Document:

exh10_1.htm

    AMENDMENT
TO

    SECURITIES
PURCHASE AGREEMENT

    

    This
Amendment to Securities Purchase Agreement (this “Amendment”) is
entered into as of October 7, 2009 by and between Invus, L.P., a Bermuda limited
partnership (the “Investor”), and
Lexicon Pharmaceuticals, Inc., a Delaware corporation (the “Company”).  Capitalized
terms used but not otherwise defined herein shall have the meanings ascribed to
them in the Securities Purchase Agreement (as defined below).

    

    W I T N E
S S E T H :

     

    WHEREAS,
the Investor and the Company entered into that certain Securities Purchase
Agreement, dated as of June 17, 2007 (the “Securities Purchase
Agreement”), and that certain Stockholders’ Agreement, made as of June
17, 2007 (the “Stockholders’
Agreement”);

    

    WHEREAS,
the Company desires to issue and sell shares of Company Common Stock in an
underwritten offering registered under the Securities Act (the “Offering”), which
Offering requires the consent of the Investor under the Securities Purchase
Agreement; and

    

    WHEREAS,
in connection with the Offering, the Investor and the Company desire to amend
the Securities Purchase Agreement as set forth below to (a) modify the
definition of Second Rights Offering Trigger Date, (b) extend the period during
which the Investor may deliver the First Rights Offering Notice and Second
Rights Offering Notice from ninety (90) days to one (1) year after the First
Rights Offering Trigger Date and Second Rights Offering Trigger Date,
respectively, (c) eliminate the Investor’s obligation to purchase unsubscribed
Rights Shares at the expiration of a Rights Offering, and (d) make certain other
amendments to the terms thereof.

     

    NOW,
THEREFORE, intending to be legally bound hereby, the parties hereto hereby agree
as follows:

     

    Section
1.                                Amendment to Section 1.01 of
the Securities Purchase Agreement

     

    The definition of “Oversubscription Pro
Rata Number” in Section 1.01 of the Securities Purchase Agreement is hereby
amended and restated in its entirety to read as follows:

     

    “Oversubscription Pro Rata
Number” shall mean, for each holder of a Right exercising Rights Offering
Oversubscription rights, a fraction the numerator of which is the total number
of shares of Company Common Stock owned by such holder and the denominator of
which is the total number of outstanding shares of Company Common Stock held by
all holders of Rights who have validly exercised Rights Offering
Oversubscription rights in the relevant Rights Offering (it being understood
that no shares shall be deemed owned by more than one holder for purposes
hereof); provided that,
to the extent any holders validly exercising Rights Offering Oversubscription
rights exercise such rights with respect to less than their entire respective
Oversubscription Pro Rata Numbers of Oversubscription Shares (with the
unsubscribed-for Oversubscription Shares being referred to as “Excess Oversubscription
Shares”), the Oversubscription Pro Rata Numbers of all other holders
validly exercising Rights Offering Oversubscription rights in full shall be
increased proportionately up to the maximum number of Oversubscription Shares
such holders elect to purchase (it being the intent of this provision that the
Oversubscription Pro Rata Numbers be established such that any such Excess
Oversubscription Shares be allocated among holders exercising Rights Offering
Oversubscription rights in full on a pro rata basis based on the number of
Oversubscription Shares allocated to such holders, up to the total number of
Excess Oversubscription Shares such holders elect to purchase); provided further, with the
written consent of both the Investor and the Company, the determination of the
Oversubscription Pro Rata Number may be based on another customary proration
method.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section 1.01 of the Securities Purchase
Agreement is hereby amended by adding the following definition of
“Oversubscription Shares” immediately after the definition of “Oversubscription
Pro Rata Number” therein as follows:

     

    “Oversubscription
Shares” shall mean First Rights Offering Oversubscription Shares in the
First Rights Offering or Second Rights Offering Oversubscription Shares in the
Second Rights Offering, as applicable.

     

    The definition of “Second Rights
Offering Trigger Date” in Section 1.01 of the Securities Purchase Agreement is
hereby amended and restated in its entirety to read as follows:

     

    “Second Rights Offering
Trigger Date” means the date that is (i) ninety (90) days after the
delivery of the First Rights Offering Notice or (ii) if such notice is not
delivered, the date of the expiration of the period (as it may be extended by
any Rights Offering Notice Blackout Period) in which the Investor may give
notice to require the Company to conduct the First Rights Offering pursuant to
Section 3.01(a).

     

    Section
2.                                Amendments to Section 3.01
of the Securities Purchase Agreement

     

    The first
sentence of Section 3.01(a) of the Securities Purchase Agreement is hereby
amended and restated in its entirety to read as follows:

     

    Subject
to Section 3.03(e), for a period of one (1) year following the First Rights
Offering Trigger Date, the Investor shall have the right, but not the
obligation, exercisable by a written notice (the “First Rights Offering
Notice”) to the Company in accordance with Section 10.02, to require the
Company to make a pro rata offering (the “First Rights
Offering”) to all holders of Company Common Stock (including the Investor
and its affiliates) of non-transferable subscription rights (the “First Rights”)
entitling the holders thereof to purchase shares of Company Common Stock, on the
terms set forth herein, (i) in an aggregate amount equal to the First Rights
Offering Amount, and (ii) at a price per share (the “First Rights Offering
Price”) to be designated by the Investor at any time on or after delivery
of the First Rights Offering Notice and before the establishment of the record
date for the distribution of the First Rights to the Company’s stockholders
(provided that the establishment of such record date shall not be prior to the
time the First Rights Offering Registration Statement shall have been declared
effective by the SEC) by written notice  (the “First Rights Offering
Pricing Notice”) to the Company in accordance with Section 10.02; provided that the First
Rights Offering Price shall be any price (A) at or above the lower of $4.50 (as
adjusted for any stock splits, reverse splits, stock dividends, combinations or
similar transactions occurring after the date hereof and prior to the First
Rights Offering) and the average of the volume weighted average trading prices
of the Company Common Stock on the Nasdaq Stock Market for the ten (10) full
trading days immediately prior to the date of the First Rights Offering Pricing
Notice (the “First
Rights Offering Market Price”) and (B) at or below the higher of $4.50
(as adjusted for any stock splits, reverse splits, stock dividends, combinations
or similar transactions occurring after the date hereof and prior to the First
Rights Offering) and the First Rights Offering Market Price.

