American Natural Energy Corporation - Exhibit 10.6 - Filed by newsfilecorp.com






Exhibit 10.6  

SECURITY AGREEMENT 

      
     This SECURITY AGREEMENT, dated as of July 3, 2014
(this “Agreement”), is among American Natural Energy Corporation, an
Oklahoma corporation (the “Company”), all of the Subsidiaries of the
Company (such subsidiaries, the “Guarantors” and together with the
Company, the “Debtors”) and the holders of the Company’s 8% Senior
Secured Original Issue Discount Convertible Debentures due January 1, 2016, in
the original aggregate principal amount of $835,899.76 (collectively, the
“Debentures”) signatory hereto, their endorsees, transferees and assigns
(collectively, the “Secured Parties”). 

W I T N E S S E T H: 

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

            WHEREAS,
pursuant to a certain Subsidiary Guarantee, dated as of the date hereof (the
“Guarantee”), the Guarantors have jointly and severally agreed to
guarantee and act as surety for payment of such Debentures; and 

            WHEREAS,
in order to induce the Secured Parties to extend the loans evidenced by the
Debentures, each Debtor has agreed to execute and deliver to the Secured Parties
this Agreement and to grant the Secured Parties, pari passu with
each other Secured Party and through the Agent (as defined in Section 18
hereof), a security interest in certain property of such Debtor to secure the
prompt payment, performance and discharge in full of all of the Company’s
obligations under the Debentures and the Guarantors’ obligations under the
Guarantee. 

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

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

            (a)       
“Collateral” means the collateral in which the Secured Parties are
granted a security interest by this Agreement and which shall include the
following personal property of the Debtors, whether presently owned or existing
or hereafter acquired or coming into existence, wherever situated, and all
additions and accessions thereto and all substitutions and replacements thereof,
and all proceeds, products and accounts thereof, including, without limitation,
all proceeds from the sale or transfer of the Collateral and of insurance covering the same and of
any tort claims in connection therewith, and all dividends, interest, cash,
notes, securities, equity interest or other property at any time and from time
to time acquired, receivable or otherwise distributed in respect of, or in
exchange for, any or all of the Pledged Securities (as defined below): 

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

            (ii)      All
contract rights and other general intangibles, including, without limitation,
all partnership interests, membership interests, stock or other securities,
rights under any of the Organizational Documents, agreements related to the
Pledged Securities, licenses, distribution and other agreements, computer
software (whether “off-the-shelf”, licensed from any third party or developed by
any Debtor), computer software development rights, leases, franchises, customer
lists, quality control procedures, grants and rights, goodwill, Intellectual
Property and income tax refunds; 

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

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

           
(v)        All commercial tort claims; 

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

           
(vii)      All investment property; 

           
(viii)     All supporting obligations; and 

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

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

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            Without
limiting the generality of the foregoing, the “Collateral” shall include
all investment property and general intangibles respecting ownership and/or
other equity interests in each Guarantor, including, without limitation, the
shares of capital stock and the other equity interests listed on Schedule
H hereto (as the same may be modified from time to time pursuant to the
terms hereof), and any other shares of capital stock and/or other equity
interests of any other direct or indirect subsidiary of any Debtor obtained in
the future, and, in each case, all certificates representing such shares and/or
equity interests and, in each case, all rights, options, warrants, stock, other
securities and/or equity interests that may hereafter be received, receivable or
distributed in respect of, or exchanged for, any of the foregoing and all rights
arising under or in connection with the Pledged Securities, including, but not
limited to, all dividends, interest and cash. 

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

            (b)       
“Intellectual Property” means the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation, (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, (ii) all letters patent of
the United States, any other country or any political subdivision thereof, all
reissues and extensions thereof, and all applications for letters patent of the
United States or any other country and all divisions, continuations and
continuations-in-part thereof, (iii) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade dress,
service marks, logos, domain names and other source or business identifiers, and
all goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark Office
or in any similar office or agency of the United States, any State thereof or
any other country or any political subdivision thereof, or otherwise, and all
common law rights related thereto, (iv) all trade secrets arising under the laws
of the United States, any other country or any political subdivision thereof,
(v) all rights to obtain any reissues, renewals or extensions of the foregoing,
(vi) all licenses for any of the foregoing, and (vii) all causes of action for
infringement of the foregoing. 

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

           
(d)        “Necessary Endorsement”
means undated stock powers endorsed in blank or other proper instruments of
assignment duly executed and such other instruments or documents as the Agent
(as that term is defined below) may reasonably request. 

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

            (f)       
“Organizational Documents” means with respect to any Debtor, the
documents by which such Debtor was organized (such as a certificate of
incorporation, certificate of limited partnership or articles of organization,
and including, without limitation, any certificates of designation for preferred
stock or other forms of preferred equity) and which relate to the internal
governance of such Debtor (such as bylaws, a partnership agreement or an
operating, limited liability or members agreement). 

            (g)       
“Pledged Interests” shall have the meaning ascribed to such term in
Section 4(j). 

