reasonable detail, all incoming and outgoing cash flows of the
Company during the immediately preceding month, and identifying any variance
between such actual cash flows and the cash flow projections provided by the
Company to the Buyer in connection with Buyer’s due diligence review of the
Company, which cash flow analysis shall be prepared and certified as accurate in
all material respects by the an officer of the Company; and 

                    (d)      Monthly
Compliance Certificate. On the first (1st) day of every month,
the Company shall deliver to the Buyer a compliance certificate in substantial
substance and form as attached hereto as Exhibit “B”.

                    (e)      Project
Expense Audit. At any time while any of the Debentures remain outstanding,
the Buyer may request that an independent audit of the costs and expenses on any
approved Project the Company undertakes, and the Company shall cooperate in all
respects with any such audit.

22 




Any such audit shall be at the Company’s sole expense,
provided, however, the Buyer shall only be responsible for such expense for a
maximum of four (4) audits per year at a coast not to exceed $1,500 per audit.


                    (f)      Project
Reports. While any of the Debentures are outstanding, the Company shall
submit to the Buyer, no less than two (2) times per calendar month, detailed
progress reports on each Project, which reports shall include, at a minimum, a
detailed use of proceeds in any such Project funded through the purchase and
sale of Debentures hereunder, comparison of estimated or budgeted expenses to
actual expenses incurred, comparison of time estimated or budgeted to actual
time, and any other material information about the Project and its status. 

          7.4     
Fees and Expenses.

                    (a)      Transaction
Fees. The Company agrees to pay to Buyer a transaction advisory fee equal to
four percent (4%) of the amount of the Debentures purchased by Buyer at the
First Closing, which fee shall be due and payable on the Effective Date and
withheld from the gross purchase price paid by Buyer for the Debentures. In the
event of any Additional Closings, the Company shall pay to Buyer a transaction
advisory fee equal to four percent (4%) of the amount of the Debentures
purchased by Buyer at any such Additional Closings, which fee shall be due and
payable upon such Additional Closing and withheld from the gross purchase price
paid by Buyer for the Debentures at such Additional Closing. 

                    (b)      Due
Diligence Fees. The Company agrees to pay to the Buyer a due diligence fee
equal to Twelve Thousand Five Hundred and No/100 Dollars ($12,500.00), which
shall be due and payable in full on the Effective Date, or any remaining portion
thereof shall be due and payable on the Effective Date if a portion of such fee
was paid upon the execution of any term sheet related to this Agreement.

                    (c)     
Document Review and Legal Fees. The Company agrees to pay to the Buyer or
its counsel a document review and legal fee equal to Twelve Thousand Five
Hundred and No/100 Dollars ($12,500.00), which shall be due and payable in full
on the Effective Date, or any remaining portion thereof shall be due and payable
on the Effective Date if a portion of such fee was paid upon the execution of
any term sheet related to this Agreement. In addition, in the event of any
Additional Closings, the Company agrees to pay to the Buyer or its counsel all
additional legal fees incurred by the Company in connection with any such
Additional Closings. The Company also agrees to be responsible for the prompt
payment of all legal fees and expenses of the Company and its own counsel and
other professionals incurred by the Company in connection with the negotiation
and execution of this Agreement and the Transaction Documents. 

