Document:

Exhibit 10.9

 

FIRST
AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

This First Amendment to Amended
and Restated Credit Agreement (this “First Amendment”)
is entered into effective as of the 23rd day of February, 2009 (the “First Amendment  Effective Date”), by and among Ellora Energy Inc., a
Delaware corporation (“Borrower”),
JPMorgan Chase Bank, N.A., as Administrative Agent (“Administrative
Agent”), and the financial institutions party to the Credit
Agreement (defined below) as Lenders (“Lenders”).

 

W I T N E S S E T H

 

WHEREAS,
Borrower, Administrative Agent, the other Agents party thereto and Lenders are
parties to that certain Amended and Restated Credit Agreement dated as of May 1,
2008 (as amended, the “Credit Agreement”)
(unless otherwise defined herein, all terms used herein with their initial
letter capitalized shall have the meaning given such terms in the Credit
Agreement, including after giving effect to this First Amendment); and

 

WHEREAS,
pursuant to the Credit Agreement, Lenders have made Loans to Borrower and
provided certain other credit accommodations to Borrower; and

 

WHEREAS, the
parties hereto desire to (i) amend certain terms of the Credit Agreement
in certain respects as provided in this First Amendment to be effective as of
the First Amendment Effective Date, (ii) provide for the automatic
reduction of the Borrowing Base to the amount of $160,000,000 and the
reaffirmation the Conforming Borrowing Base in the amount of $160,000,000, in
each case to be effective five (5) Business Days after the original
issuance of the Permitted Convertible Preferred Stock and continuing until the
next redetermination of the Borrowing Base and Conforming Borrowing Base
thereafter, and (iii) waive certain violations of the Credit Agreement,
all as more particularly set forth herein.

 

NOW THEREFORE,
for and in consideration of the mutual covenants and agreements herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed, Borrower,
Administrative Agent and Lenders hereby agree as follows:

 

Section 1.                                          Amendments.  In reliance on the representations,
warranties, covenants and agreements contained in this First Amendment, and
subject to the satisfaction of the conditions precedent set forth in Section 4
hereof, the Credit Agreement shall be amended effective as of the First
Amendment Effective Date in the manner provided in this Section 1.

 

1.1                                 Additional Definitions.  Section 1.02 of the Credit Agreement
shall be amended to add thereto in alphabetical order the following definitions
which shall read in full as follows:

 

“Defaulting Lender”
means any Lender that (a) has failed to fund any portion of the Loans or
participations in Letters of Credit required to be funded by it hereunder within
one Business Day of the date required to be funded by it hereunder, (b) has
otherwise failed to pay over to the Administrative Agent or any

 

1

 

other Lender any other amount required to be
paid by it hereunder within one Business Day of the date when due, unless the
subject of a good faith dispute, or (c) has (or whose bank holding company
has) been deemed insolvent or become the subject of a bankruptcy or insolvency
proceeding.

 

“First Amendment”
means that certain First Amendment to Amended and Restated Credit Agreement
dated as of February     , 2009 among Borrower,
Administrative Agent and the Lenders party thereto.

 

“First Amendment Effective
Date” means the date on which all of the conditions precedent
set forth in Section 4 of the First Amendment are satisfied.

 

“Impacted Lender”
means (a) any Lender that is a Defaulting Lender and (b) any Lender
as to which the Administrative Agent or the Issuing Bank has a good faith
belief that such Lender has defaulted in fulfilling its obligations under one
or more other syndicated credit facilities.

 

“Net Proceeds”
means, with respect to any event, (a) the proceeds received in respect of
such event net of (b) the sum of all reasonable fees and out-of-pocket
expenses paid to third parties (other than Affiliates) in connection with such
event.

 

“Permitted Convertible
Preferred Stock” means the shares of Borrower’s Series A
convertible preferred stock, if any, originally issued and sold by it no later
than 30 days after the First Amendment Effective Date in an aggregate maximum
amount of $40,000,000 (plus an oversubscription allowance not to exceed
$4,000,000) and with an cumulative dividend rate of not greater than six
percent (6%) per annum, compounded semiannually, together with dividends in the
form of additional shares of Borrower’s Series A convertible preferred
stock issued thereafter with respect to Borrower’s previously issued Series A
convertible preferred stock.

 

1.2                                 Amendment to Definitions.  The definitions of “Alternate
Base Rate” and “Loan Documents”
contained in Section 1.02 of the Credit Agreement shall be amended and
restated to read in full as follows:

 

“Alternate Base Rate”
means, for any day, a rate per annum equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in
effect on such day plus one-half of one percent (0.5%) and (c) the
Adjusted LIBO Rate with respect to an Interest Period of one month beginning on

 

2

 

such day (or if such day is not a Business
Day, beginning on the immediately preceding Business Day) plus one and
three-quarters percent (1.75%), provided that, for the avoidance of doubt, the
Adjusted LIBO Rate for any day shall be based upon the rate appearing on Page 3750
of the Dow Jones Market Service (or on any successor or substitute page of
such page) at approximately 11:00 a.m. London time on such day.  Any change in the Alternate Base Rate due to
a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted
LIBO Rate shall be effective from and including the effective date of such
change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO
Rate, respectively.

 

“Loan Documents”
means this Agreement, the First Amendment, the Notes, the Letter of Credit
Agreements, the Letters of Credit and the Security Instruments.

 

1.3                                 Amendment to Letter of Credit Provision.  Section 2.08(b) of the Credit
Agreement is hereby amended by adding the following language to the end of such
Section:

 

“Notwithstanding anything to the contrary
contained herein, the Issuing Bank shall not at any time be obligated to issue,
amend, renew or extend any Letter of Credit if any Lender is at such time an
Impacted Lender hereunder, unless the Issuing Bank has entered into
arrangements satisfactory to the Issuing Bank with the Borrower or such
Impacted Lender to eliminate Issuing Bank’s risk with respect to such Impacted
Lender.”

 

1.4                                 Amendment to Mandatory Prepayment Provision.  Clause (c)(i) of Section 3.04(c) of
the Credit Agreement, is hereby amended to add the following at the end of such
clause :

 

In the event and on each occasion that any Net Proceeds are received by
or on behalf of the Borrower in respect of the issuance of Permitted
Convertible Preferred Stock, the Borrower shall, promptly after such Net
Proceeds are received by or on behalf of the Borrower but in no event more than
five (5) Business Days after the issuance of such Permitted Convertible
Preferred Stock, prepay the Indebtedness as set forth in Section 3.04(c)(v) and
(vi) below in an aggregate amount equal to 100% of such Net Proceeds.

 

1.5                                 Amendment to Mitigation Provision.  Clause (iii) of Section 5.04(b) of
the Credit Agreement, which presently states “(iii) any Lender defaults in
its obligation to fund Loans hereunder,” is hereby amended to state “(iii) any
Lender is a Defaulting Lender,”.