            (h)       
“Pledged Securities” shall have the meaning ascribed to such term in
Section 4(i). 

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

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

           
3.        Delivery of Certain
Collateral. Contemporaneously or prior to the execution of this Agreement,
each Debtor shall deliver or cause to be delivered to the Agent (a) any and all
certificates and other instruments representing or evidencing the Pledged
Securities, and (b) any and all certificates and other instruments or documents
representing any of the other Collateral, in each case, together with all
Necessary Endorsements. The Debtors are, contemporaneously with the execution
hereof, delivering to Agent, or have previously delivered to Agent, a true and
correct copy of each Organizational Document governing any of the Pledged
Securities. 

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

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

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

5 




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

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

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

            (f)       
This Agreement creates in favor of the Secured Parties a valid security interest
in the Collateral, subject only to Permitted Liens (as defined in the
Debentures) securing the payment and performance of the Obligations. Upon making
the filings described in the immediately following paragraph, all security
interests created hereunder in any Collateral which may be perfected by filing
Uniform Commercial Code financing statements shall have been duly perfected.
Except for the filing of the Uniform Commercial Code financing statements
referred to in the immediately following paragraph, the recordation of the
Intellectual Property Security Agreement (as defined in Section 4(p) hereof)
with respect to copyrights and copyright applications in the United States
Copyright Office referred to in paragraph (m), the execution and delivery of
deposit account control agreements satisfying the requirements of Section
9-104(a)(2) of the UCC with respect to each deposit account of the Debtors, and
the delivery of the certificates and other instruments provided in Section 3, no
action is necessary to create, perfect or protect the security interests created
hereunder. Without limiting the generality of the foregoing, except for the
filing of said financing statements, the recordation of said Intellectual
Property Security Agreement, and the execution and delivery of said deposit
account control agreements, no consent of any third parties and no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for (i) the execution,
delivery and performance of this Agreement, (ii) the creation or perfection of
the Security Interests created hereunder in the Collateral or (iii) the
enforcement of the rights of the Agent and the Secured Parties hereunder. 

6 




            
(g)        Each Debtor hereby authorizes the
Agent to file one or more financing statements under the UCC, with respect to
the Security Interests, with the proper filing and recording agencies in any
jurisdiction deemed proper by it. 

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

            
(i)        The capital stock and other equity
interests listed on Schedule H hereto (the “Pledged Securities”)
represent all of the capital stock and other equity interests of the Guarantors,
and represent all capital stock and other equity interests owned, directly or
indirectly, by the Company. All of the Pledged Securities are validly issued,
fully paid and nonassessable, and the Company is the legal and beneficial owner
of the Pledged Securities, free and clear of any lien, security interest or
other encumbrance except for the security interests created by this Agreement
and other Permitted Liens (as defined in the Debentures).

            (j)       
The ownership and other equity interests in partnerships and limited liability
companies (if any) included in the Collateral (the “Pledged Interests”) by their express terms do not provide that they
are securities governed by Article 8 of the UCC and are not held in a securities
account or by any financial intermediary.


7 




            (k)       
Except for Permitted Liens (as defined in the Debentures), each Debtor shall at
all times maintain the liens and Security Interests provided for hereunder as
valid and perfected first priority liens and security interests in the
Collateral in favor of the Secured Parties until this Agreement and the Security
Interest hereunder shall be terminated pursuant to Section 14 hereof. Each
Debtor hereby agrees to defend the same against the claims of any and all
persons and entities. Each Debtor shall safeguard and protect all Collateral for
the account of the Secured Parties. At the request of the Agent, each Debtor
will sign and deliver to the Agent on behalf of the Secured Parties at any time
or from time to time one or more financing statements pursuant to the UCC in
form reasonably satisfactory to the Agent and will pay the cost of filing the
same in all public offices wherever filing is, or is deemed by the Agent to be,
necessary or desirable to effect the rights and obligations provided for herein.
Without limiting the generality of the foregoing, each Debtor shall pay all
fees, taxes and other amounts necessary to maintain the Collateral and the
Security Interests hereunder, and each Debtor shall obtain and furnish to the
Agent from time to time, upon demand, such releases and/or subordinations of
claims and liens which may be required to maintain the priority of the Security
Interests hereunder. 

            (l)       
No Debtor will transfer, pledge, hypothecate, encumber, license, sell or
otherwise dispose of any of the Collateral (except for non-exclusive licenses
granted by a Debtor in its ordinary course of business and sales of inventory by
a Debtor in its ordinary course of business) without the prior written consent
of a Majority in Interest. 

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

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

8 




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

            
(p)        Each Debtor shall promptly execute
and deliver to the Agent such further deeds, mortgages, assignments, security
agreements, financing statements or other instruments, documents, certificates
and assurances and take such further action as the Agent may from time to time
request and may in its sole discretion deem necessary to perfect, protect or
enforce the Secured Parties’ security interest in the Collateral including,
without limitation, if applicable, the execution and delivery of a separate
security agreement with respect to each Debtor’s Intellectual Property
(“Intellectual Property Security Agreement”) in which the Secured
Parties have been granted a security interest hereunder, substantially in a form
reasonably acceptable to the Agent, which Intellectual Property Security
Agreement, other than as stated therein, shall be subject to all of the terms
and conditions hereof. 

