American Natural Energy Corporation  - Exhibit 10.2 - Filed by newsfilecorp.com






Exhibit 10.2 

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

Original Issue Date: August 13, 2012 
Original Conversion
Price (subject to adjustment herein): $0.10 

$2,000,000.00 

12% CONVERTIBLE DEBENTURE 
DUE AUGUST 13, 2014 

          THIS
12% CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly
issued 12% Convertible Debentures of American Natural Energy Corporation, a
Nevada corporation (the “Company”), having its principal place of
business at 6100 South Yale, Suite 2010, Tulsa, Oklahoma 74136, designated as
its 12% Convertible Debenture due August 13, 2014 (this debenture, the
“Debenture” and, collectively with the other debentures of such series,
the “Debentures”). 

          FOR
VALUE RECEIVED, the Company promises to pay to Palo Verde Acquisitions, LLC or
its registered assigns (the “Holder”), or shall have paid pursuant to the
terms hereunder, the principal sum of TWO MILLION DOLLARS US $2,000,000.00
on August 13, 2014 (the “Maturity Date”) or such earlier date as this
Debenture is required or permitted to be repaid as provided hereunder. Except as
otherwise set forth in this Debenture, the Company may not prepay any portion of
the principal amount of this Debenture without the prior written consent of the
Holder. This Debenture is subject to the following additional provisions: 




Section 1.     
Definitions. For the purposes hereof, in addition to the terms defined
elsewhere in this Debenture, (a) capitalized terms not otherwise defined herein
shall have the meanings set forth in the Purchase Agreement and (b) the
following terms shall have the following meanings: 

          “Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act. 

          “Alternate
Consideration” shall have the meaning set forth in Section 5(e). 

          “Bankruptcy
Event” means any of the following events: (a) the Company or any Significant
Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof
commences a case or other proceeding under any bankruptcy, reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction relating to the Company or any
Significant Subsidiary thereof, (b) there is commenced against the Company or
any Significant Subsidiary thereof any such case or proceeding that is not
dismissed within 60 days after commencement, (c) the Company or any Significant
Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief
or other order approving any such case or proceeding is entered, (d) the Company
or any Significant Subsidiary thereof suffers any appointment of any custodian
or the like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such appointment, (e) the
Company or any Significant Subsidiary thereof makes a general assignment for the
benefit of creditors, (f) the Company or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts or (g) the Company or any Significant
Subsidiary thereof, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the foregoing.


          “Base
Conversion Price” shall have the meaning set forth in Section 4(b). 

          “Beneficial
Ownership Limitation” shall have the meaning set forth in Section 4(d).

          “Business
Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of Oklahoma are authorized or required by law or other
governmental action to close. 

          “Conversion”
shall have the meaning ascribed to such term in Section 4. 

          “Conversion
Date” shall have the meaning set forth in Section 4(a). 

          “Conversion
Price” shall have the meaning set forth in Section 4(b). 

2




          “Conversion
Schedule” means the Conversion Schedule in the form of Schedule 1
attached hereto. 

          “Conversion
Shares” means, collectively, the shares of Common Stock issuable upon
conversion of this Debenture in accordance with the terms hereof. 

          “Debenture
Register” shall have the meaning set forth in Section 3(b). 

          “Dilutive
Issuance” shall have the meaning set forth in Section 5(b). 

          “Dilutive
Issuance Notice” shall have the meaning set forth in Section 5(b). 

          “Event
of Default” shall have the meaning set forth in Section 6(a). 

          “Notice
of Conversion” shall have the meaning set forth in Section 4(a). 

          “Original
Issue Date” means the date of the first issuance of the Debentures,
regardless of any transfers of any Debenture and regardless of the number of
instruments which may be issued to evidence such Debentures. 

          
“Purchase Agreement” means the Securities Purchase Agreement, dated as of
August 13, 2012 among the Company and the original Holder, as amended, modified
or supplemented from time to time in accordance with its terms. 

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

          “Share
Delivery Date” shall have the meaning set forth in Section 4(c)(ii). 

          “Trading
Day” means a day on which the principal Trading Market is open for trading.


