Investment Agreement

INVESTMENT AGREEMENT


between


American Natural Energy Corporation


and


Michael K. Paulk and Steven P. Ensz


Dated June 15, 2004


INVESTMENT AGREEMENT


THIS INVESTMENT AGREEMENT (this "AGREEMENT") is made this 15th day of June, 2004 between American Natural Energy Corporation, an Oklahoma corporation (the "COMPANY") and Michael K. Paulk and Steven P. Ensz (the "INVESTORS").


W I T N E S S E T H:


WHEREAS, the Company intends to effect a rights offering (the "RIGHTS OFFERING") to distribute, on a pro rata basis and at no charge, transferable rights (the "RIGHTS") to each holder of record of Common Stock (the "COMMON STOCK"), as of a record date (the "RIGHTS OFFERING RECORD DATE") to be set by the Board of Directors, to purchase shares ("RIGHTS SHARES") of Common Stock;


WHEREAS, each holder of Rights will be entitled to purchase its pro rata number of Rights Shares (the "BASIC SUBSCRIPTION PRIVILEGE") at a price per Rights Share equal to $0.24, as appropriately adjusted for any stock split, combination, reorganization, recapitalization, stock dividend, stock distribution or similar event, the "SUBSCRIPTION PRICE;


WHEREAS, each holder of Rights who exercises in full its Basic Subscription Privilege will be entitled, on a pro rata basis, to subscribe for additional Rights Shares at the Subscription Price (the "OVER-SUBSCRIPTION PRIVILEGE"), to the extent that other holders of Rights do not exercise all of their Rights in the Basic Subscription Privilege;


WHEREAS, subject to the conditions set forth herein, including, among others the subscription to not less than the greater of (a) 5,623,952 Rights Shares or (b) 85% of the RIGHTS SHARES sold in the RIGHTS OFFERING, the Investors are willing, as set forth herein, to purchase in a private sale, upon consummation of the Rights Offering and at the Subscription Price, such number of shares of Common Stock as equals all of the Rights Shares that are not purchased by other holders of Rights in the Rights Offering as part of their Basic Subscription Privilege and their Over-Subscription Privilege;


WHEREAS, the Board of Directors of the Company (the "BOARD OF DIRECTORS"), has determined that the Rights Offering, this Agreement and the transactions contemplated hereby and thereby are advisable and in the best interests of the Company and its stockholders;


NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained in this Agreement, the parties hereto hereby agree as follows:


SECTION 1. DEFINITIONS. For purposes of this Agreement, the following terms will have the meaning set forth below:


"AFFILIATE" of any Person means any Person that directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, "control" (including with its correlative meanings, "controlled by" and "under common control with") shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise).


"AGREEMENT" means this Investment Agreement.


"BASIC SUBSCRIPTION PRIVILEGE" has the meaning assigned to it in the Preamble.


"BOARD OF DIRECTORS" has the meaning assigned to it in the Preamble.


"BUSINESS DAY" means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close.


"CLOSING" has the meaning assigned to it in Article 6.


"COMMON STOCK" means the Company's Common Stock, par value $0.001 per share.


"COMPANY" has the meaning assigned to it in the Preamble.


"INVESTORS" has the meaning assigned to it in the Preamble.


"INVESTORS OBLIGATIONS" has the meaning assigned to it in Section 2.7 hereof.


"OVER-SUBSCRIPTION PRIVILEGE" has the meaning assigned to it in the Preamble.


"PERSON" includes all natural persons, corporations, business trusts, limited liability companies, associations, companies, partnerships, joint ventures and other entities, as well as governments and their respective agencies and political subdivisions.


"REGISTRATION STATEMENT" has the meaning assigned to it in Section 2.5(a) hereof.


"RIGHTS" has the meaning assigned to it in the Preamble.


"RIGHTS OFFERING" has the meaning assigned to it in the Preamble.


"RIGHTS OFFERING RECORD DATE" has the meaning assigned to it in the Preamble.


"RIGHTS SHARES" has the meaning assigned to it in the Preamble.


"SEC" means the Securities and Exchange Commission.


"SUBSCRIPTION AGENT" means Computershare Investor Services Inc.


"SUBSCRIPTION PRICE" has the meaning assigned to it in the Preamble.


SECTION 2. THE RIGHTS OFFERING.


2.1 Basic Subscription Privilege. The Investors agree, severally, and not jointly, upon the consummation of the Rights Offering and at the Subscription Price, to acquire in a private sale the number of shares of Common Stock as equals the number of Rights Shares that the Investors were entitled to purchase in the Rights Offering had all subscriptions been fully exercised and that were not purchased in the Rights Offering, subject to the approval of the TSX Venture Exchange.


2.2 Purchase By Investors. Within three (3) Business Days following the expiration of the Rights Offering, at such time as shall be mutually agreed between the Company and the Investors, pursuant to the terms and subject to the conditions of this Agreement and the Rights Offering as set forth in the Registration Statement, the Investors shall, on the same terms as the Rights Offering severally, and not jointly, purchase in a private sale, in proportion to the percentages set forth in Schedule A hereto, such number of shares of Common Stock as equals all of the Rights Shares that are not otherwise subscribed for by the holders of Rights under either their Basic Subscription Privilege or their Over-subscription Privilege. The Investors' obligation to purchase the shares of Common Stock pursuant to this Section 2.2 is conditioned upon consummation of the Rights Offering in accordance with its terms and the subscription to and sale of not less than the greater of (a) 5,623,952 of the Rights Shares or (b) 85% of the Rights Shares sold in the Rights Offering, as well as satisfaction of the conditions set forth in Section 6 hereof.