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

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

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

9 




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

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

            (v)       
No Debtor will change its name, type of organization, jurisdiction of
organization, organizational identification number (if it has one), legal or
corporate structure, or identity, or add any new fictitious name unless it
provides at least 30 days prior written notice to the Secured Parties of such
change and, at the time of such written notification, such Debtor provides any
financing statements or fixture filings necessary to perfect and continue the
perfection of the Security Interests granted and evidenced by this Agreement.


            (w)       
Except in the ordinary course of business, no Debtor may consign any of its
inventory or sell any of its inventory on bill and hold, sale or return, sale on
approval, or other conditional terms of sale without the consent of the Agent
which shall not be unreasonably withheld. 

            (x)       
No Debtor may relocate its chief executive office to a new location without
providing 30 days prior written notification thereof to the Secured Parties and
so long as, at the time of such written notification, such Debtor provides any
financing statements or fixture filings necessary to perfect and continue the
perfection of the Security Interests granted and evidenced by this Agreement.


            
(y)        Each Debtor was organized and
remains organized solely under the laws of the state set forth next to such
Debtor’s name in Schedule D attached hereto, which Schedule D sets
forth each Debtor’s organizational identification number or, if any Debtor does
not have one, states that one does not exist. 

            (z)       
(i) The actual name of each Debtor is the name set forth in Schedule D
attached hereto; (ii) no Debtor has any trade names except as set forth on
Schedule E attached hereto; (iii) no Debtor has used any name other than
that stated in the preamble hereto or as set forth on Schedule E for the
preceding five years; and (iv) no entity has merged into any Debtor or been
acquired by any Debtor within the past five years except as set forth on
Schedule E. 

            (aa)       
At any time and from time to time that any Collateral consists of instruments,
certificated securities or other items that require or permit possession by the
secured party to perfect the security interest created hereby, the applicable
Debtor shall deliver such Collateral to the Agent. 

10 




           
(bb)        Each Debtor, in its capacity as
issuer, hereby agrees to comply with any and all orders and instructions of
Agent regarding the Pledged Interests consistent with the terms of this
Agreement without the further consent of any Debtor as contemplated by Section
8-106 (or any successor section) of the UCC. Further, each Debtor agrees that it
shall not enter into a similar agreement (or one that would confer “control”
within the meaning of Article 8 of the UCC) with any other person or entity.


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

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

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

            (ff)       
To the extent that any Collateral is in the possession of any third party, the
applicable Debtor shall join with the Agent in notifying such third party of the
Secured Parties’ security interest in such Collateral and shall use its best
efforts to obtain an acknowledgement and agreement from such third party with
respect to the Collateral, in form and substance reasonably satisfactory to the
Agent. 

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

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

11 




            
(ii)        Each Debtor shall cause each
subsidiary of such Debtor to immediately become a party hereto (an “Additional
Debtor”), by executing and delivering an Additional Debtor Joinder in
substantially the form of Annex A attached hereto and comply with the
provisions hereof applicable to the Debtors. Concurrent therewith, the
Additional Debtor shall deliver replacement schedules for, or supplements to all
other Schedules to (or referred to in) this Agreement, as applicable, which
replacement schedules shall supersede, or supplements shall modify, the
Schedules then in effect. The Additional Debtor shall also deliver such opinions
of counsel, authorizing resolutions, good standing certificates, incumbency
certificates, organizational documents, financing statements and other
information and documentation as the Agent may reasonably request. Upon delivery
of the foregoing to the Agent, the Additional Debtor shall be and become a party
to this Agreement with the same rights and obligations as the Debtors, for all
purposes hereof as fully and to the same extent as if it were an original
signatory hereto and shall be deemed to have made the representations,
warranties and covenants set forth herein as of the date of execution and
delivery of such Additional Debtor Joinder, and all references herein to the
“Debtors” shall be deemed to include each Additional Debtor. 

            (jj)       
Each Debtor shall vote the Pledged Securities to comply with the covenants and
agreements set forth herein and in the Debentures. 

            (kk)       
Each Debtor shall register the pledge of the applicable Pledged Securities on
the books of such Debtor. Each Debtor shall notify each issuer of Pledged
Securities to register the pledge of the applicable Pledged Securities in the
name of the Secured Parties on the books of such issuer. Further, except with
respect to certificated securities delivered to the Agent, the applicable Debtor
shall deliver to Agent an acknowledgement of pledge (which, where appropriate,
shall comply with the requirements of the relevant UCC with respect to
perfection by registration) signed by the issuer of the applicable Pledged
Securities, which acknowledgement shall confirm that: (a) it has registered the
pledge on its books and records; and (b) at any time directed by Agent during
the continuation of an Event of Default, such issuer will transfer the record
ownership of such Pledged Securities into the name of any designee of Agent,
will take such steps as may be necessary to effect the transfer, and will comply
with all other instructions of Agent regarding such Pledged Securities without
the further consent of the applicable Debtor. 