 

3

 

1.6                                 Amendment to Litigation Provision.  Clause (a) of Section 7.05 of the
Credit Agreement is hereby restated in full as follows:

 

(a)                                  Except
as set forth on Schedule  7.05, there are no actions, suits,
investigations or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower, threatened in
writing against the Borrower or any Subsidiary (i) as to which there is a
reasonable possibility of an adverse determination that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect or (ii) that involve any Loan Document
or the Transactions.

 

1.7                                 Amendment to Restricted Payment Provision.  Section 9.04 of the Credit Agreement is
hereby restated in full as follows:

 

9.04                           Restricted Payments.  The Borrower will not, and will not permit
any Subsidiary to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment, return any capital to its stockholders or
make any distribution, including, without limitation, any payments of cash dividends
with respect to the Permitted Convertible Preferred Stock, of its Property to
its Equity Interest holders, except, provided no Default or Event of Default
exists on the date any such distribution is declared or paid, (i) Subsidiaries
may declare and pay dividends ratably with respect to their Equity Interests
and (ii) the Borrower may declare and make dividends in the form of
additional shares of Borrower’s Permitted Convertible Preferred Stock issued
with respect to Borrower’s previously issued Permitted Convertible Preferred
Stock.

 

1.8                                 Amendment to Preferred Stock Provision.  Section 9.16 of the Credit Agreement is
hereby restated in full as follows:

 

9.16                           Subsidiary Indebtedness and Preferred Stock.  The Borrower will not, and will not permit
any Subsidiary to, issue preferred stock (other than Permitted Convertible
Preferred Stock) or create, incur or assume any Debt, except for Debt permitted
under Section 9.02.

 

1.9                                 Schedule 7.05.  Schedule 7.05 to the Credit Agreement is
hereby amended and restated in its entirety in the form of Schedule 7.05
attached to this First Amendment.

 

1.10                           Schedule 7.15.  Schedule 7.15 to the Credit Agreement is
hereby amended and restated in its entirety in the form of Schedule 7.15
attached to this First Amendment.

 

Section 2.                                          Borrowing
Base.  Upon the issuance of
Permitted Convertible Preferred Stock, the Borrowing Base shall, pursuant to Section 2.07
of the Credit Agreement, be established at

 

4

 

$160,000,000 and the Conforming Borrowing
Base shall be reaffirmed at $160,000,000, each effective five (5) Business
Days after the original issuance of the Permitted Convertible Preferred Stock,
and continuing until the next Scheduled Redetermination, Interim
Redetermination or other redetermination of the Borrowing Base thereafter.  The parties agree that the redetermination
provided herein shall not constitute an Interim Redetermination.

 

Section 3.                                          Limited
Waiver.  Borrower has advised Administrative Agent and
Lenders that it has restructured its Subsidiaries’ ownership of certain
unmortgaged royalty interests and certain unmortgaged Colorado and Kansas
properties by creating three new Subsidiaries (Ellora Royalties GP, Inc.,
a Colorado corporation, Ellora Royalties, LLC, a Colorado limited liability
company, and Ellora CO, LLC, a Colorado limited liability company) and by
converting its Subsidiary previously named Ellora, LLC into Ellora Royalties,
LP, a Colorado limited partnership. Borrower has further advised Administrative
Agent and Lenders that Borrower did not promptly comply with the provisions of (a) Sections
8.14(b) and 9.15 of the Credit Agreement in connection with Borrower’s
creation of such new Subsidiaries, (b) Section 8.01(i) of the
Credit Agreement in connection with the conversion and name change of Ellora,
LLC, a Colorado limited liability company, to Ellora Royalties, LP, , a Colorado
limited partnership, and (c) Section 8.02(b) of
the Credit Agreement in connection with giving notice of the litigation
described in Schedule 7.05 hereto (such violations collectively referred
to herein as the “Specified Violations”).
Borrower has advised Administrative Agent and Lenders that the Specified
Violations have been cured and no longer exist. Nonetheless, Borrower requests
that Lenders execute this First Amendment in part to evidence the Lenders’
limited waiver of the Specified Violations, which occurred during the period
prior to the First Amendment Effective Date (the “Specified Period”). In reliance on the representations and
warranties of Borrower contained herein, and subject to the limitations set
forth herein, Lenders party hereto hereby waive the Specified Violations for
the Specified Period. The limited waiver granted under this First Amendment is
limited solely to the Specified Violations and solely for the Specified Period.
Nothing contained herein shall be deemed a waiver of any other action or
inaction of Borrower which constitutes (or would constitute) a violation of any
provision of the Credit Agreement or any other Loan Document, or which results
(or would result) in a Default or Event of Default under the Credit Agreement
or any other Loan Document. Neither Lenders nor the Administrative Agent shall
be obligated to grant any future waivers, consents or amendments with respect
to the Credit Agreement or any other Loan Document

 

Section 4.                                          Conditions
Precedent.  The amendments
contained in Section 1 hereof, the establishment of the Borrowing
Base and the reaffirmation of the Conforming Borrowing Base set forth in Section 2
hereof and the limited waivers set forth in Section 3 hereof are
subject to the satisfaction of each of the following conditions precedent:

 

4.1                                 Counterparts.  The Administrative Agent shall have received
counterparts hereof duly executed by the Borrower and Required Lenders.

 

4.2                                 Fees.  Borrower shall have paid to Administrative
Agent any and all reasonable fees payable to Administrative Agent or Lenders
pursuant to or in connection with this First Amendment in consideration for the
agreements set forth herein.

 

5

 

4.3                                 No Material Adverse Effect.  There shall not have occurred since December 31,
2007, any events that, individually or in the aggregate, have had a Material
Adverse Effect.

 

4.4                                 No Default.  No Default or Event of Default shall have
occurred which is continuing.

 

4.5                                 Permitted Convertible Preferred Stock Documents.  The Administrative Agent shall have received (a) copies,
certified by a Responsible Officer of Borrower, of all material documents
instruments and agreements evidencing or relating to the offering and issuance
of the Permitted Convertible Preferred Stock and (b) any other documents,
instruments or agreements as Administrative Agent may reasonably require in
connection with this First Amendment and the transactions contemplated hereby.

 

4.6                                 Other Documentation.  The Administrative Agent shall have received
such other documents, instruments and agreements as it may reasonably request,
all in form and substance reasonably satisfactory to the Administrative Agent,
including, without limitation, such documents, instruments and agreements
required under Sections 8.11 and 8.14(b) in connection with the
Administrative Agent’s confirmation that the Specified Violations no longer
exist.

 

Section 5.                                          Representations
and Warranties.  To induce
Lenders and Administrative Agent to enter into this First Amendment, Borrower
hereby represents and warrants to Lenders and Administrative Agent as follows:

 

5.1                                 Reaffirm Existing Representations and Warranties.  Each representation and warranty of Borrower
contained in the Credit Agreement and the other Loan Documents is true and
correct in all material respects on the date hereof and will be true and
correct in all material respects after giving effect to the amendments set
forth in Section 1 hereof.