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    Section 3.01(b) of the Securities
Purchase Agreement is hereby amended and restated in its entirety to read as
follows:

    

    (b)           In
connection with the First Rights Offering, upon the terms and subject to the
conditions of this Agreement, the Investor shall be required to subscribe for
and purchase a number of First Rights Shares that is not less than its Pro Rata
Number of First Rights Shares.

    

    Section
3.                                Amendments to Section 3.02
of the Securities Purchase Agreement

    

    The first
sentence of Section 3.02(a) of the Securities Purchase Agreement is hereby
amended and restated in its entirety to read as follows:

     

    Subject
to Section 3.03(e), for a period of one (1) year following the Second Rights
Offering Trigger Date, the Investor shall have the right, but not the
obligation, exercisable by written notice (the “Second Rights Offering
Notice” and, together with the First Rights Offering notice, the “Rights Offering
Notices”) to the Company in accordance with Section 10.02, to require the
Company to make a pro rata offering (the “Second Rights
Offering” and, together with the First Rights Offering, the “Rights Offerings”) to
all holders of Company Common Stock (including the Investor and its affiliates)
of non-transferable subscription rights (the “Second Rights” and,
together with the First Rights, the “Rights”) entitling
the holders thereof to purchase shares of Company Common Stock, on the terms set
forth herein, (i) in an aggregate amount equal to the Second Rights Offering
Amount, and (ii) at a price per share (the “Second Rights Offering
Price”) to be designated by the Investor at any time on or after delivery
of the Second Rights Offering Notice and before the establishment of the record
date for the distribution of the Second Rights to the Company’s stockholders
(provided that the establishment of such record date shall not be prior to the
time the Second Rights Offering Registration Statement shall have been declared
effective by the SEC) by written notice  (the “Second Rights Offering
Pricing Notice”) to the Company in accordance with Section 10.02; provided that the Second
Rights Offering Price shall be any price (A) at or above the lower of $4.50 (as
adjusted for any stock splits, reverse splits, stock dividends, combinations or
similar transactions occurring after the date hereof and prior to the Second
Rights Offering) and the average of the volume weighted average trading prices
of the Company Common Stock on the Nasdaq Stock Market for the ten (10) full
trading days immediately prior to the date of the Second Rights Offering Pricing
Notice (the “Second
Rights Offering Market Price”) and (B) at or below the higher of $4.50
(as adjusted for any stock splits, reverse splits, stock dividends, combinations
or similar transactions occurring after the date hereof and prior to the Second
Rights Offering) and the Second Rights Offering Market Price.

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    Section 3.02(b) of the Securities
Purchase Agreement is hereby amended and restated in its entirety to read as
follows:

    

    (b)           In
connection with the Second Rights Offering, upon the terms and subject to the
conditions of this Agreement, the Investor shall be required to subscribe for
and purchase a number of Second Rights Shares that is not less than its Pro Rata
Number of Second Rights Shares.

    

    Section
4.                                Amendment to Section 3.03 of
the Securities Purchase Agreement

    

    Section 3.03 of the Securities Purchase
Agreement is hereby amended by adding new Section 3.03(e) at the end thereof as
follows:

    

    (e)           In
the event that the Company delivers a bona fide Notice of Issuance in connection
with a Marketed Offering (in each case, as such terms are defined and
contemplated by Section 4.02 of the Stockholders’ Agreement) to the Investor
during the period in which the Investor may deliver any Rights Offering Notice
under Section 3.01(a) or Section 3.02(a), the Investor shall have the right, for
a period of ten (10) business days from the date of receipt of such Notice of
Issuance, to deliver a Rights Offering Notice to the Company, in which case the
Company shall retract the Notice of Issuance, proceed with the Rights Offering
contemplated by the Investor’s notice, and forego the Marketed Offering
contemplated thereby until such Rights Offering is completed or, with the
consent of the Investor, terminated.  In the event that the Investor
does not deliver such Rights Offering Notice to the Company upon the expiration
of such ten (10) business day period, the Company shall have the right to
conduct the Marketed Offering contemplated by the Notice of Issuance, and the
Investor shall not deliver a Rights Offering Notice to the Company (i) for a
period of thirty (30) days from the date of delivery by the Company of the
Notice of Issuance (the “Initial Rights Offering
Notice Blackout Period”) and (ii) so long as the offering of New
Securities (as defined in the Stockholders’ Agreement) described in such Notice
of Issuance occurs within the Initial Rights Offering Notice Blackout Period,
and only if requested in writing by the underwriters for the Marketed Offering
contemplated by such Notice of Issuance, for a period of ninety (90) days from
the date of issuance of the New Securities contemplated by such Notice of
Issuance (such period, together with the Initial Rights Offering Notice Blackout
Period, the “Rights
Offering Notice Blackout Periods”).  Notwithstanding anything
to the contrary in the foregoing, the Company may exercise its right to cause
Rights Offering Notice Blackout Periods under this Section 3.03(e) only once in
any twelve (12) month period; provided that, for such
purposes, the Company shall not be deemed to have exercised such right if,
following the Company’s delivery of a Notice of Issuance in connection with a
Marketed Offering, the Investor shall have delivered a Rights Offering Notice to
the Company and the Company shall have retracted such Notice of Issuance in
accordance with this Section 3.03(e); and provided, further, that
nothing in this Section 3.03(e) shall prohibit the Company from conducting a
Marketed Offering without exercising its right to cause a Rights Offering Notice
Blackout Period under this Section 3.03(e).  The running of the period
in which the Investor may deliver any Rights Offering Notice under Section
3.01(a) or Section 3.02(a), as applicable, shall be tolled while any Rights
Offering Notice Blackout Period is in effect.