          “Trading
Market” means any of the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the TSX Venture
Exchange, NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market, the New York Stock Exchange, the OTC Bulletin
Board, or the “Pink Sheets” published by Pink OTC Markets, Inc. (or any
successors to any of the foregoing). 

          “VWAP”
means, for any date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a Trading
Market, the daily volume weighted average price of the Common Stock for such
date (or the nearest preceding date) on the Trading Market on which the Common
Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading
Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)
if the OTC Bulletin Board is not a Trading Market, the volume weighted average
price of the Common Stock for such date (or the nearest preceding date) on the OTC
Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading
on the OTC Bulletin Board and if prices for the Common Stock are then reported
in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported, or (d) in all
other cases, the fair market value of a share of Common Stock as determined by
an independent appraiser selected in good faith by the Purchasers of a majority
in interest of the Securities then outstanding and reasonably acceptable to the
Company, the fees and expenses of which shall be paid by the Company. 

3




Section 2.     
Interest. The Company hereby promises to pay to the Holder, interest on
the outstanding principal amount under this Debenture at a rate of twelve
percent (12%) per annum simple interest on a quarterly basis from the date of
the original issue until paid in full, or converted pursuant to the provision of
Section 4. Interest is payable in immediately available lawful money of the
United States of America or in shares of common stock of the Company, at the
election of the Company. Common shares shall be valued at the average VWAP for
the preceding five (5) trading days prior to such interest payment. 

Section
3.      Registration of Transfers and
Exchanges.

          a)           Investment
Representations. This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance with the
Purchase Agreement and applicable federal and state securities laws and
regulations.

          b)          
Reliance on Debenture Register. Prior to due presentment to the Company
of this Debenture for transfer, the Company and any agent of the Company may
treat the Person in whose name this Debenture is duly registered on the records
of the Company regarding registration and transfers of this Debenture (the
“Debenture Register”) as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this
Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary. 

Section
4.      Conversion. 

          a)          
Voluntary Conversion. At any time after the Original Issue Date until
this Debenture is no longer outstanding, this Debenture shall be convertible, in
whole or in part, into shares of Common Stock at the option of the Holder, at
any time and from time to time (subject to the conversion limitations set forth
in Section 4(d) hereof). The Holder shall effect conversions by delivering to
the Company a Notice of Conversion, the form of which is attached hereto as
Annex A (each, a “Notice of Conversion”), specifying therein the
principal amount of this Debenture to be converted and the date on which such
conversion shall be effected (such date, the “Conversion Date”). If
no Conversion Date is specified in a Notice of Conversion, the Conversion Date
shall be the date that such Notice of Conversion is deemed delivered hereunder.
To effect conversions hereunder, the Holder shall
not be required to physically surrender this Debenture to the Company unless the
entire principal amount of this Debenture has been so converted. Conversions
hereunder shall have the effect of lowering the outstanding principal amount of
this Debenture in an amount equal to the applicable conversion. The Holder and
the Company shall maintain records showing the principal amount(s) converted and
the date of such conversion(s). The Company may deliver an objection to any
Notice of Conversion within five (5) Business Days of delivery of such Notice of
Conversion.

4




          b)           Conversion
Price. The conversion price in effect on any Conversion Date shall be equal
to $0.10, subject to adjustment herein (the “Conversion Price”).


          c)          
Mechanics of Conversion. 

          i.     
Conversion Shares Issuable Upon Conversion of Principal Amount.
The number of Conversion Shares issuable upon a conversion hereunder shall be
determined by the quotient obtained by dividing (x) the outstanding principal
amount of this Debenture to be converted by (y) the Conversion Price. 

          ii.      Delivery
of Certificate Upon Conversion. Not later than three (3) Trading Days after
each Conversion Date (the “Share Delivery Date”), the Company shall
deliver, or cause to be delivered, to the Holder (A) a certificate or
certificates representing the Conversion Shares which, on or after the earlier
of (i) the six month anniversary of the Original Issue Date or (ii) the
Effective Date, shall be free of restrictive legends and trading restrictions
(other than those which may then be required by the Purchase Agreement)
representing the number of Conversion Shares being acquired upon the conversion
of this Debenture. On or after the earlier of (i) the six month anniversary of
the Original Issue Date or (ii) the Effective Date, the Company shall use its
best efforts to deliver any certificate or certificates required to be delivered
by the Company under this Section 4(c) electronically through the Depository
Trust Company or another established clearing corporation performing similar
functions. 

