American Natural Energy Corporation - Exhibit 10.5 - Filed by newsfilecorp.com






Exhibit 10.5  

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

SERIES B COMMON STOCK PURCHASE WARRANT 

AMERICAN NATURAL ENERGY CORPORATION 

	Warrant Shares: 19,641,002 	Initial Exercise Date: July 3, 2014
  


                   THIS
SERIES B COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, Hillair Capital Investments, L.P. or its assigns (the
“Holder”) is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after July
3, 2014 (the “Initial Exercise Date”) and on or prior to the close of
business on the two (2) year anniversary of the Initial Exercise Date (the
“Termination Date”) but not thereafter, to subscribe for and
purchase from American Natural Energy Corporation, an Oklahoma corporation (the
“Company”), up to 19,641,002 shares (as subject to adjustment hereunder,
the “Warrant Shares”) of Common Stock. The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise Price, as defined
in Section 2(b).

            Section
1.        Definitions. Capitalized
terms used and not otherwise defined herein shall have the meanings set forth in
that certain Securities Purchase Agreement (the “Purchase
Agreement”), dated July 2, 2014, among the Company and the purchasers
signatory thereto. 

           
Section 2.        Exercise.


           
a)        Exercise of Warrant.
Exercise of the purchase rights represented by this Warrant may be made, in
whole or in part, at any time or times on or after the Initial Exercise Date and
on or before the Termination Date by delivery to the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered Holder at the
address of the Holder appearing on the books of the Company) of a duly executed
facsimile copy of the Notice of Exercise in the form annexed hereto and within
three (3) Trading Days of the date said Notice of Exercise is delivered to the
Company, the Company shall have received payment of the aggregate Exercise Price
of the shares thereby purchased by wire transfer or cashier’s check drawn on a
United States bank or, if available, pursuant to the cashless exercise procedure
specified in Section 2(c) below. No ink-original Notice of Exercise shall be
required, nor shall any medallion guarantee (or other type of guarantee or
notarization) of any Notice of Exercise form be required. Notwithstanding
anything herein to the contrary, the Holder shall not be required to physically
surrender this Warrant to the Company until the Holder has purchased all of the
Warrant Shares available hereunder and the Warrant has been exercised in full,
in which case, the Holder shall surrender this Warrant to the Company for
cancellation within three (3) Trading Days of the date the final Notice of
Exercise is delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant Shares
available hereunder shall have the effect of lowering the outstanding number of
Warrant Shares purchasable hereunder in an amount equal to the applicable number
of Warrant Shares purchased. The Holder and the Company shall maintain records
showing the number of Warrant Shares purchased and the date of such purchases.
The Company shall deliver any objection to any Notice of Exercise within one (1)
Business Day of receipt of such notice. The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following the purchase of a portion of the Warrant
Shares hereunder, the number of Warrant Shares available for purchase hereunder
at any given time may be less than the amount stated on the face hereof.
 

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b)        Exercise Price. The
exercise price per share of the Common Stock under this Warrant shall be
$0.10, subject to adjustment hereunder (the “Exercise Price”).


           
c)        Cashless Exercise. If at any
time after the six month anniversary of the date of the Purchase Agreement,
there is no effective Registration Statement registering, or no current
prospectus available for, the resale of the Warrant Shares by the Holder, then
this Warrant may also be exercised, in whole or in part, at such time by means
of a “cashless exercise” in which the Holder shall be entitled to receive a
number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)]
by (A), where: 

		(A) = 	
      the VWAP on the Trading Day immediately preceding the
      date on which Holder elects to exercise this Warrant by means of a
      “cashless exercise,” as set forth in the applicable Notice of Exercise;
      

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

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



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


           
d)        Mechanics of Exercise. 