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    Section
5.                                Addition of Section 3.04 of
the Securities Purchase Agreement

    

    The Securities Purchase Agreement is
hereby amended by adding new Section 3.04:

    

    SECTION
3.04.                                           Shelf
Registration.

     

    (a)           So
long as it would not reasonably be expected to materially delay the applicable
Rights Offering, (i) the Company may, at its option, file with the SEC one or
more shelf registration statements on Form S-3 (or, if Form S-3 is not then
available to the Company, on such form of registration statement as is then
available to effect a registration of securities), in form and substance
reasonably satisfactory to the Investor, covering the issuance of Rights and
Rights Shares, together with such other securities as the Company may elect
(together with the prospectus relating thereto and any prospectus supplement and
offering documents, a “Shelf Registration
Statement”) and (ii) in the event the Company has in effect, at the time
of the Investor’s delivery of a Rights Offering Notice, an effective Shelf
Registration Statement sufficient to cover the issuance of the Rights and the
Rights Shares to be offered in such Rights Offering, then rather than filing a
Rights Offering Registration Statement pursuant to Section 3.01(c) or 3.02(c),
as applicable, the Company shall be entitled to employ such Shelf Registration
Statement as the relevant Rights Offering Registration Statement for purposes of
such Rights Offering. Any such Shelf Registration Statement (and each amendment
or supplement thereto, and each request for acceleration of effectiveness
thereof) will be provided to the Investor prior to its filing with or other
submission to the SEC.  The Company shall not include any other
securities in the prospectus supplement relating to any Rights
Offering.  Any such Shelf Registration Statement employed as a Rights
Offering Registration Statement will comply in all material respects with the
requirements of the Securities Act and the rules and regulations thereunder and
other applicable Laws.  The Company promptly will correct any
information included in any Shelf Registration Statement employed as a Rights
Offering Registration Statement if, and to the extent that, such information
becomes false or misleading in any material respect, and the Company will take
all steps necessary to cause the applicable prospectus (including any applicable
prospectus supplement) contained in such Shelf Registration Statement employed
as a Rights Offering Registration Statement, as so corrected, to be filed with
the SEC and to be disseminated to the distributees of Rights, in each case as
and to the extent required by applicable federal securities laws.  The
Investor will be given a reasonable opportunity to review and comment upon any
Shelf Registration Statement in each instance before it is filed with the
SEC.  In addition, the Company will provide the Investor with any
written comments or other written communications that the Company receives from
time to time from the SEC or its staff with respect to any Shelf Registration
Statement promptly after the receipt of such comments or other
communications.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (b)           Notwithstanding
the provisions of Section 3.01(d) or 3.02(d), as applicable, in the event the
Company employs a Shelf Registration Statement as the relevant Rights Offering
Registration Statement for purposes of a Rights Offering, the Company will
commence such Rights Offering as soon as reasonably practicable following its
receipt of the Rights Offering Notice relating thereto.

     

    Section
6.                                Amendment to Section 6.02(a)
of the Securities Purchase Agreement

    

    Section 6.02(a) of the Securities
Purchase Agreement is hereby amended and restated in its entirety to read as
follows:

    

    (a)           Until
(i) the completion of the Second Rights Offering as contemplated by Section 3.02
or (ii) the expiration of the period following the Second Rights Offering
Trigger Date during which the Investor may exercise its right to require the
Company to conduct the Second Rights Offering (as such period may be extended),
if the Investor does not exercise such right within such period, the prior
written consent of the Investor shall be required for the issuance by the
Company of any shares of Company Common Stock for a per share price of less than
$4.50 (as adjusted for any stock splits, reverse splits, stock dividends,
combinations or similar transactions occurring after the date hereof and prior
to the Second Rights Offering); provided that the provisions
of this Section 6.02 shall not apply to the issuance of Company Common Stock (A)
pursuant to employee or director stock option, incentive compensation or similar
plans approved by the Board or a duly authorized committee thereof or such
committee, (B) to persons involved in the pharmaceutical industry in connection
with simultaneous strategic transactions involving such persons in the ordinary
course or (C) in connection with the exercise, on or after February 27, 2011, of
the Company’s option to acquire Symphony Icon, Inc. in accordance with the terms
of its Purchase Option Agreement among the Company, Symphony Icon Holdings LLC
and Symphony Icon, Inc., as such agreement is in effect on October 6,
2009.

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    Section
7.                                Consent to Further
Amendments; Further Assurances

    

    The parties hereto hereby consent to
such other amendments and changes to the Securities Purchase Agreement and
Ancillary Agreements as necessary to give effect to the intent of this Amendment
and shall execute and deliver or cause to be executed and delivered any
additional documents, certificates, consents, waivers and instruments and
perform any additional acts that may be reasonably necessary or appropriate to
effectuate and perform the provisions of this Amendment and those transactions
contemplated herein.