 

5.2                                 Due Authorization; No Conflict.  The execution, delivery and performance by
Borrower of this First Amendment are within Borrower’s corporate powers, have
been duly authorized by all necessary action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do
not violate or constitute a default under any provision of applicable law or
any material agreement binding upon Borrower or its Subsidiaries or result in
the creation or imposition of any Lien upon any of the assets of Borrower or
its Subsidiaries other than Excepted Liens.

 

5.3                                 Validity and Enforceability.  This First Amendment constitutes the valid
and binding obligation of Borrower enforceable in accordance with its terms,
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditor’s rights generally, and (ii) the
availability of equitable remedies may be limited by equitable principles of
general application.

 

Section 6.                                          Miscellaneous.

 

6.1                                 Reaffirmation of Loan Documents.  Any and all of the terms and provisions of
the Credit Agreement and the Loan Documents shall, except as amended and
modified hereby, remain in full force and effect.  The amendments contemplated hereby shall not
limit or impair

 

6

 

any Liens securing the Indebtedness, each of
which are hereby ratified, affirmed and extended to secure the Indebtedness as
they may be increased pursuant hereto.

 

6.2                                 Parties in Interest.  All of the terms and provisions of this First
Amendment shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns.

 

6.3                                 Legal Expenses.  Borrower hereby agrees to pay on demand all
reasonable fees and expenses of counsel to Administrative Agent incurred by
Administrative Agent in connection with the preparation, negotiation and
execution of this First Amendment and all related documents.

 

6.4                                 Counterparts.  This First Amendment may be executed in
counterparts, and all parties need not execute the same counterpart; however,
no party shall be bound by this First Amendment until Borrower and Required
Lenders have executed a counterpart.  Facsimiles
shall be effective as originals.

 

6.5                                 Complete Agreement.  THIS FIRST AMENDMENT, THE CREDIT AGREEMENT
AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES.

 

6.6                                 Headings.  The headings, captions and arrangements used
in this First Amendment are, unless specified otherwise, for convenience only
and shall not be deemed to limit, amplify or modify the terms of this First
Amendment, nor affect the meaning thereof.

 

6.7                                 Governing Law.  THIS FIRST AMENDMENT (INCLUDING, BUT NOT
LIMITED TO, THE VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

 

IN WITNESS WHEREOF, the parties
hereto have caused this First Amendment to be duly executed by their respective
authorized officers on the date and year first above written.

 

[Signature Pages to
Follow]

 

7

 

	
   

  	
  ELLORA ENERGY INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven
  R. Enger

  
	
   

  	
  Name:

  	
  Steven R.
  Enger

  
	
   

  	
  Title:

  	
  Chief
  Financial Officer

  

 

[Signature Page]

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

ELLORA ENERGY INC.

 

 

	
   

  	
  ADMINISTRATIVE AGENT/LENDER:

  
	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK, N.A.,

  
	
   

  	
  as Administrative Agent and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Orlando

  
	
   

  	
  Name:

  	
  Brian Orlando

  
	
   

  	
  Title:

  	
  Vice President

  

 

[Signature Page]

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

ELLORA ENERGY INC.

 

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  KEYBANK, N.A., as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Angela McCracken

  
	
   

  	
  Name:

  	
  Angela McCracken

  
	
   

  	
  Title:

  	
  Senior Vice President

  

 

[Signature Page]

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

ELLORA ENERGY INC.

 

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  GUARANTY BANK, FSB,
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christopher S. Parada

  
	
   

  	
  Name:

  	
  Christopher S. Parada

  
	
   

  	
  Title:

  	
  Senior Vice President

  

 

[Signature Page]

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT

ELLORA ENERGY INC.

 

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  FORTIS CAPITAL CORP.,
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Scott Myatt

  
	
   

  	
  Name:

  	
  Scott Myatt

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Darrell Holley

  
	
   

  	
  Name:

  	
  Darrell Holley

  
	
   

  	
  Title:

  	
  Managing Director

  

 

[Signature Page]

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT

ELLORA ENERGY INC.

 

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  COMPASS BANK,  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Greg Determann

  
	
   

  	
  Name:

  	
  Greg Determann

  
	
   

  	
  Title:

  	
  Vice President

  

 

[Signature Page]

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT

ELLORA ENERGY INC.

 

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  BANK OF SCOTLAND plc,
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

[Signature Page]

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT

ELLORA ENERGY INC.

 

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  UNION BANK, N.A.,
  formerly known as Union Bank of California, N.A., as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

[Signature Page]

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT

ELLORA ENERGY INC.

 

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK, N.A.,
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William Champion

  
	
   

  	
  Name:

  	
  William Champion

  
	
   

  	
  Title:

  	
  Assistant Vice President

  

 

[Signature Page]

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT

ELLORA ENERGY INC.

 

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL ASSOCIATION,
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bruce E. Hernandez

  
	
   

  	
  Name:

  	
  Bruce E. Hernandez

  
	
   

  	
  Title:

  	
  Vice President

  

 

[Signature Page]

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT

ELLORA ENERGY INC.

 

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  ALLIED IRISH BANKS, p.l.c.,
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Vaughn Buck

  
	
   

  	
  Name:

  	
  Vaughn Buck

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David O’Driscoll

  
	
   

  	
  Name:

  	
  David O’Driscoll

  
	
   

  	
  Title:

  	
  Assistant Vice President

  

 

[Signature Page]

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT

ELLORA ENERGY INC.

 

 

	
   

  	
   

  	
  LENDER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  NATIXIS, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Donovan C. Broussard

  
	
   

  	
   

  	
  Name:

  	
  Donovan
  C. Broussard

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Liana Tchernysheva

  
	
   

  	
   

  	
  Name:

  	
  Liana
  Tchernysheva

  
	
   

  	
   

  	
  Title:

  	
  Director

  

 

[Signature Page]

FIRST
AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

ELLORA ENERGY INC.

 

 

	
   

  	
   

  	
  LENDER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  THE BANK OF NOVA SCOTIA, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  David G. Mills

  
	
   

  	
   

  	
  Name:

  	
  David
  G. Mills

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Director

  

 

[Signature Page]

FIRST
AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

ELLORA
ENERGY INC.

 

 

	
   

  	
   

  	
  LENDER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GUARANTY BANK AND TRUST COMPANY, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

[Signature Page]

FIRST
AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

ELLORA
ENERGY INC.

 

 

Each of the undersigned (i) consent
and agree to this First Amendment, and (ii) agree that the Loan Documents
to which it is a party shall remain in full force and effect and shall continue
to be the legal, valid and binding obligation of such Person, enforceable against
it in accordance with its terms.