           
i.        Delivery of Warrant Shares Upon
Exercise. Warrant Shares purchased hereunder shall be transmitted by the
Transfer Agent to the Holder by crediting the account of the Holder’s prime
broker with The Depository Trust Company through its Deposit or Withdrawal at
Custodian system (“DWAC”) if the Company is then a participant in such
system and either (A) there is an effective registration statement permitting
the issuance of the Warrant Shares to or resale of the Warrant Shares by the
Holder or (B) the shares are eligible for resale by the Holder pursuant to Rule
144, and otherwise by physical delivery to the address specified by the Holder
in the Notice of Exercise by the date that is two (2) Trading Days after the
delivery to the Company of the Notice of Exercise (such date, the “Warrant
Share Delivery Date”). The Warrant Shares shall be deemed to have been
issued, and Holder or any other person so designated to be named therein shall
be deemed to have become a holder of record of such shares for all purposes, as
of the date the Warrant has been exercised, with payment to the Company of the
Exercise Price (or by cashless exercise, if permitted) and all taxes required to
be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the
issuance of such shares, having been paid. If the Company fails for any reason
to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by
the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash,
as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares
subject to such exercise (based on the VWAP of the Common Stock on the date of
the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per
Trading Day on the fifth Trading Day after such liquidated damages begin to
accrue) for each Trading Day after such Warrant Share Delivery Date until such
Warrant Shares are delivered or Holder rescinds such exercise. 

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

           
iii.      Rescission Rights. If the Company
fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares
pursuant to Section 2(d)(i) by the Warrant Share
Delivery Date, then the Holder will have the right to rescind such exercise. 

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

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

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            vi.       Charges,
Taxes and Expenses. Issuance of Warrant Shares shall be made without charge
to the Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of Warrant Shares, all of which taxes and expenses shall
be paid by the Company, and such Warrant Shares shall be issued in the name of
the Holder or in such name or names as may be directed by the Holder;
provided, however, that in the event that Warrant Shares are to be
issued in a name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto. The Company shall pay all Transfer Agent fees required for
same-day processing of any Notice of Exercise and all fees to the Depository
Trust Company (or another established clearing corporation performing similar
functions) required for same-day electronic delivery of the Warrant Shares. 

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

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

5 




           
Section 3.        Certain
Adjustments. 

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

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b)        Subsequent Equity Sales. If
the Company or any Subsidiary thereof, as applicable, at any time while this
Warrant is outstanding, shall sell or grant any option to purchase, or sell or
grant any right to reprice, or otherwise dispose of or issue (or announce any
offer, sale, grant or any option to purchase or other disposition) any Common
Stock or Common Stock Equivalents, at an effective price per share less than the
Exercise Price then in effect (such lower price, the “Base Share Price” and such
issuances collectively, a “Dilutive Issuance”) (it being understood and
agreed that 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 less than the Exercise Price, such issuance
shall be deemed to have occurred for less than the Exercise Price on such date
of the Dilutive Issuance at such effective price), then simultaneously with the
consummation of each Dilutive Issuance the Exercise Price shall be reduced and
only reduced to equal the Base Share Price and the number of Warrant Shares
issuable hereunder shall be increased such that the aggregate Exercise Price
payable hereunder, after taking into account the decrease in the Exercise Price,
shall be equal to the aggregate Exercise Price prior to such adjustment. Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued. Notwithstanding the foregoing, no adjustments shall be made, paid or
issued under this Section 3(b) in respect of an Exempt Issuance. The Company
shall notify the Holder, in writing, no later than the Trading Day following the
issuance or deemed issuance of any Common Stock or Common Stock Equivalents
subject to this Section 3(b), indicating therein the applicable issuance price,
or applicable reset price, exchange price, conversion price and other pricing
terms (such notice, the “Dilutive Issuance Notice”). For purposes of
clarification, whether or not the Company provides a Dilutive Issuance Notice
pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, the
Holder is entitled to receive a number of Warrant Shares based upon the Base
Share Price regardless of whether the Holder accurately refers to the Base Share
Price in the Notice of Exercise. If the Company enters into a Variable Rate
Transaction, despite the prohibition thereon in the Purchase Agreement, the Company shall be deemed
to have issued Common Stock or Common Stock Equivalents at the lowest possible
conversion or exercise price at which such securities may be converted or
exercised. 

7 




           
c)        Subsequent Rights Offerings.
In addition to any adjustments pursuant to Section 3(a) above, if at any time
the Company grants, issues or sells any Common Stock Equivalents or rights to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the “Purchase Rights”),
then the Holder will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any limitations on
exercise hereof, including without limitation, the Beneficial Ownership
Limitation) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights (provided,
however, to the extent that the Holder’s right to participate in any such
Purchase Right would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in such
Purchase Right to such extent (or beneficial ownership of such shares of Common
Stock as a result of such Purchase Right to such extent) and such Purchase Right
to such extent shall be held in abeyance for the Holder until such time, if
ever, as its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation). 