    

    Section
8.                                Consent to Waiver of
Investor Election Period in Sections 4.02(b) and 4.02(c)of the Stockholders’
Agreement; Rights Offering Blackout

    

    (a)           With
respect to the Offering (including any related overallotment option), the
Company and the Investor hereby waive any applicability to the Offering of the
notice provisions contained in Sections 4.02(b) and (c) of the Stockholders’
Agreement and agree that notice will be delivered as follows: the Company shall
deliver a Notice of Issuance specifying the price to public and number of shares
to be sold to public in the Offering on the date the underwriting agreement is
expected to be signed by the Company in connection with the Offering and, upon
receipt of such notice by the Investor, the Investor (i) shall exercise its
rights under Section 4.02 with respect to the Offering by delivering notice of
such exercise substantially concurrently with the signing by the Company of the
underwriting agreement with respect thereto, and (ii) shall retain the right to
make an election whether to exercise its rights under Section 4.02 with respect
to any additional New Securities issued upon the exercise by the underwriters of
their overallotment option in connection with such Offering by delivering notice
of such exercise as promptly as practicable following the Company’s notice to
the Investor of the underwriters’ exercise of such option. For the
avoidance of doubt, with respect to the Offering, the Investor waives its right
to deliver notice of its intent to participate in the Offering ten (10) business
days following receipt of the Notice of Issuance related thereto.

    

    (b)           The
Investor agrees not to exercise its right to cause the Company to conduct a
Rights Offering during the ninety (90) day period following the delivery of the
Offering Consent (as defined in Section 9 hereof).  Notwithstanding
the amendments to Section 3.03 of the Securities Purchase Agreement effected
hereby, the periods in which the Investor may deliver any Rights Offering Notice
under Section 3.01(a) and Section 3.02(a) shall not be extended by such ninety
(90) day period, and shall not be deemed to be an exercise of the Company’s
right to cause Rights Offering Notice Blackout Periods under Section
3.03(e).

    

    (c)           The
Investor expressly acknowledges and agrees that the provisions of Sections
4.02(b) and 4.02(c) of the Stockholders’ Agreement relating to the free
transferability of shares to be received in the Offering shall not affect its
obligations under its “lock-up” agreement dated October 5, 2009 with the
underwriters, which restricts the transferability of New Securities to be issued
by the Company in connection with the Offering.

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    Section
9.                                Effectiveness;
Termination

    

    This
Amendment shall become effective only upon delivery by the Investor to the
Company, pursuant to Section 6.02(a) of the Securities Purchase Agreement, of
the Investor’s written consent to the Offering substantially in the form of
Exhibit A hereto (the “Offering
Consent”).  Notwithstanding any such delivery, in the event
that the underwriting agreement relating to the Offering is not executed on or
before October 13, 2009, (i) this Amendment shall terminate and cease to have
any force or effect and (ii) the Offering Consent shall be of no force or
effect.

     

    Section
10.                                Ratification and
Confirmation

    

    The
Securities Purchase Agreement and Stockholders’ Agreement, as hereby amended or
supplemented, are hereby ratified and confirmed in all respects.  This
Amendment shall be interpreted and construed together with, and as a part of,
the Securities Purchase Agreement or Stockholders’ Agreement, as
applicable.  Any reference in any other document to the Securities
Purchase Agreement or Stockholders’ Agreement shall be deemed to refer to the
Securities Purchase Agreement or Stockholders’ Agreement, as applicable, as
modified by this Amendment.  The execution, delivery and effectiveness
of this Amendment shall not constitute a modification or waiver of any provision
of the Securities Purchase Agreement or Stockholders’ Agreement except as
expressly provided herein.

    

    Section
11.                                Governing
Law

     

    This
Amendment shall be governed by, and construed in accordance with, the laws of
the State of New York.  All actions and proceedings arising out of or
relating to this Amendment shall be heard and determined exclusively in any New
York state or federal court, in each case sitting in the Borough of
Manhattan.  The parties hereto hereby (a) submit to the exclusive
jurisdiction of any New York state or federal court, in each case sitting in the
Borough of Manhattan, for the purpose of any Action arising out of or relating
to this Amendment brought by any party hereto, and (b) irrevocably waive, and
agree not to assert by way of motion, defense, or otherwise, in any such Action,
any claim that it is not subject personally to the jurisdiction of the
above-named courts, that its property is exempt or immune from attachment or
execution, that the Action is brought in an inconvenient forum, that the venue
of the Action is improper, or that this Amendment may not be enforced in or by
any of the above-named courts.

     

    Section
12.                                Counterparts

     

    This
Amendment may be executed and delivered (including by facsimile transmission) in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed and delivered shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.

     

    [Signature
Page Follows]

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    IN
WITNESS WHEREOF, the Investor and the Company have caused this Amendment to be
executed as of the date first written above by their respective officers
thereunto duly authorized.

     

    
      

      
        
          
            
              	 	 INVESTOR:
	 	 
	 
      	
                      INVUS,
      L.P.

                      a Bermuda limited
partnership

                    
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                       

                    	
                      By:

                    	
                      /s/
      Raymond Debbane

                    
	 
      	Name:	
                      Raymond
      Debbane

                    
	 
      	Title:	
                      President, Invus Advisors,
      L.L.C.

                    
	 
      	 
      	
                       

                    

            

          

        

      

      

    

    
      

      
        
          
            
              	 	 COMPANY
	 	 
	 
      	
                      Lexicon
      Pharmaceuticals, Inc.,

                      a Delaware corporation

                    
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                       

                    	
                      By:

                    	
                      /s/
      Jeffrey L. Wade

                    
	 
      	Name:	
                      Jeffrey
      L. Wade

                    
	 
      	Title:	
                      Executive Vice President
      and

                    
	 
      	 
      	
                      General
      Counsel

                    

            

          

        

      

      
 

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      Exhibit A

       

      
        NOTICE
OF

        

        CONSENT TO
OFFERING

        

        October
__, 2009

        

        Invus,
L.P.

        c/o The
Invus Group, L.L.C.

        750
Lexington Avenue (30th
Floor)

        New York,
New York 10022

        

        Lexicon
Pharmaceuticals, Inc.