            (ll)       
In the event that, upon an occurrence of an Event of Default, Agent shall sell
all or any of the Pledged Securities to another party or parties (herein called
the “Transferee”) or shall purchase or retain all or any of the Pledged
Securities, each Debtor shall, to the extent applicable: (i) deliver to Agent or
the Transferee, as the case may be, the articles of incorporation, bylaws,
minute books, stock certificate books, corporate seals, deeds, leases,
indentures, agreements, evidences of indebtedness, books of account, financial
records and all other Organizational Documents and records of the Debtors and
their direct and indirect subsidiaries; (ii) use its best efforts to obtain
resignations of the persons then serving as officers and directors of the
Debtors and their direct and indirect subsidiaries, if so requested; and (iii)
use its best efforts to obtain any approvals that are required by any governmental or
regulatory body in order to permit the sale of the Pledged Securities to the
Transferee or the purchase or retention of the Pledged Securities by Agent and
allow the Transferee or Agent to continue the business of the Debtors and their
direct and indirect subsidiaries. 

12 




            (mm)       
Without limiting the generality of the other obligations of the Debtors
hereunder, each Debtor shall promptly (i) cause to be registered at the United
States Copyright Office all of its material copyrights, (ii) cause the security
interest contemplated hereby with respect to all Intellectual Property
registered at the United States Copyright Office or United States Patent and
Trademark Office to be duly recorded at the applicable office, and (iii) give
the Agent notice whenever it acquires (whether absolutely or by license) or
creates any additional material Intellectual Property. 

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

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

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


            (qq)       
Until the Obligations shall have been paid and performed in full, the Company
covenants that it shall promptly direct any direct or indirect subsidiary of the
Company formed or acquired after the date hereof to enter into a Subsidiary
Guarantee in favor of the Secured Party, in the form attached as an exhibit to
the Purchase Agreement. 

           
5.        Effect of Pledge on Certain
Rights. If any of the Collateral subject to this Agreement consists
of nonvoting equity or ownership interests (regardless of class, designation,
preference or rights) that may be converted into voting equity or ownership
interests upon the occurrence of certain events (including, without limitation,
upon the transfer of all or any of the other stock or assets of the issuer), it
is agreed that the pledge of such equity or ownership interests pursuant to this
Agreement or the enforcement of any of Agent’s rights hereunder shall not be
deemed to be the type of event which would trigger such conversion rights notwithstanding any provisions in the Organizational Documents
or agreements to which any Debtor is subject or to which any Debtor is party. 

13 




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

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

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

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

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

           
7.        Duty To Hold In Trust.

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

            (b)       
If any Debtor shall become entitled to receive or shall receive any securities
or other property (including, without limitation, shares of Pledged Securities
or instruments representing Pledged Securities acquired after the date hereof,
or any options, warrants, rights or other similar property or certificates
representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its direct
or indirect subsidiaries) in respect of the Pledged Securities (whether as an
addition to, in substitution of, or in exchange for, such Pledged Securities or
otherwise), such Debtor agrees to (i) accept the same as the agent of the
Secured Parties; 

14 




(ii) hold the same in trust on behalf
of and for the benefit of the Secured Parties; and (iii) to deliver any and all
certificates or instruments evidencing the same to Agent on or before the close
of business on the fifth business day following the receipt thereof by such
Debtor, in the exact form received together with the Necessary Endorsements, to
be held by Agent subject to the terms of this Agreement as Collateral. 

           
8.        Rights and Remedies Upon
Default.

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


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

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

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

15 




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

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

            (vi)       
The Agent may (but is not obligated to) transfer any or all Intellectual
Property registered in the name of any Debtor at the United States Patent and
Trademark Office and/or Copyright Office into the name of the Secured Parties or
any designee or any purchaser of any Collateral. 

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

            (c)       
For the purpose of enabling the Agent to further exercise rights and remedies
under this Section 8 or elsewhere provided by agreement or applicable law, each
Debtor hereby grants to the Agent, for the benefit of the Agent and the Secured
Parties, an irrevocable, nonexclusive license (exercisable without payment of
royalty or other compensation to such Debtor) to use, license or sublicense
following an Event of Default, any Intellectual Property now owned or hereafter
acquired by such Debtor, and wherever the same may be located, and including in
such license access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
compilation or printout thereof. 