                    (d)      Other
Fees. The Company also agrees to pay to the Buyer (or any designee of the
Buyer), upon demand, or to otherwise be responsible for the payment of, any and
all other costs, fees and expenses, including the reasonable fees, costs,
expenses and disbursements of counsel for the Buyer and of any experts and
agents, which the Buyer may incur or which may otherwise be due and payable in
connection with: (i) the preparation, negotiation, execution, delivery,
recordation, administration, amendment, waiver or other modification or
termination of this Agreement or any other Transaction Documents; (ii) any
documentary stamp taxes, intangibles taxes, recording fees, filing fees, or
other similar taxes, fees or charges imposed by or due to any Governmental
Authority in connection with this Agreement or any other Transaction Documents;
(iii) the exercise or enforcement of any of the rights of the Buyer under this
Agreement or the Transaction Documents; or (iv) the failure by the Company to perform or observe any of the provisions of this Agreement or
any of the Transaction Documents. Included in the foregoing shall be the amount
of all expenses paid or incurred by Buyer in consulting with counsel concerning
any of its rights under this Agreement or any other Transaction Document or
under applicable law. To the extent any such costs, fees, charges, taxes or
expenses are incurred prior to the funding of proceeds from a Closing, same
shall be paid directly from the proceeds of each such Closing. All such costs
and expenses, if not so immediately paid when due or upon demand thereof, shall
bear interest from the date of outlay until paid, at the highest rate set forth
in the Debenture, or if none is so stated, the highest rate allowed by law. All
of such costs and expenses shall be additional Obligations of the Company to
Buyer secured under the Transaction Documents. The provisions of this Subsection
shall survive the termination of this Agreement.


23 




          7.5      Incentive
Shares.

                    (a)      Share
Issuance. At the First Closing, the Company shall issue to the Buyer that
number of shares of the Company’s Common Stock that equal to an aggregate value
of One Hundred Fifty Thousand Dollars ($150,000) (in the aggregate, the
“Share Value”). For purposes of determining the number of
Incentive Shares issuable to Buyer under this Section 7.5, the Company’s Common
Stock shall be valued as of the business day immediately prior to the date the
purchase of the Debentures is funded by Buyer (the “Valuation
Date”), using the daily volume weighted average price of the Common
Stock for the five (5) trading days immediately prior to the Valuation Date (the
“VWAP”), as reported by Bloomberg L.P. On or prior to the First
Closing, the Buyer shall confirm to the Company the VWAP for the Common Stock as
of the Valuation Date, and the corresponding number of Incentive Shares issuable
at the First Closing based on such VWAP. The Company shall instruct its transfer
agent to issue certificates representing the Incentive Shares issuable to the
Buyer immediately upon the occurrence of the First Closing, and shall cause its
transfer agent to deliver such certificates to Buyer within seven (7) business
days following the First Closing. In the event such certificates representing
the Incentive Shares issuable hereunder shall not be delivered to the Buyer
within said seven (7) business day period, same shall be an immediate default
under this Agreement and the Transaction Documents. The Incentive Shares, when
issued, shall be deemed to be validly issued, fully paid, and non-assessable
shares of the Company’s Common Stock. The Incentive Shares shall be deemed fully
earned as of the date the Company executes this Agreement, regardless of whether
any Additional Closings are funded hereunder. 

                    (b)      Registration
of Shares. The Common Stock to be issued to Buyer pursuant to this Section
7.5 shall be included on any registration statement filed by the Company after
the date hereof, unless such shares may be resold without any limitation or
restriction pursuant to Rule 144. 

ARTICLE VIII 
CONDITIONS PRECEDENT TO THE COMPANY’S
OBLIGATIONS TO SELL 

                    
The obligation of the Company hereunder to issue and sell the Securities to the
Buyer at the Closings is subject to the satisfaction, at or before the
respective Closing Dates, of each of the following conditions, provided that
these conditions are for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion: 

          8.1      Buyer
shall have executed the Transaction Documents and delivered them to the Company.


24 




          8.2      The
representations and warranties of the Buyer shall be true and correct in all
material respects as of the date when made and as of the Closing Dates as though
made at that time (except for representations and warranties that speak as of a
specific date), and the Buyer shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Buyer at or
prior to the Closing Dates. 

ARTICLE IX 
CONDITIONS PRECEDENT TO THE BUYER’S
OBLIGATIONS TO PURCHASE 

          9.1      First
Closing. The obligation of the Buyer hereunder to purchase the Debentures at
the First Closing is subject to the satisfaction, at or before the First Closing
Date, of each of the following conditions (in addition to any other conditions
precedent elsewhere in this Agreement), provided that these conditions are for
the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole
discretion: 

                    (a)      The
Company shall have executed and delivered the Transaction Documents applicable
to the First Closing and delivered the same to the Buyer. 