           
d)        Pro Rata Distributions.
During such time as this Warrant is outstanding, if the Company shall declare or
make any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of shares of Common Stock, by way of return of capital or
otherwise (including, without limitation, any distribution of cash, stock or
other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a “Distribution”), at any time after the issuance
of this Warrant, then, in each such case, the Holder shall be entitled to
participate in such Distribution to the same extent that the Holder would have
participated therein if the Holder had held the number of shares of Common Stock
acquirable upon complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the Beneficial
Ownership Limitation) immediately before the date of which a record is taken for
such Distribution, or, if no such record is taken, the date as of which the
record holders of shares of Common Stock are to be determined for the
participation in such Distribution (provided, however, to the
extent that the Holder's right to participate in any such Distribution would
result in the Holder exceeding the Beneficial Ownership Limitation, then the
Holder shall not be entitled to participate in such Distribution to such extent
(or in the beneficial ownership of any shares of Common Stock as a result of
such Distribution to such extent) and the portion of such Distribution shall be
held in abeyance for the benefit of the Holder until such time, if ever, as its
right thereto would not result in the Holder exceeding the Beneficial Ownership
Limitation).

8 




            e)       
Fundamental Transaction. If, at any time while this Warrant is
outstanding, (i) the Company, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Company with or into
another Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other disposition of all or
substantially all of its assets in one or a series of related transactions,
(iii) any, direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to sell, tender or exchange their shares
for other securities, cash or property and has been accepted by the holders of
50% or more of the outstanding Common Stock, (iv) the Company, directly or
indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property, or (v) the Company, directly
or indirectly, in one or more related transactions consummates a stock or share
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person or group of Persons whereby such other Person or group acquires
more than 50% of the outstanding shares of Common Stock (not including any
shares of Common Stock held by the other Person or other Persons making or party
to, or associated or affiliated with the other Persons making or party to, such
stock or share purchase agreement or other business combination) (each a
“Fundamental Transaction”), then, upon any subsequent exercise of this
Warrant, the Holder shall have the right to receive, for each Warrant Share that
would have been issuable upon such exercise immediately prior to the occurrence
of such Fundamental Transaction, at the option of the Holder (without regard to
any limitation in Section 2(e) on the exercise of this Warrant), the number of
shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration
(the “Alternate Consideration”) receivable as a result of such
Fundamental Transaction by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such Fundamental
Transaction (without regard to any limitation in Section 2(e) on the exercise of
this Warrant). For purposes of any such exercise, the determination of the
Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction. Notwithstanding anything to the contrary, “in the event of a
Fundamental Transaction, the Company or any Successor Entity (as defined below)
shall, at the Holder’s option, exercisable at any time concurrently with, or
within 30 days after, the consummation of the Fundamental Transaction, purchase
this Warrant from the Holder by paying to the Holder an amount of cash equal to
the Black Scholes Value of the remaining unexercised portion of this Warrant on
the date of the consummation of such Fundamental Transaction. “Black Scholes
Value” means the value of this Warrant based on the Black and Scholes Option Pricing
Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”)
determined as of the day of consummation of the applicable Fundamental
Transaction for pricing purposes and reflecting (A) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the time between
the date of the public announcement of the applicable Fundamental Transaction
and the Termination Date, (B) an expected volatility equal to the greater of
100% and the 100 day volatility obtained from the HVT function on Bloomberg as
of the Trading Day immediately following the public announcement of the
applicable Fundamental Transaction, (C) the underlying price per share used in
such calculation shall be the sum of the price per share being offered in cash,
if any, plus the value of any non-cash consideration, if any, being offered in
such Fundamental Transaction and (D) a remaining option time equal to the time
between the date of the public announcement of the applicable Fundamental
Transaction and the Termination Date. The Company shall cause any successor
entity in a Fundamental Transaction in which the Company is not the survivor
(the “Successor Entity”) to assume in writing all of the obligations of
the Company under this Warrant and the other Transaction Documents in accordance
with the provisions of this Section 3(e) pursuant to written agreements in form
and substance reasonably satisfactory to the Holder and approved by the Holder
(without unreasonable delay) prior to such Fundamental Transaction and shall, at
the option of the Holder, deliver to the Holder in exchange for this Warrant a
security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Warrant which is exercisable for a
corresponding number of shares of capital stock of such Successor Entity (or its
parent entity) equivalent to the shares of Common Stock acquirable and
receivable upon exercise of this Warrant (without regard to any limitations on
the exercise of this Warrant) prior to such Fundamental Transaction, and with an
exercise price which applies the exercise price hereunder to such shares of
capital stock (but taking into account the relative value of the shares of
Common Stock pursuant to such Fundamental Transaction and the value of such
shares of capital stock, such number of shares of capital stock and such
exercise price being for the purpose of protecting the economic value of this
Warrant immediately prior to the consummation of such Fundamental Transaction),
and which is reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Warrant and the other
Transaction Documents referring to the “Company” shall refer instead to the
Successor Entity), and may exercise every right and power of the Company and
shall assume all of the obligations of the Company under this Warrant and the
other Transaction Documents with the same effect as if such Successor Entity had
been named as the Company herein. 