            9.       
Applications of Proceeds. The proceeds of any such sale, lease or other
disposition of the Collateral hereunder or from payments made on account of any
insurance policy insuring any portion of the Collateral shall be applied first,
to the expenses of retaking, holding, storing, processing and preparing for sale, selling,
and the like (including, without limitation, any taxes, fees and other costs
incurred in connection therewith) of the Collateral, to the reasonable
attorneys’ fees and expenses incurred by the Agent in enforcing the Secured
Parties’ rights hereunder and in connection with collecting, storing and
disposing of the Collateral, and then to satisfaction of the Obligations pro
rata among the Secured Parties (based on then-outstanding principal amounts of
Debentures at the time of any such determination), and to the payment of any
other amounts required by applicable law, after which the Secured Parties shall
pay to the applicable Debtor any surplus proceeds. If, upon the sale, license or
other disposition of the Collateral, the proceeds thereof are insufficient to
pay all amounts to which the Secured Parties are legally entitled, the Debtors
will be liable for the deficiency, together with interest thereon, at the rate
of 18% per annum or the lesser amount permitted by applicable law (the
“Default Rate”), and the reasonable fees of any attorneys employed by the
Secured Parties to collect such deficiency. To the extent permitted by
applicable law, each Debtor waives all claims, damages and demands against the
Secured Parties arising out of the repossession, removal, retention or sale of
the Collateral, unless due solely to the gross negligence or willful misconduct
of the Secured Parties as determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction. 

16 




           
10.      Securities Law Provision. Each Debtor
recognizes that Agent may be limited in its ability to effect a sale to the
public of all or part of the Pledged Securities by reason of certain
prohibitions in the Securities Act of 1933, as amended, or other federal or
state securities laws (collectively, the “Securities Laws”), and may be
compelled to resort to one or more sales to a restricted group of purchasers who
may be required to agree to acquire the Pledged Securities for their own
account, for investment and not with a view to the distribution or resale
thereof. Each Debtor agrees that sales so made may be at prices and on terms
less favorable than if the Pledged Securities were sold to the public, and that
Agent has no obligation to delay the sale of any Pledged Securities for the
period of time necessary to register the Pledged Securities for sale to the
public under the Securities Laws. Each Debtor shall cooperate with Agent in its
attempt to satisfy any requirements under the Securities Laws (including,
without limitation, registration thereunder if requested by Agent) applicable to
the sale of the Pledged Securities by Agent. 

            11.    
 Costs and Expenses. Each Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Agent. The Debtors shall also pay all other claims
and charges which in the reasonable opinion of the Agent is reasonably likely to
prejudice, imperil or otherwise affect the Collateral or the Security Interests
therein. The Debtors will also, upon demand, pay to the Agent the amount of any
and all reasonable expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, which the Agent, for the benefit of the
Secured Parties, may incur in connection with the creation, perfection,
protection, satisfaction, foreclosure, collection or enforcement of the Security
Interest and the preparation, administration, continuance, amendment or
enforcement of this Agreement and pay to the Agent the amount of any and all
reasonable expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, which the Agent, for the benefit of the Secured
Parties, and the Secured Parties may incur in connection with (i) the
enforcement of this Agreement, (ii) the custody or preservation of, or the sale
of, collection from, or other realization upon, any of the Collateral, or (iii) the exercise or enforcement of any of
the rights of the Secured Parties under the Debentures. Until so paid, any fees
payable hereunder shall be added to the principal amount of the Debentures and
shall bear interest at the Default Rate. 

17 




            12.     
Responsibility for Collateral. The Debtors assume all liabilities and
responsibility in connection with all Collateral, and the Obligations shall in
no way be affected or diminished by reason of the loss, destruction, damage or
theft of any of the Collateral or its unavailability for any reason. Without
limiting the generality of the foregoing, (a) neither the Agent nor any Secured
Party (i) has any duty (either before or after an Event of Default) to collect
any amounts in respect of the Collateral or to preserve any rights relating to
the Collateral, or (ii) has any obligation to clean-up or otherwise prepare the
Collateral for sale, and (b) each Debtor shall remain obligated and liable under
each contract or agreement included in the Collateral to be observed or
performed by such Debtor thereunder. Neither the Agent nor any Secured Party
shall have any obligation or liability under any such contract or agreement by
reason of or arising out of this Agreement or the receipt by the Agent or any
Secured Party of any payment relating to any of the Collateral, nor shall the
Agent or any Secured Party be obligated in any manner to perform any of the
obligations of any Debtor under or pursuant to any such contract or agreement,
to make inquiry as to the nature or sufficiency of any payment received by the
Agent or any Secured Party in respect of the Collateral or as to the sufficiency
of any performance by any party under any such contract or agreement, to present
or file any claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to the Agent or to which
the Agent or any Secured Party may be entitled at any time or times. 

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

18 




           
14.      Term of Agreement. This Agreement and
the Security Interests shall terminate on the date on which all payments under
the Debentures have been indefeasibly paid in full and all other Obligations
have been paid or discharged; provided, however, that all indemnities of the
Debtors contained in this Agreement (including, without limitation, Annex B
hereto) shall survive and remain operative and in full force and effect
regardless of the termination of this Agreement. 