                    (b)     
The representations and warranties of the Company shall be true and correct in
all material respects (except to the extent that any of such representations and
warranties are already qualified as to materiality in Article VI above, in which
case, such representations and warranties shall be true and correct in all
respects without further qualification) as of the date when made and as of the
First Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the First Closing Date. 

                    (c)      The
Buyer shall have received an opinion of counsel from counsel to the Company in a
form satisfactory to the Buyer and its counsel. 

                    (d)     
The Buyer shall have issued the appropriate corporate resolutions for the
issuance of the Incentive Shares, and the Company shall have instructed its
transfer agent to issue the Incentive Shares to Buyer, and the transfer agent
shall have acknowledged to Buyer that there are no impediments to the issuance
and delivery of the Incentive Shares to the Buyer or its counsel. 

                    (e)     
The Company shall have executed and delivered to Buyer a closing certificate in
substance and form required by Buyer, which closing certificate shall include
and attach as exhibits: (i) a true copy of a certificate of good standing
evidencing the formation and good standing of the Company from the secretary of
state (or comparable office) from the jurisdiction in which the Company is
incorporated, as of a date within ten (10) days of the First Closing Date; (ii)
the Company’s Certificate of Incorporation; (iii) the Company’s Bylaws; and (iv)
copies of the resolutions of the board of directors of the Company consistent
with Section 6.3, as adopted by the Company’s board of directors in a form
reasonably acceptable to Buyer. 

                    (f)      No
event shall have occurred which could reasonably be expected to have a Material
Adverse Effect. 

25 




                    (g)      The
Buyer shall have approved the Project to be funded from the proceeds of the
First Closing and the budget for such Project. 

                    (h)      The
Escrow Agent shall have received the Company Escrow Funds for the Project to be
funded from the proceeds of the First Closing. 

                    (i)      The
Company shall have executed such other agreements, certificates, confirmations
or resolutions as the Buyer may required to consummate the transactions
contemplated by this Agreement and the Transaction Documents, including a
closing statement and joint disbursement instructions as may be required by
Buyer. 

          9.2      Additional
Closings. Provided the Buyer is to purchase additional Debentures in
accordance with Section 4.4 at an Additional Closing, the obligation of the
Buyer hereunder to accept and purchase the Debentures at any Additional Closing
is subject to the satisfaction, at or before the Additional Closing Date, of
each of the following conditions: 

                    (a)      The
Company shall have executed the Transaction Documents applicable to the
Additional Closing and delivered the same to the Buyer. 

                    (b)      The
representations and warranties of the Company shall be true and correct in all
material respects (except to the extent that any of such representations and
warranties are already qualified as to materiality in Article VI above, in which
case, such representations and warranties shall be true and correct in all
respects without further qualification) as of the date when made and as of the
Additional Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Additional Closing Date. 

                    (c)      No
event shall have occurred which could reasonably be expected to have a Material
Adverse Effect. 

                    (d)     
No default or Event of Default shall have occurred and be continuing under this
Agreement or any other Transaction Documents, and no event shall have occurred
that, with the passage of time, the giving of notice, or both, would constitute
a default or an Event of Default under this Agreement or any other Transaction
Documents. 

                    (e)     
The Buyer shall have approved the Project to be funded from the proceeds of the
Additional Closing and the budget for such Project. 

                    (f)      The
Buyer shall have confirmed that the Company has the Company Project Funds
available for the Project to be funded from the proceeds of the Additional
Closing. 

                    (g)      The
Company shall have executed such other agreements, certificates, confirmations
or resolutions as the Buyer may required to consummate the transactions
contemplated by this Agreement and the Transaction Documents, including a
closing statement and joint disbursement instructions as may be required by
Buyer. 