 

	
   

  	
   

  	
  ELLORA ENERGY GP, LLC,

  
	
   

  	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Steven R. Enger

  
	
   

  	
   

  	
  Name:

  	
  Steven R. Enger

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ELLORA LAND HOLDINGS, L.P.,

  
	
   

  	
   

  	
  a Texas limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  Ellora Energy GP, LLC, a Delaware

  
	
   

  	
   

  	
   

  	
  limited liability company, its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Steven R. Enger

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Steven R. Enger

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ELLORA ROYALTIES, LP,

  
	
   

  	
   

  	
  a Colorado limited
  partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Steven R. Enger

  
	
   

  	
   

  	
  Name:

  	
  Steven R. Enger

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President
  of Finance

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ELLORA OPERATING GP, LLC,

  
	
   

  	
   

  	
  a Delaware limited
  liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Steven R. Enger

  
	
   

  	
   

  	
  Name:

  	
  Steven R. Enger

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  

 

[Signature Page]

FIRST
AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

ELLORA
ENERGY INC.

 

 

	
   

  	
   

  	
  ELLORA OPERATING L.P.,

  
	
   

  	
   

  	
  a Texas limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  Ellora Operating GP, LLC,  a Delaware

  
	
   

  	
   

  	
   

  	
  limited liability company,

  
	
   

  	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Steven R. Enger

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Steven R. Enger

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PRESCO WESTERN, LLC,

  
	
   

  	
   

  	
  a Colorado limited
  liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Steven R. Enger

  
	
   

  	
   

  	
  Name:

  	
  Steven R. Enger

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ENGLISH BAY PIPELINE, L.P.,

  
	
   

  	
   

  	
  a Texas limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  Ellora Energy GP, LLC, a Delaware

  
	
   

  	
   

  	
   

  	
  limited liability company,

  
	
   

  	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Steven R. Enger

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Steven R. Enger

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ELLORA ROYALTIES, LLC,

  
	
   

  	
   

  	
  a Colorado limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Steven R. Enger

  
	
   

  	
   

  	
  Name:

  	
  Steven R. Enger

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President of Finance

  

 

[Signature Page]

FIRST
AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

ELLORA ENERGY INC.

 

 

	
   

  	
   

  	
  ELLORA ROYALTIES GP, INC.,

  
	
   

  	
   

  	
  a Colorado corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Steven R. Enger

  
	
   

  	
   

  	
  Name:

  	
  Steven R. Enger

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President of Finance

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ELLORA CO, LLC,

  
	
   

  	
   

  	
  a Colorado limited liability corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Steven R. Enger

  
	
   

  	
   

  	
  Name:

  	
  Steven R. Enger

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President of Finance

  

 

[Signature Page]

FIRST
AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

ELLORA ENERGY INC.

 

 

SCHEDULE 7.05

 

LITIGATION

 

Through our wholly
owned subsidiary, Ellora Land Holdings, L.P., we filed a lawsuit against Bayou
Bleu Farm, L.P., GrandTree, L.C., and certain other named individual defendants
(collectively, the “Defendants”) in the District Court of Shelby County, Texas
(Cause No. 08CV30,195) on August 25, 2008 seeking a declaratory
judgment that we are the rightful possessor of the entire mineral leasehold
interest acquired through oil and gas leases that we entered into with the Defendants
covering approximately 5,100 net acres (4,150 net acres) located in Shelby
County, Texas.  In June and July 2008,
the Defendants claimed that our interest had expired as to the deep rights of
the leased lands, which would have included the Haynesville Shale. We dispute
the Defendants’ claim and believe that the leases are still in effect for all
of the leased lands based upon the terms of the leases.  In the lawsuit, we brought claims against the
Defendants seeking a declaratory judgment, the removal of the obstruction/cloud
of title, slander of title, and attorneys’ fees, and related damages.

 

On or about November 18,
2008, certain of the Defendants filed a counterclaim against us.  In their counterclaim, those Defendants
asserted claims for breach of contract, slander of title, obstruction/cloud of
title, tortious interference with existing and prospective contracts,
declaratory judgment, trespass, violation of the Texas Deceptive Trade
Practices-Consumer Protection Act, attorneys’ fees, and damages exceeding $100
million.  In the counterclaim, the
Defendants allege that we improperly claimed the entire mineral leasehold
interest, impeded the ability of the Defendants to lease and develop their
minerals, drilled certain wells after the leases had terminated, improperly
charged certain transportation costs to them, and failed to make and improperly
made royalty payments.

 

Although we have not specified the amount of damages
sought from Defendants—and are not required to specify that information in our petition—the
damages we anticipate seeking to recover on our claims equal or exceed the
damages Defendants’ claim.  Discovery in
this matter is just beginning; however, we believe the claims made by the
Defendants are without merit, and we intend to vigorously defend our position
and contest the counterclaim.

 

1

 

SCHEDULE 7.15

 

SUBSIDIARIES AND PARTNERSHIPS

 

ENGLISH BAY PIPELINE, L.P., a Texas
limited partnership

Filing Number:  80091426

 

ELLORA LAND HOLDINGS, L.P., a Texas
limited partnership

Filing Number:  800090895

 

ELLORA OPERATING, L.P., a Texas limited
partnership

Filing Number:  800090891

 

ELLORA ENERGY GP, LLC, a Delaware limited
liability company

Organizational Identification Number: 
3533651

 

ELLORA OPERATING GP, LLC, a Delaware
limited liability company

Organizational Identification Number: 
3533641

 

PRESCO WESTERN, LLC, a Colorado limited
liability company

Organizational Identification Number: 
19971179962

 

ELLORA CO, LLC, a Colorado limited liability
company

Organizational Identification Number: 
20081469127

 

ELLORA ROYALTIES GP, Inc., a Colorado
corporation that is the general partner of Ellora Royalties, LP a Colorado
limited partnership

Organizational Identification Number: 
20081478871

 

ELLORA ROYALTIES, LLC, a Colorado limited
liability company

Organization Identification Number: 
20081478838

 

ELLORA ROYALTIES, LP, a Colorado limited
partnership

Organizational Identification Number: 
19951063065

 

Each of these entities has its principal place of business at

5665 Flatiron Parkway, Boulder, Colorado 80301

 

1exh41.htm

     

    
      
        

      

      Exhibit
4.1

      

      
        SUBSCRIPTION
AGREEMENT

         

      

      
        FOR
Z TRIM HOLDINGS, INC.

         

        

      

      
        

         

        Z Trim
Holdings, Inc.