           
15.      Power of Attorney; Further Assurances.


            
(a)        Each Debtor authorizes the Agent,
and does hereby make, constitute and appoint the Agent and its officers, agents,
successors or assigns with full power of substitution, as such Debtor’s true and
lawful attorney-in-fact, with power, in the name of the Agent or such Debtor,
to, after the occurrence and during the continuance of an Event of Default, (i)
endorse any note, checks, drafts, money orders or other instruments of payment
(including payments payable under or in respect of any policy of insurance) in
respect of the Collateral that may come into possession of the Agent; (ii) to
sign and endorse any financing statement pursuant to the UCC or any invoice,
freight or express bill, bill of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications and notices in connection with
accounts, and other documents relating to the Collateral; (iii) to pay or
discharge taxes, liens, security interests or other encumbrances at any time
levied or placed on or threatened against the Collateral; (iv) to demand,
collect, receipt for, compromise, settle and sue for monies due in respect of
the Collateral; (v) to transfer any Intellectual Property or provide licenses
respecting any Intellectual Property; and (vi) generally, at the option of the
Agent, and at the expense of the Debtors, at any time, or from time to time, to
execute and deliver any and all documents and instruments and to do all acts and
things which the Agent deems necessary to protect, preserve and realize upon the
Collateral and the Security Interests granted therein in order to effect the
intent of this Agreement and the Debentures all as fully and effectually as the
Debtors might or could do; and each Debtor hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof. This power of
attorney is coupled with an interest and shall be irrevocable for the term of
this Agreement and thereafter as long as any of the Obligations shall be
outstanding. The designation set forth herein shall be deemed to amend and
supersede any inconsistent provision in the Organizational Documents or other
documents or agreements to which any Debtor is subject or to which any Debtor is
a party. Without limiting the generality of the foregoing, after the occurrence
and during the continuance of an Event of Default, each Secured Party is
specifically authorized to execute and file any applications for or instruments
of transfer and assignment of any patents, trademarks, copyrights or other Intellectual Property with the United
States Patent and Trademark Office and the United States Copyright Office. 

19 




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

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

            16.    
 Notices. All notices, requests, demands and other communications
hereunder shall be subject to the notice provision of the Purchase Agreement (as
such term is defined in the Debentures). 

            17.     
Other Security. To the extent that the Obligations are now or hereafter
secured by property other than the Collateral or by the guarantee, endorsement
or property of any other person, firm, corporation or other entity, then the
Agent shall have the right, in its sole discretion, to pursue, relinquish,
subordinate, modify or take any other action with respect thereto, without in
any way modifying or affecting any of the Secured Parties’ rights and remedies
hereunder. 

           
18.      Appointment of Agent. The Secured
Parties hereby appoint Hillair Capital Management LLC to act as their agent
(“Hillair” or “Agent”) for purposes of exercising any and all rights and
remedies of the Secured Parties hereunder. Such appointment shall continue until
revoked in writing by a Majority in Interest, at which time a Majority in
Interest shall appoint a new Agent, provided that Hillair may not be removed as
Agent unless funds managed by Hillair shall then hold less than $50,000 in
principal amount of Debentures; provided, further, that such removal may occur
only if each of the other Secured Parties shall then hold not less than an
aggregate of $250,000 in principal amount of Debentures. The Agent shall have
the rights, responsibilities and immunities set forth in Annex B hereto. 

           
19.      Miscellaneous. 

20 




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

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

            (c)       
This Agreement, together with the exhibits and schedules hereto, contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into
this Agreement and the exhibits and schedules hereto. No provision of this
Agreement may be waived, modified, supplemented or amended except in a written
instrument signed, in the case of an amendment, by the Debtors and the Secured
Parties holding 50.1% or more of the principal amount of Debentures then
outstanding, or, in the case of a waiver, by the party against whom enforcement
of any such waived provision is sought.

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

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

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

21 




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

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

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

            (j)       
All Debtors shall jointly and severally be liable for the obligations of each
Debtor to the Secured Parties hereunder. 

22 




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

            (l)       
Nothing in this Agreement shall be construed to subject Agent or any Secured
Party to liability as a partner in any Debtor or any if its direct or indirect
subsidiaries that is a partnership or as a member in any Debtor or any of its
direct or indirect subsidiaries that is a limited liability company, nor shall
Agent or any Secured Party be deemed to have assumed any obligations under any
partnership agreement or limited liability company agreement, as applicable, of
any such Debtor or any of its direct or indirect subsidiaries or otherwise,
unless and until any such Secured Party exercises its right to be substituted
for such Debtor as a partner or member, as applicable, pursuant hereto. 

            (m)       
To the extent that the grant of the security interest in the Collateral and the
enforcement of the terms hereof require the consent, approval or action of any
partner or member, as applicable, of any Debtor or any direct or indirect
subsidiary of any Debtor or compliance with any provisions of any of the
Organizational Documents, the Debtors hereby grant such consent and approval and
waive any such noncompliance with the terms of said documents. 