          iii.     
Reservation of Shares Issuable Upon Conversion. The Company covenants
that it will at all times reserve and keep available out of its authorized and
unissued shares of Common Stock for the sole purpose of issuance upon conversion
of this Debenture, each as herein provided, free from preemptive rights or any
other actual contingent purchase rights of Persons other than the Holder (and
the other holders of the Debentures), not less than such aggregate number of
shares of the Common Stock as shall (subject to the terms and conditions set
forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 5) upon the conversion of the then
outstanding principal amount of this Debenture. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly
authorized, validly issued, fully paid and nonassessable.

5




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

          d)          
Holder’s Conversion Limitations. The Company shall not effect any
conversion of this Debenture, and a Holder shall not have the right to convert
any portion of this Debenture, to the extent that after giving effect to the
conversion set forth on the applicable Notice of Conversion, the Holder
(together with the Holder’s Affiliates, and any Persons acting as a group
together with the Holder or any of the Holder’s Affiliates) would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below). For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its affiliates shall include the number of
shares of Common Stock issuable upon conversion of this Debenture with respect
to which such determination is being made, but shall exclude the number of
shares of Common Stock which are issuable upon (i) conversion of the remaining,
unconverted principal amount of this Debenture beneficially owned by the Holder
or any of its Affiliates and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company subject to a
limitation on conversion or exercise analogous to the limitation contained
herein (including, without limitation, any other Debentures or the Warrants)
beneficially owned by the Holder or any of its affiliates. Except as set forth
in the preceding sentence, for purposes of this Section 4(d), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. In addition, a
determination as to any group status as contemplated above shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 4(d), in
determining the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as stated in the most
recent of the following: (i) the Company’s most recent periodic or annual report
filed with the Commission, as the case may be, (ii) a more recent public
announcement by the Company, or (iii) a more recent written notice by the
Company or the Company’s transfer agent setting forth the number of shares of
Common Stock outstanding. Upon the written or oral request of a Holder, the
Company shall within five (5) Trading Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including
this Debenture, by the Holder or its Affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. The
“Beneficial Ownership Limitation” shall be no more than 19.9% of
the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon conversion of
this Debenture held by the Holder or group of Holders, unless approved by the
shareholders. The Beneficial Ownership Limitation provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict conformity with
the terms of this Section 4(d) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended Beneficial Ownership
Limitation contained herein or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The limitations contained
in this paragraph shall apply to a successor holder of this Debenture. 

6




               e)          
Shareholder Vote to Approve Conversion Amounts above the Beneficial
Ownership Limitation. The Company and its Board of Directors shall use
their best efforts to seek the approval of the Company’s shareholders to allow
conversion of all Debentures owned by Holder at the next shareholders meeting. A
shareholders meeting will be called during the fall of 2012.

Section 5.      Certain
Adjustments. 

               a)          
Stock Dividends and Stock Splits. If the Company, at any time while this
Debenture is outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on shares of
Common Stock or any Common Stock Equivalents (which, for avoidance of doubt,
such payment or distribution shall not include any shares of Common Stock issued
by the Company upon conversion of the Debentures), (ii) subdivides outstanding
shares of Common Stock into a larger number of shares, (iii) combines (including
by way of a reverse stock split) outstanding shares of Common Stock into a
smaller number of shares or (iv) issues, in the event of a reclassification of
shares of the Common Stock, any shares of capital stock of the Company, then the
Conversion Price shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock (excluding any treasury shares of the
Company) outstanding immediately before such event, and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such
event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification. 