26 




ARTICLE X 
INDEMNIFICATION 

          10.1      Company’s
Obligation to Indemnify. In consideration of the Buyer’s execution and
delivery of this Agreement and acquiring the Securities hereunder, and in
addition to all of the Company’s other obligations under this Agreement, the
Company hereby agrees to defend and indemnify Buyer and its Affiliates and
subsidiaries and their respective directors, officers, employees, agents and
representatives, and the successors and assigns of each of them (collectively,
the “Buyer Indemnified Parties”) and Company
does hereby agree to hold the Buyer Indemnified Parties forever harmless, from
and against any and all Claims made, brought or asserted against the Buyer
Indemnified Parties, or any one of them, and Company hereby agrees to pay or
reimburse the Buyer Indemnified Parties for any and all Claims payable by any of
the Buyer Indemnified Parties to any Person, including reasonable attorneys’ and
paralegals’ fees and expenses, court costs, settlement amounts, costs of
investigation and interest thereon from the time such amounts are due at the
highest non-usurious rate of interest permitted by applicable Law, through all
negotiations, mediations, arbitrations, trial and appellate levels, as a result
of, or arising out of, or relating to: (i) any misrepresentation or breach of
any representation or warranty made by the Company in this Agreement, the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby; (ii) any breach of any covenant, agreement or
Obligation of the Company contained in this Agreement, the Transaction Documents
or any other certificate, instrument or document contemplated hereby or thereby;
or (iii) any Claims brought or made against the Buyer Indemnified Parties, or
any one of them, by a third party and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement, the
Transaction Documents or any other instrument, document or agreement executed
pursuant hereto or thereto by any of the Buyer Indemnified Parties, any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Debentures, or the status
of the Buyer or holder of any of the Securities, as a buyer of such Securities
in the Company. To the extent that the foregoing undertaking by the Company may
be unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of each of the Claims covered hereby, which is
permissible under applicable Law. 

ARTICLE XI
 MISCELLANEOUS 

          11.1      Notices.
All notices of request, demand and other communications hereunder shall be
addressed to the parties as follows: 

	 	If to the Company: 	American Natural Energy Corporation 
	 	  	6100 South Yale Ave., Suite 2010 
	 	  	Tulsa, Oklahoma 74136 
	 	  	Attn: Mr. Michael Paulk, CEO 
	 	  	Telephone: (918) 481-1440 
	 	  	Facsimile: (918) 481-1473 
	 	  	E-Mail: Mike@annrg.com
      and Steve@annrg.com 
	 	  	  
	 	With a copy to: 	Ira “Buddy” Edwards 
	 	  	Riggs, Abney, Neal, Turpen, Orbison & Lewis
    
	 	  	502 West Sixth Street 
	 	  	Tulsa, Oklahoma 74119-1010 


27 





	 	  	Telephone: 918-699-8979 
	 	  	Fax: 918-587-9708 
	 	  	E-Mail: bedwards@riggsabney.com 
	 	  	  
	 	If to the Secured Party: 	TCA Global Credit Master Fund, LP 
	 	  	1404 Rodman Street 
	 	  	Hollywood, FL 33020 
	 	  	Attn: Mr. Robert Press 
	 	  	Telephone: (786) 323-1650 
	 	  	Facsimile: (786) 323-1651 
	 	  	E-Mail: bpress@trafcap.com 
	 	  	  