[SIGNATURE PAGES FOLLOW]

23 




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

AMERICAN NATURAL ENERGY CORPORATION 

 

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


[INSERT NAMES OF SUBSIDIARIES 
Gothic Resources Inc


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


[SIGNATURE PAGE OF HOLDERS FOLLOWS] 

24 




[SIGNATURE PAGE OF HOLDERS TO ANRU SA] 

Name of Investing Entity:    Hillair Capital
Investments
L.P.                                                                                                                                     

Signature of Authorized Signatory of Investing
entity:    /s/ Sean M.
McAvoy                                                                                                   

Name
of Authorized Signatory:    Sean M.
McAvoy                                                                                                                                                  


Title of Authorized Signatory:    Managing Member,
Hillair Capital Advisors
LLC                                                                                              

 

[SIGNATURE PAGE OF HOLDERS FOLLOWS] 

25 




SCHEDULE A 

 

Principal Place of Business of Debtors: 

 

Locations Where Collateral is Located or Stored: 

 

SCHEDULE B 

 

SCHEDULE C 

 

SCHEDULE D 
Legal Names and Organizational
Identification Numbers 

     

SCHEDULE E 
Names; Mergers and Acquisitions 

 

SCHEDULE F 
Intellectual Property 

 

SCHEDULE G 
Account Debtors 

 

SCHEDULE H 
Pledged Securities 

26 




ANNEX A 
to 
SECURITY

AGREEMENT 


FORM OF ADDITIONAL DEBTOR JOINDER 

Security Agreement dated as of July 3, 2014 made by 
American
Natural Energy Corporation 
and its subsidiaries party thereto from time to
time, as Debtors 
to and in favor of 
the Secured Parties identified
therein (the “Security Agreement”) 


           
Reference is made to the Security Agreement as defined above; capitalized terms
used herein and not otherwise defined herein shall have the meanings given to
such terms in, or by reference in, the Security Agreement. 

           
The undersigned hereby agrees that upon delivery of this Additional Debtor
Joinder to the Secured Parties referred to above, the undersigned shall (a) be
an Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the same
extent as if the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth therein as of the date
of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE
SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH IN
THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL
PROVISIONS SET FORTH THEREIN. 

           
Attached hereto are supplemental and/or replacement Schedules to the Security
Agreement, as applicable. 

           
An executed copy of this Joinder shall be delivered to the Secured Parties, and
the Secured Parties may rely on the matters set forth herein on or after the
date hereof. This Joinder shall not be modified, amended or terminated without
the prior written consent of the Secured Parties. 




           
IN WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
the name and on behalf of the undersigned. 

[Name of Additional Debtor 

By: 

Name: 
Title: 

Address: 

 

 

 

 

 

Dated: 




ANNEX B 
to 
SECURITY

AGREEMENT 


THE AGENT 

                       
1. Appointment. The Secured Parties (all capitalized terms used herein
and not otherwise defined shall have the respective meanings provided in the
Security Agreement to which this Annex B is attached (the "Agreement")), by
their acceptance of the benefits of the Agreement, hereby designate Hillair
Capital Management LLC (“Hillair” or “Agent”) as the Agent to act
as specified herein and in the Agreement. Each Secured Party shall be deemed
irrevocably to authorize the Agent to take such action on its behalf under the
provisions of the Agreement and any other Transaction Document (as such term is
defined in the Purchase Agreement) and to exercise such powers and to perform
such duties hereunder and thereunder as are specifically delegated to or
required of the Agent by the terms hereof and thereof and such other powers as
are reasonably incidental thereto. The Agent may perform any of its duties
hereunder by or through its agents or employees. 

                       
2. Nature of Duties. The Agent shall have no duties or
responsibilities except those expressly set forth in the Agreement. Neither the
Agent nor any of its partners, members, shareholders, officers, directors,
employees or agents shall be liable for any action taken or omitted by it as
such under the Agreement or hereunder or in connection herewith or therewith, be
responsible for the consequence of any oversight or error of judgment or
answerable for any loss, unless caused solely by its or their gross negligence
or willful misconduct as determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction. The duties of the Agent shall be
mechanical and administrative in nature; the Agent shall not have by reason of
the Agreement or any other Transaction Document a fiduciary relationship in
respect of any Debtor or any Secured Party; and nothing in the Agreement or any
other Transaction Document, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in respect of the
Agreement or any other Transaction Document except as expressly set forth herein
and therein. 

                       
3. Lack of Reliance on the Agent. Independently and without reliance upon
the Agent, each Secured Party, to the extent it deems appropriate, has made and
shall continue to make (i) its own independent investigation of the financial
condition and affairs of the Company and its subsidiaries in connection with
such Secured Party’s investment in the Debtors, the creation and continuance of
the Obligations, the transactions contemplated by the Transaction Documents, and
the taking or not taking of any action in connection therewith, and (ii) its own
appraisal of the creditworthiness of the Company and its subsidiaries, and of
the value of the Collateral from time to time, and the Agent shall have no duty
or responsibility, either initially or on a continuing basis, to provide any
Secured Party with any credit, market or other information with respect thereto,
whether coming into its possession before any Obligations are incurred or at any time or times thereafter. The Agent shall not be
responsible to the Debtors or any Secured Party for any recitals, statements,
information, representations or warranties herein or in any document,
certificate or other writing delivered in connection herewith, or for the
execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of the Agreement or any other
Transaction Document, or for the financial condition of the Debtors or the value
of any of the Collateral, or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
the Agreement or any other Transaction Document, or the financial condition of
the Debtors, or the value of any of the Collateral, or the existence or possible
existence of any default or Event of Default under the Agreement, the Debentures
or any of the other Transaction Documents. 