               b)          
Subsequent Equity Sales. If, at any time while this Debenture is
outstanding, the Company or any Subsidiary, as applicable, sells or grants any
option to purchase or sells or grants any right to reprice, or otherwise
disposes of or issues (or announces any sale, grant or any option to purchase or
other disposition), any Common Stock or Common Stock Equivalents entitling any
Person to acquire shares of Common Stock at an effective price per share that is
lower than the then Conversion Price (such lower price, defined herein as the
“Base Conversion Price” and such issuances, collectively, a “Dilutive
Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so
issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise,
or due to warrants, options or rights per share which are issued in connection
with such issuance, be entitled to receive shares of Common Stock at an
effective price per share that is lower than the
Conversion Price, such issuance shall be deemed to have occurred for less than
the Conversion Price on such date of the Dilutive Issuance), then the Conversion
Price shall be reduced to equal the Base Conversion Price. Such adjustment shall
be made whenever such Common Stock or Common Stock Equivalents are issued
provided an adjustment with respect to such securities has not theretofore been
made with respect to the issuance of such Common Stock or Common Stock
Equivalents. Notwithstanding the foregoing, no adjustment will be made under
this Section 5(b) in respect of an Exempt Issuance. If the Company enters into a
Variable Rate Transaction, despite the prohibition set forth in the Purchase
Agreement, the Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the lowest possible conversion price at which such
securities may be converted or exercised. The Company shall notify the Holder in
writing, no later than the Trading Day following the issuance of any Common
Stock or Common Stock Equivalents subject to this Section 5(b), indicating
therein the applicable issuance price, or applicable reset price, exchange
price, conversion price and other pricing terms (such notice, the “Dilutive
Issuance Notice”). For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon
the occurrence of any Dilutive Issuance, the Holder is entitled to receive a
number of Conversion Shares based upon the Base Conversion Price on or after the
date of such Dilutive Issuance, regardless of whether the Holder accurately
refers to the Base Conversion Price in the Notice of Conversion. 

7




          c)          
Subsequent Rights Offerings. If the Company, at any time while the
Debenture is outstanding, shall issue rights, options or warrants to all holders
of Common Stock (and not to the Holders) entitling them to subscribe for or
purchase shares of Common Stock at a price per share that is lower than the VWAP
on the record date referenced below, then the Conversion Price shall be
multiplied by a fraction of which the denominator shall be the number of shares
of the Common Stock outstanding on the date of issuance of such rights, options
or warrants plus the number of additional shares of Common Stock offered for
subscription or purchase, and of which the numerator shall be the number of
shares of the Common Stock outstanding on the date of issuance of such rights,
options or warrants plus the number of shares which the aggregate offering price
of the total number of shares so offered (assuming delivery to the Company in
full of all consideration payable upon exercise of such rights, options or
warrants) would purchase at such VWAP. Such adjustment shall be made whenever
such rights, options or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such rights, options or warrants.

          d)           Pro
Rata Distributions. If the Company, at any time while this Debenture is
outstanding, distributes to all holders of Common Stock (and not to the Holders)
evidences of its indebtedness or assets (including cash and cash dividends) or
rights or warrants to subscribe for or purchase any security (other than the
Common Stock, which shall be subject to Section 5(b)), then in each such case
the Conversion Price shall be adjusted by multiplying such Conversion Price in
effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the denominator shall
be the VWAP determined as of the record date mentioned above, and of which the
numerator shall be such VWAP on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness or
rights or warrants so distributed applicable to one outstanding share of the
Common Stock as determined by the Board of Directors of the Company in good
faith. In either case the adjustments shall be described in a statement
delivered to the Holder describing the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one share
of Common Stock. Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date mentioned
above. 

8




          e)          
Calculations. All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 5, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding any treasury shares of the Company) issued and
outstanding. 

          f)     
Notice to the Holder. 

          i.           Adjustment
to Conversion Price. Whenever the Conversion Price is adjusted pursuant to
any provision of this Section 5, the Company shall promptly deliver to each
Holder a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.

          ii.          
Notice to Allow Conversion by Holder. If (A) the Company shall declare a
dividend (or any other distribution in whatever form) on the Common Stock, (B)
the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the granting to
all holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company, then, in each case, the Company shall cause to be
filed at each office or agency maintained for the purpose of conversion of this
Debenture, and shall cause to be delivered to the Holder at its last address as
it shall appear upon the Debenture Register, at least twenty (20) calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any defect therein
or in the delivery thereof shall not affect the validity of the corporate action
required to be specified in such notice. To the extent that any notice provided
hereunder constitutes, or contains, material, non-public information regarding
the Company or any of the Subsidiaries, the Company shall simultaneously file
such notice with the Commission pursuant to a Current Report on Form 8-K. The
Holder shall remain entitled to convert this Debenture during the 20-day period
commencing on the date of such notice through the effective date of the event
triggering such notice except as may otherwise be expressly set forth
herein.