In the event any Investor terminates this Agreement or fails to purchase the number of shares of Common Stock which he is entitled to purchase hereunder, by reason of the non-fulfillment of the conditions to a Closing, the other Investors may purchase those shares in the proportions set forth on Schedule A, after eliminating the non-purchasing Investor or Investors.


2.3 Registration Rights. The Company hereby acknowledges to the Investors that with respect to any shares of Common Stock acquired by the Investors pursuant to Sections 2.1 and 2.2, in the event the Company should file with the SEC at any time after the Closing a registration statement under the Securities Act of 1933, as amended, upon the request of any security holder pursuant to contractual rights granted to such holder and provided that the terms of such contractual rights do not prohibit the registration of such shares, the Company shall include in such registration statement, on one occasion only, such number of Rights Shares as have been purchased by Investors as such Investors may individually request.


2.4 The Rights Offering.


(a) Promptly following the effective date of the registration statement (including each amendment and supplement thereto, the "REGISTRATION STATEMENT") on Form SB-2 filed by the Company covering the issuance of the Rights and the Rights Shares, the Company will commence the Rights Offering. In the Rights Offering, the Company will distribute, on a pro rata basis and at no charge, Rights to each holder of record of Common Stock as of the Rights Offering Record Date. In accordance with the terms of the Rights Offering, each such Right shall be transferable. The Rights will entitle the holder to purchase, at the election of the holder thereof, its pro rata number of Rights Shares at the Subscription Price; as provided in the Registration Statement.


(b) Each holder of Rights who exercises in full its Basic Subscription Privilege will be entitled to subscribe for additional Rights Shares at the Subscription Price to the extent that other holders of Rights do not exercise all of their Rights in the Basic Subscription Privilege. If the number of Rights Shares remaining after the exercise of all Basic Subscription Privileges is not sufficient to satisfy all Over-subscription Privileges, the Rights holders who exercised their Basic Subscription Privileges in full will be allocated Rights Shares as set forth in the Registration Statement.


SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor, separately and not jointly, represents and warrants to the Company as of the date hereof as follows:


3.1 Capacity. The Investor has the legal capacity to enter into an perform this Agreement in accordance with its terms.


3.2 Investment Representations and Warranties.


(a) The shares of Common Stock being acquired by him hereunder
are being acquired for his own account, for the purpose of
investment and not with a view to or for sale in connection with
any public resale or distribution thereof in violation of
applicable securities laws.


(b) He is an "accredited Investor" within the meaning of Rule
501(a) promulgated under the Securities Act of 1933, as amended.


(c) The Investor is a resident of, or is otherwise subject to,
the jurisdiction referred to in its address set forth in Schedule
A, which address is the place of residence of place or business
of the Investor and not created or used solely for the purpose of
acquiring the shares of Common Stock hereunder.


(d) The Investor has completed and executed the Certificate
attached hereto as Schedule B and hereby confirms the truth and
accuracy of all statements made therein by the Investor.


(e) The Investor understands and acknowledges that the shares of
Common Stock acquired hereunder will be subject to certain resale
restrictions under applicable securities laws and the rules and
policies of the TSX Venture Exchange and the Investor agrees to
comply with such restrictions. The Investor also acknowledges
that the certificates for the shares of Common Stock may bear a
legend respecting restrictions or transfers as required under
applicable securities laws, that he has been advised to consult
his own legal advisors with respect to applicable resale
restrictions and that it is solely responsible for complying with
such restrictions.


(f) The Investor acknowledges that:


(i) no securities commission or similar regulatory authority
has reviewed or passed on the merits of the shares of Common
Stock;


(ii) there is no government or other insurance covering the
shares of Common Stock;


(iii) there are risks associated with the purchase of the
shares of Common Stock;


(iv) there are restrictions on the Investor's ability to
resell the shares of Common Stock and it is the
responsibility of the Investor to find out what those
restrictions are and to comply with them before selling the
shares of Common Stock; and


(v) the Company has advised the Investor that the Company is
relying on an exemption under applicable Canadian securities
laws from the requirements to provide the Investor with a
prospectus and to sell shares of Common Stock through a
person registered to sell securities under the securities
legislation of British Columbia and the Investor's
jurisdiction of residence and, as a consequence of acquiring
the shares of Common Stock pursuant to these exemptions,
certain protections, rights and remedies provided by
securities legislation, including statutory rights of
rescission or damages under Canadian law, will not be
available to the Investor.


SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Investors as to each of themselves as of the date hereof as follows:


4.1 Organization. The Company (a) is duly organized, validly existing and in good standing under the laws of the State of Oklahoma, (b) is duly qualified or licensed to


do business as a foreign corporation and is in good standing under the laws of each jurisdiction where the nature of the property owned or leased by it or the nature of the business conducted by it makes such qualification or license necessary, except where the failure to be so qualified or licensed would not reasonably be expected to either prevent or materially delay its ability to perform its obligations hereunder, and (c) has all corporate power and authority to carry on its business as it now is being conducted and to consum ...