        8800
Technology Forest Place

        The
Woodlands, Texas 77381

        Attn: 
President and Chief Executive Officer

        

        Ladies
and Gentlemen:

        

        Reference is made to that certain
Securities Purchase Agreement, dated as of June 17, 2007 (as amended, the “Securities Purchase
Agreement”), by and between Invus, L.P. (the “Investor”) and
Lexicon Pharmaceuticals, Inc. (the “Company”) and to that
certain Amendment to Securities Purchase Agreement, dated as of October [__],
2009, by and between the Investor and the Company.  Capitalized terms
used but not otherwise defined herein shall have the meanings ascribed to them
in the Securities Purchase Agreement.

        

        Pursuant to Section 6.02(a) of the
Securities Purchase Agreement, the Investor hereby consents to an underwritten
offering by the Company of Company Common Stock on the following
terms:

        

        Issuer: Lexicon
Pharmaceuticals, Inc.

        

        Offering: _____
shares of Company Common Stock (the “Firm Shares”), and up to
_________additional shares to cover over allotments by the underwriters in such
offering as provided in the underwriting agreement to be executed in connection
with such offering (the “Underwriting Agreement”)

        

        Size: $_____ at a
$_____ per share purchase price to the public.

        

        Timing: pricing to
occur on or before _____, 2009 with closing within T+3 (subject to extension as
provided in the Underwriting Agreement).

        
           

          
            
              
                
                  
                    
                      	 
      	
                              INVUS,
      L.P.

                              a Bermuda limited
partnership

                            
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                               

                            	
                              By:

                            	
                               

                            
	 
      	Name:	
                               

                            
	 
      	Title:	
                               

                            
	 
      	 
      	
                               

                            

                    

                  

                

              

            

          

          
9Filed by sedaredgar.com - Eden Energy Corp. - Exhibit 10.1

LOAN AGREEMENT

THIS AGREEMENT is made as of October 2, 2009,

BETWEEN:

EDEN ENERGY CORP., a
corporation incorporated under the 
laws of Nevada, having an office at 1680-
200 Burrard Street, 
Vancouver, British Columbia V6C 3L6

(the “Borrower”)

AND:

D Sharpe Management Inc., a
businessman with an address at 
1281 Eldon Road, North Vancouver, British
Columbia V7R 1T5

(the “Lender”)

WHEREAS:

	A. 	
      The Lender is the President and a director of the
      Borrower. The Borrower has requested and the Lender has agreed to lend to
      the Borrower an aggregate principal amount of up to $1,000,000 (the
      “Loan”), to be used by the Borrower for general corporate
      purposes;

	 	 
	B. 	
      The Borrower has agreed to provide the Lender with
      security for the Loan in the form of a pledge and security agreement (the
      “Security Agreement”) in the form attached as Schedule “A” granting
      to the Lender a first ranking security interest in all of the present and
      after acquired property of the Lender (the “Collateral”);
  and

	 	 
	C. 	
      The parties wish to record the terms and conditions of
      the Loan to be made pursuant to the terms of this
  Agreement.

NOW THEREFORE THIS AGREEMENT WITNESSES that pursuant to the
premises and in consideration of the mutual covenants contained in this
Agreement and the agreement of the Lender to advance funds to the Borrower, the
parties covenant and agree as follows:

1.            
LOAN

1.1          
Loan. The Lender will make the Loan available to the Borrower, to be
drawn down in an initial draw of $500,000 and, upon the provision of 30 days
written notice to the Lender, further draws of not less than $50,000, to an
aggregate maximum of $1,000,000. An advance will be made by the Lender thirty
(30) days following the receipt of a draw request and Borrower’s Certificate in
the form attached as Schedule “B” (“Draw Request”). Each Draw request
must state:

	 	(a) 	
      that the Borrower will use the funds to be advanced by
      the Lender upon receipt of the Draw Request for the operation of the
      Borrower’s business;

	 	 	 
	 	(b) 	
      the total amount of all previous draw requests (if
      any);

	 	 	 
	 	(c) 	
      the amount of funds requested, provided that the sum of
      the amount requested and the aggregate amount of all previous draw
      requests cannot exceed $1,000,000;

	 	 	 
	 	(d) 	
      the details of the Borrower’s bank account into which the
      funds are to be paid; and

	 	 	 
	 	(e) 	
      a confirmation that no default exists under this
      Agreement.

1.2          
Closing. Subject to section 1.4 below, the Lender will make the
first advance of $500,000 to the Borrower on execution of this Agreement
or such other date as the parties may agree.

1.3          
Interest Rate. The Loan is to bear interest from the date any funds are
advanced to the Borrower to the date of full repayment of all amounts
outstanding under the Loan at 20% per annum, accruing daily before as
well as after maturity, default or judgment (the “Interest Rate”).
Interest shall be payable quarterly, in arrears, commencing January 5, 2010, and
quarterly thereafter, for the initial draw. For subsequent draws, interest shall
be payable three months after such draws, in arrears, and quarterly
thereafter.

1.4          
Loan Facilitation Fee. The undrawn amount of the Loan shall bear
interest at the rate of 1% per month (the “Loan Facilitation Fee”), which
amount shall be payable quarterly, commencing three months after the date of
this Agreement.

1.5          
Conditions Precedent to Advance. The Lender will not have any obligation to
advance all or any portion of the Loan to the Borrower until all of the
following have been fulfilled to the Lender’s satisfaction:

	 	(a) 	
      the Borrower has executed and delivered this Agreement
      and the Security Agreement;

	 	 	 
	 	(b) 	
      the Borrower has executed and delivered to the Lender a
      Draw Request and Promissory Note; and

	 	 	 
	 	(c) 	
      all filings necessary or advisable have been made in the
      appropriate jurisdictions and there exists valid, perfected and
      enforceable security over the Collateral.

1.6          
Payment of Principal and Interest. The Borrower will pay to the Lender in
full the principal amount of the Loan and all accrued and unpaid Loan
Facilitation Fee amounts and Interest on the earlier to occur of:

	 	(a) 	
      October 5, 2010, subject to extension upon mutual
      agreement of the Lender and Borrower; or

	 	(b) 	
      an Event of Default occurring
hereunder.