9




Section
6.           Events
of Default.

          a)     
“Event of Default” means, wherever used herein, any of the following
events (whatever the reason for such event and whether such event shall be
voluntary or involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or regulation of any
administrative or governmental body): 

          i.     
any default in the payment of (A) the principal amount of any Debenture or (B)
liquidated damages and other amounts owing to a Holder on any Debenture, as and
when the same shall become due and payable (whether on a Conversion Date or the
Maturity Date or by acceleration or otherwise); 

          ii.      the
Company shall fail to observe or perform any other covenant or agreement
contained in the Debentures (other than a breach by the Company of its
obligations to deliver shares of Common Stock to the Holder upon conversion,
which breach is addressed in clause (x) below) which failure is not cured, if
possible to cure, within the earlier to occur of (A) ten (12) Trading Days after
notice of such failure sent by the Holder or by any other Holder to the Company
and (B) twenty (20) Trading Days after the Company has become or should have
become aware of such failure; 

          iii.     
a default or event of default (subject to any grace or cure period provided in
the applicable agreement, document or instrument) shall occur under (A) any of
the Transaction Documents or (B) any other material agreement, lease, document
or instrument to which the Company or any Subsidiary is obligated (and not
covered by clause (vi) below); 

10




          iv.           any
representation or warranty made in this Debenture, any other Transaction
Documents, any written statement pursuant hereto or thereto or any other report,
financial statement or certificate made or delivered to the Holder or any other
Holder shall be untrue or incorrect in any material respect as of the date when
made or deemed made; 

          v.           the
Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w)
of Regulation S-X) shall be subject to a Bankruptcy Event; 

          vi.          
the Company or any Subsidiary shall default on any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there
may be secured or evidenced, any indebtedness for borrowed money or money due
under any long term leasing or factoring arrangement that (a) involves an
obligation greater than $150,000, whether such indebtedness now exists or shall
hereafter be created, and (b) results in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become
due and payable;

          vii.          
at any time after issuance of the Debentures, the Common Stock shall not be
eligible for listing or quotation for trading on a Trading Market and shall not
be eligible to resume listing or quotation for trading thereon within five
Trading Days; 

          b)     
Remedies Upon Event of Default. If any Event of Default occurs, the
outstanding principal amount of this Debenture, plus interest and other amounts
owing in respect thereof through the date of acceleration, shall become, at the
Holder’s election, immediately due and payable in cash at the Mandatory Default
Amount. Upon the payment in full of the Default Amount, the Holder shall
promptly surrender this Debenture to or as directed by the Company. In
connection with such acceleration described herein, the Holder need not provide,
and the Company hereby waives, any presentment, demand, protest or other notice
of any kind, and the Holder may immediately and without expiration of any grace
period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such acceleration may be
rescinded and annulled by Holder at any time prior to payment hereunder and the
Holder shall have all rights as a holder of the Debenture until such time, if
any, as the Holder receives full payment pursuant to this Section 6(b). No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon. 

Section 7.     
Miscellaneous.

11




          a)          
Notices. Any and all notices or other communications or deliveries to be
provided by the Holder hereunder, including, without limitation, any Notice of
Conversion, shall be in writing and delivered personally, by facsimile, or sent
by a nationally recognized overnight courier service, or by email, addressed to
the Company, at the address set forth above, or such other facsimile number or
by e-mail delivery of a “.pdf” format data file or other address as the Company
may specify for such purposes by notice to the Holder delivered in accordance
with this Section 7(a). Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service or by email, addressed to each Holder at the facsimile number or
address or email address of the Holder appearing on the books of the Company, or
if no such facsimile number or address appears on the books of the Company, at
the principal place of business of such Holder, as set forth in the Purchase
Agreement. Any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (Central
time zone) on any date, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (Central time zone) on any Trading
Day, (iii) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (iv) upon actual receipt by
the party to whom such notice is required to be given. 