	 	With a copy to: 	David Kahan, P.A. 
	 	  	3125 W. Commercial Blvd., Suite 100 
	 	  	Ft, Lauderdale, FL 33309 
	 	  	Attn: David Kahan, Esq. 
	 	  	Telephone: (954) 548-3930 
	 	  	Facsimile: (954) 548-3910 
	 	  	E-Mail: david@dkpalaw.com 


unless the address is changed by the party by like notice given
to the other parties. Notice shall be in writing and shall be deemed delivered:
(i) if mailed by certified mail, return receipt requested, postage prepaid and
properly addressed to the address below, then three (3) business days after
deposit of same in a regularly maintained U.S. Mail receptacle; or (ii) if
mailed by Federal Express, UPS or other nationally recognized overnight courier
service, next business morning delivery, then one (1) business day after deposit
of same in a regularly maintained receptacle of such overnight courier; or (iii)
if hand delivered, then upon hand delivery thereof to the address indicated on
or prior to 5:00 p.m., EST, on a business day. Any notice hand delivered after
5:00 p.m., EST, shall be deemed delivered on the following business day.
Notwithstanding the foregoing, notice, consents, waivers or other communications
referred to in this Debenture may be sent by facsimile, e-mail, or other method
of delivery, but shall be deemed to have been delivered only when the sending
party has confirmed (by reply e-mail or some other form of written confirmation)
that the notice has been received by the other party. 

          11.2     
Entire Agreement. This Agreement, including the Exhibits and Schedules
attached hereto and the documents delivered pursuant hereto, including the
Transaction Documents, set forth all the promises, covenants, agreements,
conditions and understandings between the parties hereto with respect to the
subject matter hereof and thereof, and supersede all prior and contemporaneous
agreements, understandings, inducements or conditions, expressed or implied,
oral or written, except as contained herein and in the Transaction Documents.


          11.3     
Assignment. The Buyer may at any time assign its rights in this Agreement
or any of the other Transaction Documents, or any part thereof, without the
Company’s consent or approval. In addition, the Buyer may at any time sell one
or more participations in the Debentures. The Company may not sell or assign
this Agreement or any of the Transaction Documents, or any portion thereof,
either voluntarily or by operation of law, nor delegate any of its duties of
obligations hereunder or thereunder, without the prior written consent of the
Buyer, which consent may be withheld in Buyer’s sole and absolute
discretion.

28 




          11.4      Binding
Effect. This Agreement shall be binding upon the parties hereto, their
respective successors and permitted assigns. 

          11.5     
Amendment. The parties hereby irrevocably agree that no attempted
amendment, modification, or change of this Agreement shall be valid and
effective, unless the parties shall unanimously agree in writing to such
amendment, modification or change. 

          11.6     
No Waiver. No waiver of any provision of this Agreement shall be
effective, unless it is in writing and signed by the party against whom it is
asserted, and any such written waiver shall only be applicable to the specific
instance to which it relates and shall not be deemed to be a continuing or
future waiver. 

          11.7     
Gender and Use of Singular and Plural. All pronouns shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the identity of
the party or parties or their personal representatives, successors and assigns
may require. 

          11.8     
Counterparts. This Agreement and any amendments hereto may be executed in
one or more counterparts, each of which shall be deemed an original and all of
which together will constitute one and the same instrument. 

          11.9     
Electronic Signatures. The Buyer is hereby authorized to rely upon and
accept as an original for all purposes, this Agreement, any other Transaction
Document or other communication which is sent to Buyer or its counsel by
facsimile, telegraphic, .pdf, or other electronic transmission (each, a
“Communication”) which Buyer or its counsel in good faith believes
has been signed by the Company and has been delivered to Buyer or its counsel by
a properly authorized representative of the Company, whether or not that is in
fact the case. Notwithstanding the foregoing, the Buyer shall not be obligated
to accept any such Communication as an original and may in any instance require
that an original document be submitted to Buyer in lieu of, or in addition to,
any such Communication. 

          11.10     
Headings. The article and section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of the Agreement. 

          11.11     
Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Florida, without regard to the principles of conflicts of
laws. The parties further agree that any action between them shall be heard in
Broward County, Florida and expressly consent to the jurisdiction and venue of
the State Courts sitting in Broward County, Florida and the United States
District Court for the Southern District of Florida for the adjudication of any
civil action asserted pursuant to this Agreement. 