        1011
Campus Drive

      

      Mundelein,
IL 60060

       

      
        Ladies
and Gentlemen:

         

        1.          Subscription.

      

       

      

      
        

        (a)            The
undersigned (the “Purchaser”), intending to be legally bound, hereby
irrevocably
agrees to purchase a unit or units (each, a “Unit” and collectively, the
“Units”) at a purchase
price of $10,000 per Unit, from Z Trim Holdings, Inc., an Illinois corporation
(the “Company”).  Each
Unit consists of a senior secured 8% convertible note in the principal amount of
$10,000 convertible at the conversion price of $1.00 into 10,000 shares of
common stock, $.00005 par value per share (“Common Shares”), of Z Trim Holdings,
Inc., an Illinois corporation (the “Company”), and one five-year warrant,
one to purchase 15,000 Common Shares at $1.50 per share (the “$1.50 Warrants”).  This
subscription is submitted to you in accordance with and subject to the terms and
conditions described in this Subscription Agreement, and the Confidential
Private Placement Memorandum of the Company dated as of March 11, 2009, as
amended or supplemented from time to time, including all documents incorporated
by reference therein and all attachments, schedules and exhibits thereto (the
“Memorandum”), relating to the offering (the “Offering”) by the Company of a
maximum of 500 Units ($5,000,000) (the “Maximum Amount”).

      

       

      (b)            The
terms of the Offering are more completely described in the Memorandum
and such terms are incorporated herein in their entirety. Certain capitalized
terms used, but
not otherwise defined herein, shall have the respective meanings provided in the
Memorandum.

       

      2.            Payment.  The
Purchaser encloses herewith a check payable to, or will immediately
make a wire transfer payment to, Z Trim Holdings, Inc., in the full amount of
the purchase price of the Units being subscribed for (the “Subscription
Amount”).  Together with the check for, or wire transfer of, the full
Subscription Amount, the Purchaser is delivering a completed and executed
Signature Page to this Subscription Agreement.

       

      

      
        3.           Deposit of
Funds.  All payments made as provided in Section 2 hereof shall
be deposited
by the Company as soon as practicable in its corporate bank
account.  If the Company rejects a Purchaser’s subscription, either in
whole or in part (which decision is in the sole discretion of the Company), the
rejected Subscription Amount or the rejected portion thereof will be returned
promptly to the Purchaser without interest accrued thereon or deduction
therefrom. The maximum Subscription Amount for a Purchaser in the Offering is 50
Units ($500,000), unless specifically approved by the Company’s Board of
Directors.

      

       

      4.            Acceptance of
Subscription.  The Purchaser understands and agrees that the
Company
in its sole discretion reserves the right to accept or reject this or any other
subscription for the
Units, in whole or in part, notwithstanding prior receipt by the Purchaser of
notice of acceptance
of this or any other subscription.  The Company shall have no
obligation hereunder until the
Company shall execute and deliver to the Purchaser an executed copy of this
Subscription
Agreement.  If Purchaser’s subscription is rejected in whole, or the
Offering is terminated,
all funds received from the Purchaser will be returned without interest,
penalty, expense or deduction, and this Subscription Agreement shall thereafter
be of no further force or effect.  If Purchaser’s subscription is
rejected in part, the funds for the rejected portion of such subscription will
be returned without interest, penalty, expense or deduction, and this
Subscription Agreement will continue in full force and effect to the extent such
subscription was accepted.

       

      5.            Representations and Warranties of the
Purchaser.  The Purchaser hereby acknowledges,
represents, warrants, and agrees as follows:

       

      
        (a)           None
of the Units, the Notes, the Warrants or any of the shares of Common
Stock issuable upon conversion of the Notes or the exercise of the Warrants
offered pursuant to the Memorandum are registered under the Securities Act of
1933, as amended (the “Securities Act”), or any state securities
laws.  The Purchaser understands that the offering and sale of the
Units is intended to be exempt from registration under the Securities Act, by
virtue of Section 4(2) thereof and the provisions of Regulation D promulgated
thereunder, based, in part, upon the representations, warranties and agreements
of the Purchaser contained in this Subscription Agreement;

      

       

      (b)           The  Purchaser  and  the  Purchaser’s  attorney,  accountant,  purchaser
representative  and/or  tax  advisor,  if  any  (collectively,  “Advisors”),  have  received  the
Memorandum
and all other documents requested by the Purchaser or its Advisors, if any, have
carefully
reviewed them and understand the information contained therein, prior to the
execution of this
Subscription Agreement;

       

      (c)           Neither
the Securities and Exchange Commission (the “Commission”) nor any
state securities commission has approved the Units, the Notes, the Warrants or
any of the Common
Shares issuable upon conversion of the Notes or exercise of the Warrants, or
passed upon or endorsed the merits of the Offering or confirmed the accuracy or
determined the adequacy of the Memorandum. The Memorandum has not been reviewed
by any Federal, state or other regulatory authority;

       

      (d)           All
documents, records, and books pertaining to the investment in the Units
(including, without limitation, the Memorandum) have been made available for
inspection by the
Purchaser and its Advisors, if any;

       

       (e)             The
Purchaser has carefully read the memorandum including the section entitled Risk
Factors.  The  Purchaser  and  its  Advisors,  if
any,  have  had  a  reasonable
opportunity
to ask questions of and receive answers from a person or persons acting on
behalf of the
Company concerning the offering of the Units and the business, financial
condition, results of operations
and prospects of the Company, and all such questions have been answered by the
Company
to the full satisfaction of the Purchaser and its Advisors, if any, and the
Purchaser and its
Advisors have had access, through the EDGAR system, to true and complete copies
of the Company’s
most recent Annual Report on Form 10-KSB for the fiscal year ended December 31,
2007 (the
“10-KSB”) as amended, and all other reports filed by the Company pursuant to the
Securities
Exchange Act of 1934, as amended, since the filing of the 10-KSB and prior
to the date hereof
and have reviewed such filings;

       

      (f)             In
evaluating the suitability of an investment in the Company, the Purchaser
has not relied upon any representation or other information (oral or written)
other than as stated
in the Memorandum or as contained in documents so furnished to the Purchaser or
its Advisors,
if any, by the Company in writing;

       

      (g)             The
Purchaser is unaware of, is in no way relying on, and did not become
aware of
the offering of the Units through or as a result of, any form of general
solicitation or general
advertising including, without limitation, any article, notice, advertisement or
other communication
published in any newspaper, magazine or similar media or broadcast over
television,
radio or over the Internet, in connection with the offering and sale of the
Units and is not
subscribing for Units and did not become aware of the offering of the Units
through or as a result of
any seminar or meeting to which the Purchaser was invited by, or any
solicitation of a subscription
by, a person not previously known to the Purchaser in connection with
investments in
securities generally;

       

      (h) The
Purchaser has taken no action which would give rise to any claim by any person
for brokerage commissions, finders’ fees or the like relating to this
Subscription Agreement or the transactions contemplated hereby (other than
commissions to be paid by the Company  as described in the Memorandum
);

       

      (i) The
Purchaser, either alone or together with its Advisor(s), if any, have such
knowledge and experience in financial, tax, and business matters, and, in
particular, investments in securities, so as to enable them to utilize the
information made available to them in connection with the offering of the Units
to evaluate the merits and risks of an investment in the Units and the Company
and to make an informed investment decision with respect thereto;

       