1.7          
Prepayment. The Borrower may prepay the Loan in whole or in part, at
any time and from time to time without notice, bonus or penalty.

1.8          
Applications of Payments. All payments of cash made by the Borrower to
the Lender are to firstly be applied to interest, secondly to any outstanding
Loan Facilitation Fee amount and thirdly to the principal balance outstanding
under the Loan.

1.9          
Promissory Notes. The Loan is to be evidenced by promissory notes (each,
a “Promissory Note”) in the form attached hereto as Schedule “C”, issued
by the Borrower to the Lender for the amount of each and every advance. 

1.10        
Manner of Payments. The Borrower will make all payments to the Lender
under this Agreement by wire transfer, cheque, direct deposit or bank draft in
immediately available funds to such account or accounts of the Lender the Lender
may direct from time to time. 

1.11        
Withholding Taxes. If the Borrower is required by law to withhold from
any payment required to be made to the Lender under this Agreement or a
Promissory Note, any amount on account of any taxes imposed by the laws of
Canada, or the laws applicable therein, the Borrower will make the withholding
and pay the amount withheld to the appropriate governmental authority before
penalties attach or interest accrues. The amount of any payment required to be
made hereunder by the Borrower to the Lender is to be reduced by any amount
withheld and paid in respect of such payment in accordance with this Section.
Upon request of the Lender, the Borrower will deliver to the Lender official tax
receipts evidencing such payments.

2.            
SECURITY AGREEMENT

2.1          
Security Agreement. The Loan advanced under this Agreement is to be secured
by the Security Agreement in the form required by the Lender, and the Borrower
agrees to execute and deliver, or cause to be delivered, an original copy of the
Security Agreement for at the time of execution of this Agreement.

3.            
REPRESENTATIONS AND WARRANTIES

3.1          
Representations and Warranties of the Borrower. The Borrower represents
and warrants to the Lender that:

	 	(a) 	
      it has been duly incorporated, validly exists and is in
      good standing under the jurisdiction of its incorporation and each
      jurisdiction where it carries on business and has been duly licensed to
      carry on business in all jurisdictions where it is carrying on
      business,

	 	 	 
	 	(b) 	
      it has the power and authority to enter into, execute and
      deliver and to keep, observe and perform all of the covenants, agreements
      and other obligations made by or imposed on it under this Agreement and
      the Security Agreement (together the “Loan
  Documents”),

	 	(c) 	
      the Loan Documents and all other instruments and
      agreements delivered by the borrower to the Lender pursuant to this
      Agreement have been or will be validly executed by it or on its behalf
      and, when delivered to the Lender, will be legal, valid and binding
      obligations of it, enforceable in accordance with their respective terms,
      except as enforcement may be limited by,

	 	 	 	 
	 		(i) 	
      applicable bankruptcy, insolvency, moratorium,
      reorganization and similar laws at the time in effect affecting the rights
      of creditors generally, and

	 	 	 	 
	 		(ii) 	
      equitable principles which may limit the availability of
      certain remedies, including the remedy of specific performance,

	 	 	 	 
	 	(d) 	
      the execution, delivery and performance by it of the Loan
      Documents does not contravene any material provision of any regulation,
      order or permit applicable to it, or cause a breach of or constitute a
      default under or require any consent under any agreement or instrument to
      which it is a party or by which it is bound except such as have been
      obtained,

	 	 	 	 
	 	(e) 	
      there are no suits or judicial proceedings or proceedings
      before any governmental commission, board or other agency, actual, pending
      or to its knowledge threatened against it which involves a significant
      risk of a judgment or liability which, if satisfied, would have an adverse
      effect upon its financial position or the ability to meet its obligations
      under this Agreement or to grant the Loan Documents,

	 	 	 	 
	 	(f) 	
      it is not in default under any guarantee, note or other
      instrument evidencing any indebtedness, other than as disclosed in writing
      to the Lender by the Borrower, and to its knowledge there exists no state
      of facts which, after notice or lapse of time or both or otherwise, would
      constitute such a default, and

	 	 	 	 
	 	(g) 	
      no event is outstanding which constitutes, or with notice
      or lapse of time or both would constitute, an Event of Default (as defined
      below).

4.           
 COVENANTS

4.1          
Affirmative Covenants. Until such time that the Loan and any outstanding
Interest are repaid in full, the Borrower will:

	 	(a) 	
      pay all amounts due and owing to the Lender when
    due;

	 	 	 
	 	(b) 	
      at all times maintain its corporate existence and be
      registered or licensed to carry on business in all jurisdictions where the
      nature of its business makes it prudent to do so;

	 	 	 
	 	(c) 	
      preserve and protect the goodwill, assets, business and
      undertaking of the Borrower;

	 	(d) 	
      maintain adequate records and books of account reflecting
      all financial transactions in conformity with generally accepted
      accounting principles and provide to the Lender its unaudited quarterly
      and audited annual financial statements, including its balance sheet,
      income statement and statement of cash flow;

	 	 	 
	 	(e) 	
      comply in all material respects with all material
      contracts, arrangements, agreements or understandings entered into by the
      Borrower;

	 	 	 
	 	(f) 	
      promptly notify the Lender of any changes regarding the
      Borrower or the Collateral as necessary to permit the Lender to maintain
      perfection of their security interest;

	 	 	 
	 	(g) 	
      materially comply with all applicable environmental laws
      and promptly provide notice to the Lender of any material default or
      breach of any environmental law;

	 	 	 
	 	(h) 	
      pay all taxes and claims when due; and

	 	 	 
	 	(i) 	
      provide to the Lender such further assurances as may be
      reasonably requested by the Lender to create, perfect and maintain their
      interest in the Collateral.