          b)           Absolute
Obligation. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal and liquidated damages, as applicable,
on this Debenture at the time, place, and rate, and in the coin or currency,
herein prescribed. This Debenture is a direct debt obligation of the
Company.

          c)           Lost
or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen
or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu of
or in substitution for a lost, stolen or destroyed Debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or
destroyed, but only upon receipt of evidence of such loss, theft or destruction
of such Debenture, and of the ownership hereof, reasonably satisfactory to the
Company. 

          d)          
Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Oklahoma, without regard to the principles of conflict of laws thereof. Each
party agrees that all legal proceedings concerning the interpretation,
enforcement and defense of the transactions contemplated by any of the
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal
courts sitting in the City of Tulsa, (the “Oklahoma Courts”). Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the Oklahoma Courts
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such Oklahoma Courts,
or such Oklahoma Courts are improper or inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Debenture and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any other manner permitted by
applicable law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Debenture or the
transactions contemplated hereby. If any party shall commence an action or
proceeding to enforce any provisions of this Debenture, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for
its attorneys’ fees and other costs and expenses incurred in the investigation,
preparation and prosecution of such action or proceeding.


12




          e)           Waiver.
Any waiver by the Company or the Holder of a breach of any provision of this
Debenture shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture on any other
occasion. Any waiver by the Company or the Holder must be in writing. 

          f)           Severability.
If any provision of this Debenture is invalid, illegal or unenforceable, the
balance of this Debenture shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless remain
applicable to all other Persons and circumstances. If it shall be found that any
interest or other amount deemed interest due hereunder violates the applicable
law governing usury, the applicable rate of interest due hereunder shall
automatically be lowered to equal the maximum rate of interest permitted under
applicable law. The Company covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law or
other law which would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on this Debenture as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this indenture, and the Company (to
the extent it may lawfully do so) hereby expressly waives all benefits or
advantage of any such law, and covenants that it will not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the Holder,
but will suffer and permit the execution of every such as though no such law has
been enacted. 

13




          g)           Next
Business Day. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day. 

          h)           Headings.
The headings contained herein are for convenience only, do not constitute a part
of this Debenture and shall not be deemed to limit or affect any of the
provisions hereof. 

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


AMERICAN NATURAL ENERGY CORPORATION


 

By: /s/ Michael
Paulk 
        Name: Michael
Paulk 
        Title: President 

14




ANNEX A 

NOTICE OF CONVERSION 

          The
undersigned hereby elects to convert principal under the 12% Convertible
Debenture due August 13, 2014 of American Natural Energy Corporation, a Nevada
corporation (the “Company”), into shares of common stock (the “Common
Stock”), of the Company according to the conditions hereof, as of the date
written below. If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith. No fee
will be charged to the holder for any conversion, except for such transfer
taxes, if any. 

          By
the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that its ownership of the Common Stock does not exceed
the amounts specified under Section 4 of this Debenture, as determined in
accordance with Section 13(d) of the Exchange Act. 

          The
undersigned agrees to comply with the prospectus delivery requirements under the
applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.

Conversion calculations: 

Date to Effect Conversion: 

Principal Amount of Debenture to be
Converted: 

Number of shares of Common Stock to be
issued: 

Signature: 

Name: 

Address for Delivery of Common Stock
Certificates: 

Or 

DWAC Instructions: 

Broker No:
________________________
Account No: ______________________

15




Schedule 1 

CONVERSION SCHEDULE 

The 12% Convertible Debentures due on August 13, 2014 in the
aggregate principal amount of $____________are issued by American Natural Energy
Corporation, a Nevada corporation. This Conversion Schedule reflects conversions
made under Section 4 of the above referenced Debenture. 

Dated:


	Date of Conversion 
(or for first entry,
      
Original Issue Date) 	Amount of 
Conversion 	Aggregate 
Principal
      
Amount 
Remaining 
Subsequent to 
Conversion 
(or original
      
Principal 
Amount) 	Company Attest 
	
       

       
	 	 	 
	
       

       
	 	 	 
	
       

       
	 	 	 
	
       

       
	 	 	 
	
       

       
	 	 	 
	
       

       
	 	 	 
	
       

       
	 	 	 
	
       

       
	 	 	 
	
       

       
	 	 	 



16