      (j) The
Purchaser is not relying on the Company or any of its employees or agents with
respect to the legal, tax, economic and related considerations of an investment
in the Units, and the Purchaser has relied on the advice of, or has consulted
with, only its own Advisors;

       

      (k) The
Purchaser is acquiring the Units solely for such Purchaser’s own account for
investment and not with a view to resale or distribution thereof, in whole or in
part. The Purchaser has no agreement or arrangement, formal or informal, with
any person to sell or transfer all or any of the Units, the Notes, Warrants or
Common Shares issuable upon conversion of the Notes or exercise of the Warrants,
and the Purchaser has no plans to enter into any such agreement or
arrangement;

       

      (l) The
purchase of the Units represents high risk capital and the Purchaser is able to
afford an investment in a speculative venture having the risks and objectives of
the Company. The Purchaser must bear the substantial economic risks of the
investment in the Units indefinitely because none of the Units, the Notes, the
Warrants, or the Common Shares issuable upon conversion of the Notes or exercise
of the Warrants may be sold, hypothecated or otherwise disposed of unless
subsequently registered under the Securities Act and applicable state securities
laws or an exemption from such registration is available. Legends shall be
placed on the securities included in the Units to the effect that they have not
been registered under the Securities Act or applicable state securities laws and
appropriate notations thereof will be made in the Company’s stock books. Stop
transfer instructions will be placed with the transfer agent of the
securities constituting the Units. It is not anticipated that there will be any
market for resale of the Units, the Notes or   the Warrants and
such securities will not be freely transferable at any time in the foreseeable
future. The Common Shares issuable upon conversion of the Notes
or  upon exercise of the Warrants will not be  transferable
until at least 6 months after conversion or payment in full  upon
exercise and then only upon compliance with the conditions of Rule 144
promulgated under the Securities Act of 1933.

       

      (m) The
Purchaser has adequate means of providing for such Purchaser’s current financial
needs and foreseeable contingencies and has no need for liquidity of the
investment in the Units, the Notes, Warrants or any of the Common Shares
issuable upon conversion of the Notes  or  upon exercise of
the Warrants for an indefinite period of time;

       

      (n) The
Purchaser is aware that an investment in the Units involves a number of very
significant risks and has carefully read and considered the matters set forth in
the Memorandum and, in particular, the matters under the caption “Risk Factors”
therein, and, in particular, acknowledges that such risks may materially
adversely affect the Company’s results of operations and future
prospects;

       

      (o) The
Purchaser is an “accredited investor” as that term is defined in Regulation D
under the Securities Act, and has truthfully and accurately completed the
Accredited Investor Certification contained herein;

       

      (p) The
Purchaser: (i) if a natural person, represents that the Purchaser has reached
the age of 21 and has full power and authority to execute and deliver this
Subscription Agreement and all other related agreements or certificates and to
carry out the provisions hereof and thereof; (ii) if a corporation, partnership,
or limited liability company or partnership, or association, joint stock
company, trust, unincorporated organization or other entity, represents that
such entity was not formed for the specific purpose of acquiring the Units, such
entity is duly organized, validly existing and in good standing under the laws
of the state of its organization, the consummation of the transactions
contemplated hereby is authorized by, and will not result in a violation of
state law or its charter or other organizational documents, such entity has
full power and authority to execute and deliver this Subscription Agreement and
all other related agreements or certificates and to carry out the provisions
hereof and thereof and to purchase and hold the securities constituting the
Units, the execution and delivery of this Subscription Agreement has been duly
authorized by all necessary action, this Subscription Agreement has been duly
executed and delivered on behalf of such entity and is a legal, valid and
binding obligation of such entity; or (iii) if executing this Subscription
Agreement in a representative or fiduciary capacity, represents that it has full
power and authority to execute and deliver this Subscription Agreement in such
capacity and on behalf of the subscribing individual, ward, partnership, trust,
estate, corporation, or limited liability company or partnership, or other
entity for whom the Purchaser is executing this Subscription Agreement, and such
individual, partnership, ward, trust, estate, corporation, or limited liability
company or partnership, or other entity has full right and power to perform
pursuant to this Subscription Agreement and make an investment in the Company,
and represents that this Subscription Agreement constitutes a legal, valid and
binding obligation of such entity. The execution and delivery of this
Subscription Agreement will not violate or be in conflict with any order,
judgment, injunction, agreement or controlling document to which the Purchaser
is a party or by which it is bound;

       

      (q) The
Purchaser and its Advisors, if any, have had the opportunity to obtain any
additional information, to the extent the Company had such information in their
possession or could acquire it without unreasonable effort or expense, necessary
to verify the accuracy of the information contained in the Memorandum and all
documents received or reviewed in connection with the purchase of the Units and
have had the opportunity to have representatives of the Company provide them
with such additional information regarding the terms and conditions of this
particular investment and the financial condition, results of operations,
business and prospects of the Company deemed relevant by the Purchaser or its
Advisors, if any, and all such requested information, to the extent the Company
had such information in its possession or could acquire it without unreasonable
effort or expense, has been provided by the Company in writing to the full
satisfaction of the Purchaser and its Advisors, if any;

       

      (r) The
Purchaser represents to the Company that any information which the undersigned
has heretofore furnished or is furnishing herewith to the Company is complete
and accurate and may be relied upon by the Company in determining the
availability of an exemption from registration under Federal and state
securities laws in connection with the offering of securities as described in
the Memorandum. The Purchaser further represents and warrants that it will
notify and supply corrective information to the Company immediately upon
the occurrence of any change therein occurring prior to the Company’s issuance
of the securities contained in the Units;

       

      (s) The
Purchaser has significant prior investment experience, including investment in
non-listed and non-registered securities. The Purchaser is knowledgeable about
investment considerations in public companies and, in particular, public
companies traded on the OTCBB. The Purchaser has a sufficient net worth to
sustain a loss of its entire investment in the Company in the event such a loss
should occur. The Purchaser’s overall commitment to investments which are not
readily marketable is not excessive in view of the Purchaser’s net worth and
financial circumstances and the purchase of the Units will not cause such
commitment to become excessive. This investment is a suitable one for the
Purchaser;

       

      (t) The
Purchaser is satisfied that it has received adequate information with respect to
all matters which it or its Advisors, if any, consider material to its decision
to make this investment;

       

      (u) The
Purchaser acknowledges that any estimates or forward-looking statements or
projections included in the Memorandum were prepared by the Company in good
faith, but that the attainment of any such projections, estimates or
forward-looking statements cannot be guaranteed by the Company and should not be
relied upon;

       

      (v) No
oral or written representations have been made, or oral or written information
furnished, to the Purchaser or its Advisors, if any, in connection with the
offering of the Units which are in any way inconsistent with the information
contained in the Memorandum;

       

      (w)
Within five days after receipt of a request from the Company, the Purchaser will
provide such information and deliver such documents as may reasonably be
necessary to comply with any and all laws and ordinances to which the Company is
subject;

       