          11.12      Further
Assurances. The parties hereto will execute and deliver such further
instruments and do such further acts and things as may be reasonably required to
carry out the intent and purposes of this Agreement. 

          11.13     
Survival. All covenants, agreements, representations and warranties made
by the Company herein shall, notwithstanding any investigation by the Buyer, be
deemed material and relied upon by Buyer and shall survive the making and
execution of this Agreement and the Transaction Documents and the issuance of
the Debentures, and shall be deemed to be continuing representations and warranties until such time as the Company has fulfilled all of
its Obligations to Buyer, the Debentures have been repaid in full and Buyer no
longer owns any of the Incentive Shares. 

29 




          11.14      Time
is of the Essence. The parties hereby agree that time is of the essence with
respect to performance of each of the parties’ Obligations under this Agreement.
The parties agree that in the event that any date on which performance is to
occur falls on a Saturday, Sunday or state or national holiday, then the time
for such performance shall be extended until the next business day thereafter
occurring. 

          11.15     
Joint Preparation. The preparation of this Agreement has been a joint
effort of the parties and the resulting documents shall not, solely as a matter
of judicial construction, be construed more severely against one of the parties
than the other. 

          11.16     
Severability. If any one of the provisions contained in this Agreement,
for any reason, shall be held invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, and this Agreement shall remain in full force and
effect and be construed as if the invalid, illegal or unenforceable provision
had never been contained herein. 

          11.17     
No Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other Person. 

          11.18     
WAIVER OF JURY TRIAL. THE BUYER AND THE COMPANY, AFTER CONSULTING OR
HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVES, IRREVOCABLY, THE RIGHT TO TRIAL BY JURY WITH RESPECT
TO ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR ANY OTHER AGREEMENT
EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION WITH THIS AGREEMENT, OR
ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE BUYER AND THE COMPANY
ARE ADVERSE PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BUYER TO
PURCHASE THE DEBENTURES. 

          11.19      Compliance
with Federal Law. The Company shall: (i) ensure that no Person who owns a
controlling interest in or otherwise controls the Company is or shall at any
time be listed on the Specially Designated Nationals and Blocked Person List or
other similar lists maintained by the Office of Foreign Assets Control
(“OFAC”), the Department of the Treasury, included in any
Executive Orders or in any other similar lists of any Governmental Authority;
(ii) not use or permit the use of the proceeds of the purchase of the Debentures
to violate any of the foreign asset control regulations of OFAC or any enabling
statute, Executive Order relating thereto or any other requirements or
restrictions imposed by any Governmental Authority; and (iii) comply with all
applicable Lender Secrecy Act (“BSA”) laws and regulations, as
amended. As required by federal law and Buyer’s policies and practices, Buyer
may need to obtain, verify and record certain customer identification
information and documentation in connection with opening or maintaining accounts
or establishing or continuing to provide services. 

[SIGNATURES ON THE FOLLOWING PAGE] 

30 




          IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as
of the date and year set forth above. 

	 	COMPANY: 
	 	 
	 	AMERICAN NATURAL ENERGY
  
	 	CORPORATION, an Oklahoma corporation
  
	 	 
	 	By: /s/ Michael Paulk 
	 	Name: Michael Paulk 
	 	Title: President 
	 	 
	 	Date: 1/31/12 
	 	 
	 	 
	 	BUYER: 
	 	 
	 	TCA GLOBAL CREDIT MASTER FUND, LP 
	 	 
	 	By:      TCA Global
      Credit Fund GP, Ltd. 
	 	Its:      General
      Partner 
	 	 
	 	 
	 	By: /s/ Robert Press 
	 	Name: Robert Press 
	 	Title: Director 
	 	 
	 	Date: 1/31/12 


31 




EXHIBIT “A” 

FORM OF DEBENTURE 




EXHIBIT “B” 

FORM OF COMPLIANCE CERTIFICATE