4.2          
Negative Covenants. Until such time that the Loan and any outstanding
Interest are repaid in full and without the prior consent of the Lender, the
Borrower will not

	 	(a) 	
      create, assume or have outstanding any mortgage, pledge,
      charge, assignment or other security, whether fixed or floating, on any of
      its properties, assets or undertakings ranking or purporting to rank or
      capable of being enforced in priority, or pari passu with the Loan
      and the Loan Documents;

	 	 	 
	 	(b) 	
      guarantee, endorse or otherwise become surety for the
      obligations of any other person;

	 	 	 
	 	(c) 	
      reorganize or amalgamate with any other person;

	 	 	 
	 	(d) 	
      make any inter-company loans or shareholder loans or
      investments, except in the ordinary course of business;

	 	 	 
	 	(e) 	
      dispose of any of its assets, property or undertaking,
      except in the ordinary course of business; or

	 	 	 
	 	(f) 	
      materially change its
business.

5.            
EVENTS OF DEFAULT

5.1          
Events of Default. Each of the following events constitutes a default by
the Borrower under this Agreement (each, an “Event of Default”), unless
the Lender agrees to waive such default:

	 	(a) 	
      the Borrower fails to pay any amount owing to the Lender
      under this Agreement when due, and such amount remains unpaid for five
      days;

	 	 	 
	 	(b) 	
      any of the representations or warranties of the Borrower
      in this Agreement are misleading, or incorrect in any material
    respect;

	 	 	 
	 	(c) 	
      the Lender ceases to have a valid, perfected and
      enforceable charge over the Collateral;

	 	 	 
	 	(d) 	
      an order is made or a resolution passed for the
      liquidation or winding-up of the Borrower; or

	 	 	 
	 	(e) 	
      if the Borrower becomes insolvent, admits in writing its
      inability to pay its debts as they become due or otherwise acknowledges
      its insolvency, commits an act of bankruptcy, makes an assignment or bulk
      sale of its assets, is adjudged or declared bankrupt or makes an
      assignment for the benefit of creditors or a proposal or similar action
      under the Bankruptcy and Insolvency Act (Canada), the Companies
      Creditors’ Arrangement Act (Canada) or any similar legislation, or
      commences any other proceedings relating to it under any reorganization,
      arrangement, readjustment of debt, dissolution or liquidation law or
      statute of any jurisdiction whether now or thereafter in effect, or
      consents to any such proceeding.

5.2          
Remedies For Events of Default. Upon the occurrence of an Event of
Default, the Lender may:

	 	(a) 	
      immediately declare due and payable the outstanding
      balance of the Loan and any unpaid accrued Interest without presentment of
      the Notes, and without demand, protest or other notices of any kind, all
      of which are expressly waived by the Borrower; and/or

	 	 	 
	 	(b) 	
      exercise any and all rights, powers, remedies and
      recourses available to the Lender under the Loan Documents, at law, in
      equity or otherwise.

5.3          
Waiver of Default. The Lender may, in writing in their absolute
discretion at any time and from time to time, waive any breach by the Borrower
of any of its covenants in this Agreement, provided that any such waiver does
not constitute a continuing waiver and does not constitute a waiver of any other
term or provision of this Agreement.

5.4          
No Waiver. No failure or delay on the part of the Lender in exercising
any right, power or privilege under this Agreement operates as a waiver thereof;
nor does any single or partial exercise of any right, power or privilege under
this Agreement preclude any other or

further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies in this Agreement expressly
specified are cumulative and not exclusive of any rights or remedies which the
Lender would otherwise have. The acceptance by the Lender of any payment of or
on account of the Loan after a default or of any payment on account of any
partial default is not to be construed to be a waiver of any right to take
advantage of any future default or of any past default not completely cured
thereby. The Lender may exercise any and all rights, powers, remedies and
recourses available to them under this Agreement, or any other remedy available
to them, concurrently or individually without the necessity of an election.

6.       
     GENERAL

6.1          
Person. References in this Agreement to a “person” includes any
individual, partnership, joint venture, company, corporation, unincorporated
entity, government entity or other entity, whether having legal status or not,
and includes persons acting in concert with each other.

6.2          
Independent Legal Advice. The Lender acknowledges that:

	 	(a) 	
      this Agreement was prepared by the W.L. Macdonald Law
      Corporation for the Borrower;

	 	 	 
	 	(b) 	
      W.L. Macdonald Law Corporation received instructions from
      the Borrower and does not represent the Lender in regards to this
      Agreement;

	 	 	 
	 	(c) 	
      the Lender has been requested to obtain his own
      independent legal advice on this Agreement prior to signing this
      Agreement;

	 	 	 
	 	(d) 	
      the Lender has been given adequate time to obtain
      independent legal advice;

	 	 	 
	 	(e) 	
      by signing this Agreement, the Lender confirms that he
      fully understands this Agreement; and

	 	 	 
	 	(f) 	
      by signing this Agreement without first obtaining
      independent legal advice, the Lender waives his right to obtain
      independent legal advice.

6.3          
Currency. All references to dollars or currency in this Agreement are to
Canadian dollars.

6.4          
Governing Law. This Agreement and all matters arising under it are to be
governed by and construed in accordance with the laws of the Province of British
Columbia and the federal laws of Canada applicable therein, and each of the
parties submit and attorn to the jurisdiction of the courts of British
Columbia.

6.5          
Severability. If any provision of this Agreement or any part thereof is
determined to be invalid, it is to be severable and severed from this Agreement
and the remainder of this Agreement is to be construed as if such invalid
provision or part has been deleted from this Agreement.

6.6          
Gender and Number. Words importing the masculine gender include the
feminine and neuter genders and words in the singular include the plural, and
vice versa.

6.7          
Headings. The headings are inserted for convenience only and are not to
affect the interpretation of this Agreement.

6.8          
Non-limiting. The word “including”, when following any general
statement, is to be construed as referring to all other things that could
reasonably fall within the scope of such general statement, whether or not
non-limiting language (such as “without limitation”) is used.