      (x) The
Purchaser’s substantive relationship with the Company predates the Company’s
contact with the Purchaser regarding an investment in the Units;

       

      (y) THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR
THE SECURITIES LAWS OF CERTAIN STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE
ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE COMMISSION, ANY STATE SECURITIES COMMISSION OR
ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED
UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE
MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL;

       

      (z) The
Purchaser acknowledges that none of the Units, the Notes, the Warrants or the
Common Shares issuable upon the conversion of the Notes  or upon
exercise of the Warrants have been recommended by any Federal or state
securities commission or regulatory authority. In making an investment decision
investors must rely on their own examination of the Company and the terms of the
Offering, including the merits and risks involved. Furthermore, the foregoing
authorities have not confirmed the accuracy or determined the adequacy of this
Subscription Agreement. Any representation to the contrary is a criminal
offense. The Units, the Notes, the Warrants, and the Common Shares issuable by
the Company upon conversion of the Notes and  upon the exercise of the
Warrants, are subject to restrictions on transferability and resale and may not
be transferred or resold except as permitted under the Securities Act, and the
applicable state securities laws, pursuant to registration or exemption
therefrom. Investors should be aware that they will be required to bear the
financial risks of this investment for an indefinite period of time;
and

       

      (aa)
(For ERISA plans only)
The fiduciary of the ER1SA plan (the “Plan”) represents that such
fiduciary has been informed of and understands the Company’s investment
objectives, policies and strategies, and that the decision to invest “plan
assets” (as such term is defined in ERISA) in the Company is consistent with the
provisions of ERISA that require diversification of plan assets and impose other
fiduciary responsibilities. The Purchaser or Plan fiduciary (a) is responsible
for the decision to invest in the Company; (b) is independent of the Company and
any of its affiliates; (c) is qualified to make such investment decision; and
(d) in making such decision, the Purchaser or Plan fiduciary has not relied
on any advice or recommendation of the Company or any of its
affiliates.

       

      6.           Representations and Warranties of the
Company.  The Company hereby acknowledges, represents,
warrants, and agrees as follows:

       

      (a) The
Company is duly organized, validly existing and in good standing under the laws
of the State of Illinois. The Company is duly qualified to transact business and
is in good standing in each jurisdiction in which failure to do so would have a
material adverse effect on the assets, business, properties, operations,
financial condition or prospects of the Company; and

       

      (b) The
execution and delivery of this Subscription Agreement, the Notes, the Warrants
and the Security Agreement and the  performance by the Company of its
obligations hereunder and thereunder and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by the Company and no
other proceedings on the part of the Company are necessary. The person(s)
executing this Subscription Agreement, the Notes, the Security Agreement and the
Warrants on behalf of the Company has all right, power and authority to execute
and deliver such agreements in the name and on behalf of the Company. This
Subscription Agreement, the Notes, the Security Agreement and the Warrants have
been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by the subscriber hereto, will
constitute the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally and the
availability of equitable remedies.

       

      7.           Indemnification.  The
Purchaser agrees to indemnify and hold harmless the Company,
its officers, directors, employees, agents, control persons and
affiliates from and against all losses, liabilities, claims, damages, costs,
fees and expenses whatsoever
(including, but not limited to, any and all expenses incurred in investigating,
preparing
or defending against any litigation commenced or threatened) based upon or
arising out of any actual or alleged false acknowledgment, representation or
warranty, or misrepresentation or omission to state a material fact, or breach
by the Purchaser of any covenant or agreement made by the Purchaser herein or in
any other document delivered in connection with this Subscription
Agreement.

       

      8.           Irrevocability; Binding Effect.
The Purchaser hereby acknowledges and agrees that the
subscription hereunder is irrevocable by the Purchaser, except as required by
applicable law, and
that this Subscription Agreement shall survive the death or disability of the
Purchaser and shall
be binding upon and inure to the benefit of the parties and their heirs,
executors, administrators,
successors, legal representatives, and permitted assigns.  If the
Purchaser is more than one
person, the obligations of the Purchaser hereunder shall be joint and several
and the agreements,
representations, warranties, and acknowledgments herein shall be deemed to be
made by and be binding upon each such person and such person’s heirs, executors,
administrators, successors, legal representatives, and permitted
assigns.

       

      9.           Modification.  This
Subscription Agreement shall not be modified or waived except by
an instrument in writing signed by the party against whom any such modification
or waiver is
sought.

       

      10.           Notices.  Any notice or other
communication required or permitted to be given hereunder
shall be in writing and shall be mailed by certified mail, return receipt
requested, or delivered
against receipt to the party to whom it is to be given (a) if to the Company, at
the address
set forth above or (b) if to the Purchaser, at the address set forth on the
signature page hereof
(or, in either case, to such other address as the party shall have furnished in
writing in accordance
with the provisions of this Section 10). Any notice or other communication given
by certified
mail shall be deemed given at the time of certification thereof, except for a
notice changing
a party’s address which shall be deemed given at the time of receipt
thereof.

       

      11.          Assignability.  This
Subscription Agreement and the rights,  interests and obligations
hereunder are not transferable or assignable by the Purchaser and the transfer
or assignment
of the Units, the Notes, the Security Agreement, the Warrants and the shares of
Common Stock issuable by the Company upon or upon exercise of the Warrants shall
be made only in accordance with all applicable laws.

       

      12.          Applicable
Law.  This Subscription Agreement shall be governed by and
construed
under the laws of the State of Illinois as applied to agreements among Illinois
residents entered
into and to be performed entirely within Illinois. Each of the parties hereto
(1) agree that any legal
suit, action or proceeding arising out of or relating to this Agreement shall be
instituted exclusively
in the 19th
Judicial Circuit Court of Lake County, Illinois, or in the United States
District
Court for the Northern District of Illinois, (2) waive any objection which the
Company may have
now or hereafter to the venue  of any  such
suit,  action  or proceeding, and (3)
irrevocably consent to the jurisdiction of the 19th
Judicial Circuit Court of Lake County, Illinois,
and the United States District Court for the Northern District of Illinois in
any such suit, action or
proceeding. Each of the parties hereto further agrees to accept and acknowledge
service of any
and all process which may be served in any such suit, action or proceeding in
the 19th
Judicial
Circuit Court of Lake County, Illinois, or in the United States District Court
for the Northern
District of Illinois and agrees that service of process upon it mailed by
certified mail to its
address shall be deemed in every respect effective service of process upon it,
in any such suit, action or
proceeding.  THE PARTIES HERETO AGREE TO WAIVE THEIR RESPECTIVE
RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING  OUT  OF  THIS  SUBSCRIPTION  AGREEMENT  OR  ANY  DOCUMENT  OR
AGREEMENT
CONTEMPLATED HEREBY.