9 




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

           
g)        Notice to Holder.

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            i.       
Adjustment to Exercise Price. Whenever the Exercise Price is adjusted
pursuant to any provision of this Section 3, the Company shall promptly mail to
the Holder a notice setting forth the Exercise Price after such adjustment and
any resulting adjustment to the number of Warrant Shares and setting forth a
brief statement of the facts requiring such adjustment.. 

           
ii.        Notice to Allow Exercise 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 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 mailed to the Holder
at its last address as it shall appear upon the Warrant Register of the Company,
at least 20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. 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 exercise this Warrant during
the period commencing on the date of such notice to the effective date of the
event triggering such notice except as may otherwise be expressly set forth
herein. 

           
Section 4.        Transfer of
Warrant. 

11 




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

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

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

           
d)        Transfer Restrictions. If,
at the time of the surrender of this Warrant in connection with any transfer of
this Warrant, the transfer of this Warrant shall not be either (i) registered
pursuant to an effective registration statement under the Securities Act and
under applicable state securities or blue sky laws or (ii) eligible for resale
pursuant to Rule 144, the Company may require, as a condition of allowing such
transfer, that the Holder or transferee of this Warrant, as the case may be,
comply with the provisions of Section 5.7 of the Purchase Agreement. 

12 




            e)       
Representation by the Holder. The Holder, by the acceptance hereof,
represents and warrants that it is acquiring this Warrant and, upon any exercise
hereof, will acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling such Warrant
Shares or any part thereof in violation of the Securities Act or any applicable
state securities law, except pursuant to sales registered or exempted under the
Securities Act. 

           
Section 5.       
Miscellaneous. 

           
a)        No Rights as Stockholder Until
Exercise. This Warrant does not entitle the Holder to any voting rights,
dividends or other rights as a stockholder of the Company prior to the exercise
hereof as set forth in Section 2(d)(i), except as expressly set forth in Section
3. 

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

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

           
d)        Authorized Shares.

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

13 




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

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

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

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

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

14 




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

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

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

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

           
l)        Amendment. This Warrant and
all Warrants issued pursuant to the Purchase Agreement may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the holders of 50.1% in interest of the Warrants then outstanding. 

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

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

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

(Signature Page Follows) 

15 




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

 

 

AMERICAN NATURAL ENERGY CORPORATION


 

By:         /s/
Steven P.
Ensz                                                           
     
Name: Steven P. Ensz 
      Title: Vice President


16 




NOTICE OF EXERCISE 

TO:        AMERICAN NATURAL
ENERGY CORPORATION 

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

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

[_] in lawful money of the United
States; or 

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

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

 

_______________________________


 

The Warrant Shares shall be delivered to the following DWAC
Account Number: 

_______________________________



_______________________________



_______________________________


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

“SIGNATURE OF HOLDER] 

Name of Investing Entity:
________________________________________________________________________
Signature
of Authorized Signatory of Investing Entity: 
_________________________________________________
Name of Authorized
Signatory: 
___________________________________________________________________
Title of
Authorized Signatory: 
____________________________________________________________________
Date:
_______________________________________________________________________________________





EXHIBIT B 

ASSIGNMENT FORM 

         
   (To assign the foregoing Warrant, execute this form and supply
required information. Do not use this form to purchase shares.) 

           
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are
hereby assigned to 

	Name: 	 
    
	  	(Please Print) 
	 	 
	Address: 	 
    
		(Please Print) 
	 	 
	 	 
	Dated: ________________________________ _____, _________	
	 	 
	Holder’s Signature:
_____________________________________	
	 	 
	Holder’s Address: ______________________________________