6.9          
Notice. All notices, demands and payments under this Agreement must be in
writing and may be delivered personally, via e-mail or by facsimile transmission
to the addresses set out on the first page of this Agreement or to such other
addresses as may from time to time be notified in writing by the parties. All
notices will be deemed to have been given and received on the next business day
following the date of transmission or delivery, as the case may be.

6.10        
Co-operation. Each of the parties will execute all such further documents
and do all such further things as may reasonably be required by another party in
order to give full effect to this Agreement.

6.11         Fees
and Expenses. The Borrower will pay to the Lender all of its reasonable
legal and other fees and disbursements in respect of the Loan, including the
preparation, execution and carrying out of this Agreement and the Security
Agreement, and on default will pay all costs, charges and expenses of the Lender
taken to protect and preserve their security and in enforcing this Agreement and
the Security Agreement. All such costs and expenses are payable by the Borrower
to the Lender on demand, and in default of payment are to bear interest at the
Interest Rate. 

6.12        
No Prejudice. Nothing in this Agreement is to prejudice or impair any
other right or remedy that the Lender may otherwise have with respect to the
Loan or any rights or remedies the Lender may have with respect to other loans
that may be made to the Borrower.

6.13         No
Assignment. No party may assign or transfer its rights under this Agreement,
or any portion of the Loan, without the prior written consent of the other
parties.

6.14         Enurement.
This Agreement is binding upon and enures to the benefit of the Borrower and the
Lender and their respective successors and assigns. 

6.15         Confidentiality.
All documents associated with this transaction are to be confidential and the
parties will not disclose such documents to any other person except as may be
required by law. Each party will use its reasonable efforts to provide prior
notice to the other parties of any such discloser.

6.16         Time.
Time is of the essence of this Agreement.

6.17        
Entire Agreement; Conflict of Instruments. The Loan Documents represent
the entire agreement between the parties and supersede any prior arrangements or
agreement, whether in writing or not, among the parties.

6.18         Counterparts.
The parties may deliver this Agreement in counterparts and by facsimile
transmission, with the same effect as if all parties had all signed an original
copy of the same agreement, and all counterparts are to be construed together as
one and the same agreement.

AS EVIDENCE OF THEIR AGREEMENT the parties have caused this
Loan Agreement to be executed and delivered as of the date first noted
above.

EDEN ENERGY CORP.

	Per: 		 
	 	Authorized Signatory 	 

 

 

	 	 
	D Sharpe Management Inc. 	 

SCHEDULE “A”

Security Agreement

SCHEDULE “B”

Loan Draw Request
and Borrower’s Certificate

I, Drew Bonnell, the Chief Financial Officer of EDEN ENERGY
CORP. (the “Borrower”) hereby certify, without personal liability,
that as of ________________ , 2009:

	1. 	
      I am familiar with and have examined the provisions of
      the Loan Agreement (the “Agreement”) dated September 1, 2009
      between the Borrower and Donald Sharpe (the “Lender”), and have
      made reasonable investigations of corporate records and inquiries of other
      officers and senior personnel of the Borrower. Terms defined in the
      Agreement have the same meanings where used in this certificate.
      

	  	
       

	2. 	
      The representations and warranties contained in the
      Agreement are true and correct. 

	  	
       

	3. 	
      No event or circumstance has occurred which constitutes
      or which, with the giving of notice, lapse of time, or both, would
      constitute a breach of any covenant or other term or condition of the
      Agreement and there is no reason to believe that during the next month any
      such event or circumstance will occur. 

	  	
       

	4. 	
      The funds to be advanced by the Lender upon receipt of
      this Draw Request will be used for the operation of the Borrower’s
      business. 

	  	
       

	5. 	
      As of this date, the Lender has advanced $
      _______________ to the Borrower under the Agreement. 

	  	
       

	6. 	
      I hereby request on behalf of the Borrower that the sum
      of $ be advanced to the Borrower by the Lender as a further advance under
      the Agreement. The advance is to be made as follows: 

	  	
      
	
      
	
      
	
      

		
      (a) 
	
      [Insert Bank account and wire information or list the
      cheques required and the party to whom they are payable] 

	  	
      
	
       

	7. 	
      I have executed and hereby deliver concurrently with this
      Draw Request a Promissory Note in the amount of $ .
  

Dated this ______day of , 2009.

EDEN ENERGY CORP.

	Per: 	 
    	 
	Name: 	Drew Bonnell 	 
	Title: 	Chief Financial Officer 	 

SCHEDULE “C”

PROMISSORY NOTE 

_________________, 2009

	TO: 	DONALD SHARPE (the “Lender”)
  
	  	1680 - 200 Burrard Street, 
	  	Vancouver, British Colombia V6C 3L6
  

FOR VALUE RECEIVED, EDEN ENERGY CORP. (the “Borrower”)
  acknowledges itself indebted and promises to pay to, or to the order of, the
  Lender at the address indicated above the sum of ______________________ ($
  ________ ) (the “Principal Sum”), together with interest
  on the outstanding balance of the Principle Sum from time to time at the rate
  equal to 20% PER ANNUM, both before and after maturity, on September
  1, 2010, subject to any restrictions on such demand as set out in a Loan Agreement
  between the Lender and the Borrower dated as of September 1, 2009. Interest
  shall be payable quarterly, in arrears, commencing three months after the date
  of the promissory note.

If any payment is not made when required to be made in
accordance with this promissory note, interest is to be paid by the Borrower on
such overdue amount, including any accrued and unpaid interest, in the same
manner as is paid on the Principal Sum.

The Borrower waives presentment for payment, protest or notice
of protest and notice of dishonour of this promissory note.

DATED at Vancouver, British Columbia, this ____ day of
________________, 2009.

EDEN ENERGY CORP.

Per: __________________________________

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