       

      13.          Blue  Sky  Qualification.  The
purchase  of Units  under this  Subscription
Agreement
is expressly conditioned upon the exemption from qualification of the offer and
sale of the
Units from applicable Federal and state securities laws.  The Company
shall not be required
to qualify this transaction under the securities laws of any
jurisdiction and, should qualification
be necessary, the Company shall be released from any and all obligations to
maintain
its offer, and may rescind any sale contracted, in the
jurisdiction.

       

      14.          Use of
Pronouns.  All pronouns and any variations thereof used herein
shall be deemed to
refer to the masculine, feminine, neuter, singular or plural as the identity of
the person or
persons referred to may require.

       

      15.          Confidentiality. The Purchaser
acknowledges and agrees that any information or data
the Purchaser has acquired from or about the Company, not otherwise properly in
the public
domain, was received in confidence. The Purchaser agrees not to divulge,
communicate or disclose,
except as may be required by law or for the performance of this Subscription
Agreement,
or use to the detriment of the Company or for the benefit of any other
person or persons,
or misuse in any way, any confidential information of the Company, including any
scientific,
technical, trade or business secrets of the Company and any scientific,
technical, trade or
business materials that are treated by the Company as confidential or
proprietary, including, but not
limited to, ideas, discoveries, inventions, developments and improvements
belonging to the
Company and confidential information obtained by or given to the Company about
or belonging
to third parties.

       

      16.          Miscellaneous.

       

      (a)  This
Subscription Agreement, together with the Warrants constitute the entire
agreement between the Purchaser and the Company with respect to the subject
matter hereof and supersede all prior oral or written agreements and
understandings, if any, relating to the subject matter hereof. The terms and
provisions of this Subscription Agreement may be waived, or consent for the
departure therefrom granted, only by a written document executed by the party
entitled to the benefits of such terms or provisions.

       

      (b)           Each
of the Purchaser’s and the Company’s representations and warranties
made in this Subscription Agreement shall survive the execution and delivery
hereof and
delivery of the Notes, the Warrants and the Common Shares issuable upon
conversion of, or payment
of interest on, the Notes and issuable upon the exercise of the
Warrants.

       

      (c)           Each
of the parties hereto shall pay its own fees and expenses (including
the fees
of any attorneys, accountants, appraisers or others engaged by such party) in
connection with this
Subscription Agreement and the transactions contemplated hereby whether or not
the transactions
contemplated hereby are consummated.

       

      (d)           This  Subscription  Agreement  may  be  executed  in  one  or  more
counterparts
each of which shall be deemed an original, but all of which shall together
constitute one and
the same instrument.

       

      (e)           Each
provision of this Subscription Agreement shall be considered separable
and, if for any reason any provision or provisions hereof are determined to be
invalid or contrary to applicable law, such invalidity or illegality shall not
impair the operation of or affect the remaining portions of this Subscription
Agreement.

       

      (f)           Paragraph
titles are for descriptive purposes only and shall not control or alter the
meaning of this Subscription Agreement as set forth in the text.

       

       

      
         

        
          	
                   
      

                	
                  17.
      Omnibus signature
      page. This Subscription Agreement is intended to be read and
      construed in conjunction with the Security Agreement pertaining to the
      Notes.  Accordingly, pursuant to the terms and conditions of
      this Subscription Agreement and such related agreement it is herby agreed
      that the execution by the Purchaser of this Subscription Agreement, in the
      place set forth herein shall constitute agreement to be bound by the terms
      and conditions hereof and the terms and conditions of the Security
      Agreement, the Patent Security Agreement and the Trademark Security
      Agreement with the same effect as if each of such separate, but related
      agreements were separately signed.

                

        

        

          
            
               

            

            
               

              
                

              

            

            
               

            

          

      

      
        

         

        

      

      ANTI-MONEY
LAUNDERING REQUIREMENTS

       

      

       

      

       

      
        	
                The
      USA PATRIOT Act

                 

              	
                What
      is money laundering?

              	
                How
      big is the problem and why is it important?

              
	
                 

                The
      USA PATRIOT Act is designed to detect, deter, and punish terrorists in the
      United States and abroad.  The Act imposes new anti-money
      laundering requirements on brokerage firms and financial
      institutions.  Since April 24, 2002 all brokerage firms have
      been required to have new, comprehensive anti-money laundering
      programs.

                 

                To
      help you understand theses efforts, we want to provide you with some
      information about money laundering and our steps to implement the USA
      PATRIOT Act.

              	
                 

                Money
      laundering is the process of disguising illegally obtained money so that
      the funds appear to come from legitimate sources or
      activities.  Money laundering occurs in connection with a wide
      variety of crimes, including illegal arms sales, drug trafficking,
      robbery, fraud, racketeering, and terrorism.

              	
                 

                The
      use of the U.S. financial system by criminals to facilitate terrorism or
      other crimes could well taint our financial markets.  According
      to the U.S. State Department, one recent estimate puts the amount of
      worldwide money laundering activity at $1 trillion a
  year.

              

      

      

      
        	
                What
      are we required to do to eliminate money laundering?

              
	
                 

                Under
      new rules required by the USA PATRIOT Act, our anti-money laundering
      program must designate a special compliance officer, set up employee
      training, conduct independent audits, and establish policies and
      procedures to detect and report suspicious transaction and ensure
      compliance with the new laws.

              	
                 

                As
      part of our required program, we may ask you to provide various
      identification documents or other information.  Until you
      provide the information or documents we need, we may not be able to effect
      any transactions for you.

              

      

      Z
TRIM HOLDINGS, INC.

       

      SIGNATURE
PAGE TO

       

      SUBSCRIPTION
AGREEMENT, SECURITY AGREEMENT, PATENT SECURITY AGREEMENT AND TRADEMARK SECURITY
AGREEMENT

       

      
        Purchaser
hereby elects to purchase a total of ______ Units at a price of $________ per
Unit (NOTE: to be completed by the Purchaser).

         

        Date
(NOTE: To be completed by the Purchaser): __________________, 2009

         

        

         

        

      

      If the
Purchaser is an INDIVIDUAL, and if purchased as JOINT TENANTS, as TENANTS IN
COMMON, or as COMMUNITY PROPERTY:

      

      ____________________________                                                                           ______________________________

      Print
Name(s)                                                                Social
Security Number(s)

      

      ___________________________                                                                ______________________________

      Signature(s) of
Purchaser(s)                                                                           Signature

      

      ____________________________                                                                           ______________________________

      Date                                                      Address

      

      If the
Purchaser is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY or
TRUST:

      

      ____________________________                                                                           ______________________________

      Name of
Partnership,                                                                 Federal
Taxpayer

      Corporation,
Limited                                                                  Identification
Number

      Liability Company or Trust

      

      By:_________________________                                                                           ______________________________

            Name:                                                      State
of Organization

            Title:

      

      ____________________________                                                                           ______________________________

      Date                                                      Address

      

       

      Z
TRIM HOLDINGS,
INC.                                                                                                

       

      

       

      By:           __________________________

       

      Authorized
Officer

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