                       
4. Certain Rights of the Agent. The Agent shall have the right to take
any action with respect to the Collateral, on behalf of all of the Secured
Parties. To the extent practical, the Agent shall request instructions from the
Secured Parties with respect to any material act or action (including failure to
act) in connection with the Agreement or any other Transaction Document, and
shall be entitled to act or refrain from acting in accordance with the
instructions of a Majority in Interest; if such instructions are not provided
despite the Agent’s request therefor, the Agent shall be entitled to refrain
from such act or taking such action, and if such action is taken, shall be
entitled to appropriate indemnification from the Secured Parties in respect of
actions to be taken by the Agent; and the Agent shall not incur liability to any
person or entity by reason of so refraining. Without limiting the foregoing, (a)
no Secured Party shall have any right of action whatsoever against the Agent as
a result of the Agent acting or refraining from acting hereunder in accordance
with the terms of the Agreement or any other Transaction Document, and the
Debtors shall have no right to question or challenge the authority of, or the
instructions given to, the Agent pursuant to the foregoing and (b) the Agent
shall not be required to take any action which the Agent believes (i) could
reasonably be expected to expose it to personal liability or (ii) is contrary to
this Agreement, the Transaction Documents or applicable law. 

                       
5. Reliance. The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, radiogram, order
or other document or telephone message signed, sent or made by the proper person
or entity, and, with respect to all legal matters pertaining to the Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
counsel selected by it and upon all other matters pertaining to this Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
other experts selected by it. Anything to the contrary notwithstanding, the
Agent shall have no obligation whatsoever to any Secured Party to assure that
the Collateral exists or is owned by the Debtors or is cared for, protected or
insured or that the liens granted pursuant to the Agreement have been properly
or sufficiently or lawfully created, perfected, or enforced or are entitled to
any particular priority. 




                       
6. Indemnification. To the extent that the Agent is not reimbursed
and indemnified by the Debtors, the Secured Parties will jointly and severally
reimburse and indemnify the Agent, in proportion to their initially purchased
respective principal amounts of Debentures, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in performing its duties
hereunder or under the Agreement or any other Transaction Document, or in any
way relating to or arising out of the Agreement or any other Transaction
Document except for those determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction to have resulted solely from the
Agent's own gross negligence or willful misconduct. Prior to taking any action
hereunder as Agent, the Agent may require each Secured Party to deposit with it
sufficient sums as it determines in good faith is necessary to protect the Agent
for costs and expenses associated with taking such action. 

                       
7. Resignation by the Agent.

           
(a)      The Agent may resign from the performance of
all its functions and duties under the Agreement and the other Transaction
Documents at any time by giving 30 days' prior written notice (as provided in
the Agreement) to the Debtors and the Secured Parties. Such resignation shall
take effect upon the appointment of a successor Agent pursuant to clauses (b)
and (c) below. 

           
(b)      Upon any such notice of resignation, the
Secured Parties, acting by a Majority in Interest, shall appoint a successor
Agent hereunder. 

           
(c)      If a successor Agent shall not have been so
appointed within said 30-day period, the Agent shall then appoint a successor
Agent who shall serve as Agent until such time, if any, as the Secured Parties
appoint a successor Agent as provided above. If a successor Agent has not been
appointed within such 30-day period, the Agent may petition any court of
competent jurisdiction or may interplead the Debtors and the Secured Parties in
a proceeding for the appointment of a successor Agent, and all fees, including,
but not limited to, extraordinary fees associated with the filing of
interpleader and expenses associated therewith, shall be payable by the Debtors
on demand. 

                       
8. Rights with respect to Collateral. Each Secured Party agrees
with all other Secured Parties and the Agent (i) that it shall not, and shall
not attempt to, exercise any rights with respect to its security interest in the
Collateral, whether pursuant to any other agreement or otherwise (other than
pursuant to this Agreement), or take or institute any action against the Agent
or any of the other Secured Parties in respect of the Collateral or its rights
hereunder (other than any such action arising from the breach of this Agreement)
and (ii) that such Secured Party has no other rights with respect to the
Collateral other than as set forth in this Agreement and the other Transaction
Documents. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, 




powers, privileges and duties of the retiring Agent and the
retiring Agent shall be discharged from its duties and obligations under the
Agreement. After any retiring Agent’s resignation or removal hereunder as Agent,
the provisions of the Agreement including this Annex B shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent.