Document:

L O A N   A G R E E M E N T

EXHIBIT 10.1 (i)

L O A N   A G R E E M E N T

AGREEMENT, made as of this 30th day of June, 2004

by and among:

ZION OIL & GAS, INC. of 6510 Abrams Rd., Suite 300, Dallas, TX 75231

(the "Borrower")

and

ROBERT E. RENDER TRUST U/A DTD 2-15-94 of  Lewiston, Michigan

(the "Lender")

WHEREAS, Borrower is currently in the process of raising funds by an initial public offering in the United States ("IPO") pursuant to a Registration Statement filed with the Securities and Exchange Commission ("SEC") pursuant to the Securities Act of 1933, as amended (the "Act") declared effective on February 17, 2004 (the "Registration Statement"); and

WHEREAS, the IPO is being underwritten by Network 1 Financial Securities, Inc. on a best efforts minimum-maximum basis to raise between $6,500,000 and $35,000,000 through the sale of shares of common stock of the Lender, par value $0.01 per share (the "Common Stock") at $5.00 per share; and

WHEREAS, by its terms, an initial closing of the IPO must take place following the receipt of subscription for at least the minimum offering and no later than August 30, 2004, as extended from the originally set date for initial closing of May 31, 2004, in accordance with the terms of the offering as described in the Registration Statement (the "Initial Closing"), barring which the Registration Statement will be withdrawn and subscriptions returned; and

WHEREAS, due to delays experienced in the process of raising funds necessary to comply with the conditions for the Initial Closing, the Borrower is in need of funds to cover working capital and other financial needs during the period preceding the Initial Closing and in connection therewith ("Pre-Closing Funding Needs"); and 

WHEREAS, Lender is willing to loan to the Borrower amounts up to $300,000.00 (the "Loan") towards the Borrower's Pre-Closing Funding Needs on the terms and conditions set forth below; and

WHEREAS, the Borrower wishes to accept the Loan from the Lender pursuant to the terms and conditions set forth below; 

NOW, THEREFORE, the parties hereto agree as follows:

1.Definitions

(a)The "Loan" shall mean a fixed rate loan to Zion Oil & Gas, Inc. of  up to $300,000.00 due on March 2, 2005 (the "Loan Due Date"), subject to Lender's option (the "Extension Option") to convert the Loan into a five (5) year reducing principal term loan with final payment due on August 1, 2009 (the "Extended Due Date").

(b)"Loan Agreement" shall mean this Agreement.

(c)The "Loan Period" shall mean the period commencing on the Effective Date as defined in section 12 below and ending on the Loan Due Date or the Extended Loan Due Date, as appropriate..

(d)"Dollars" shall mean Dollars which are the lawful money of the United States of America.

(e)   "Affiliate" shall mean any entity controlling, controlled by or under common control with the Lender or a Person controlling the Lender. For purposes of this definition, "control" shall have the meaning presently specified in Rule 405 promulgated under the Act.

(f)    "Person" shall mean an individual, a corporation, a partnership, a limited liability company or a trust.

2.Loan and Term. The Lender hereby agrees, on the terms and subject to the conditions of this Loan Agreement, to loan in one or more tranches to the Borrower during the Loan Period, through and including the Loan Due Date or, if the Extension Option is exercised, the Extended Loan Due Date amounts up to $300,000.00 (Three Hundred Thousand Dollars); provided, however, Lender is under no obligation to lend to Borrower any amount in excess of $100,000.   To avoid any doubt, if the Extension Option is exercised, it must be exercised in whole for each note that is issued in evidence of the Loan as provided by the terms of section 4 below, but the exercise decision may be made separately for each note.

3.Disbursement of Loan Proceeds. The Lender shall transfer to the Borrower or cause to be transferred to Borrower $100,000 as of the date hereof and such additional amounts thereafter up to a total amount of $300,000, in such amounts and at such times,  as are mutually agreed upon between Lender and Borrower.

 4.The Note. The Loan shall be evidenced by series of promissory notes of the Borrower in the form of Exhibit 1 attached hereto (the "Note"); provided, however, that if the Lender exercises its right under section 11 below to assign its rights and obligations under this Loan Agreement, the Loan may be evidenced by one or more promissory notes each in a form identical to the Note except with respect to the principal amount of the Note and the principal repayment amounts which shall reflect the proportionate amounts of the Loan for which the Lender and each assignee is responsible, provided that in no event will any initial note to an assignee be for a principal amount of less than Fifty Thousand Dollars ($50,000). The Note shall be subject to repayment, in whole or in part, as provided by the terms thereof.

5.Interest. Interest shall accrue at the rate of 10% per annum, payable in full on or before the Loan Due Date or, if appropriate, the Extended Loan Due Date and calculated as set forth in the Note.

6.Payments. The outstanding balance of principal and accrued interest shall be paid by Borrower to Lender (on behalf of all holders of notes issued pursuant to section 4 above) as provided in the Note in immediately available funds delivered by bank wire to an account designated in writing by Lender. In the absence of such a designation, immediately available funds in the form of a certified check drawn on a United States bank shall be delivered to Lender at the location set forth in section 9 below. 

7.Additional Consideration. In order to induce Lender to enter into this Loan Agreement and stand the Loan to the Borrower and as additional consideration therefore, the Borrower shall grant to Lender with respect to each $50,000 of principal amount of notes, a warrant to purchase 10,000 (Ten Thousand) shares of Common Stock of the Borrower at an exercise price of $3.00 (Three Dollars) per share (the "Warrants") and pursuant to such other terms and conditions as provided in a Warrant Certificate to be issued by the Borrower in the form of Exhibit 2 attached hereto (the "Warrant Certificate"). The Warrants may be exercised at any time during the period commencing January 1, 2006 and terminating December 31, 2006. The Warrants shall be granted and the Warrant Certificate signed effective upon each disbursement of the Loan Proceeds pursuant to section 3 above with respect to the loan principal of the note issued in connection with such disbursement. In the event more than one note is issued to evidence the Loan as provided in section 4 above, a number of Warrant Certificates shall be issued equal in amount to the number of notes issued, each Warrant Certificate for a number of shares representing that proportionate share of 10,000 as the loan principal of the note held by the holder of the Warrant Certificate bears to $50,000.

8.Lender Representations, Warranties and Agreements concerning Warrants. In connection with the grant of the Warrants  as provided in section 7 above and the acceptance of such grant as part of the consideration for agreeing to make and making the Loan to Borrower (such grant being "Additional Consideration"), the Lender on its own behalf and, as attorney in fact of each assignee, if any, under section 11 below, on behalf of each such assignee, represents and warrants as follows (unless otherwise required by the context, each reference below to Lender to refer jointly and severally to Lender on its own behalf and on behalf of each and every assignee, if any):

(a)The Lender has received, read and relied only on the information contained in the following documents of the Borrower:

(i)Amended Registration Statement and Prospectus, dated February 12, 2004, 

(ii)Confidential Pro Forma Presentation of the Joseph Project in Israel, dated October 2003,

(iii)Prospect Description for the Joseph Project in Israel, dated January 2003, 

(iv)The Borrower"s Annual Report on Form 10-KSB as filed with the SEC for the year ended December 31, 2003, 

(v)The Borrower's Quarterly Report on Form 10-QSB filed with the SEC for the quarterly period ended March 31, 2004, and,

(vi)Report dated May 2004 by Stephen Pierce & Associates.

(collectively, "Investor Documents"), has relied only on the information contained therein or otherwise provided in writing by the Borrower, has not relied on any oral representations, has been given the opportunity to ask questions, and has been given access to full and complete information regarding the Borrower;

(b)The Lender recognizes that the Warrants and the shares of Common Stock  underlying the Warrants have not been registered under the Act, nor under the securities laws of any state or country and the Lender has no right to require such registration and no registration is contemplated; 

(c)The Lender believes that the acceptance of the Warrants as Additional Consideration for agreeing to make and making the Loan is suitable based upon the undersigned's investment objectives and financial needs, and the undersigned has no need for liquidity of the Additional Consideration; 

(d)The Lender has the requisite knowledge to assess the relative merits and risks, is capable of interpreting financial statements, or has relied upon the advice of counsel, accountants and/or purchaser representative(s) with regard to tax aspects, risks and other considerations involved in making the Loan and in accepting the Warrants as Additional Consideration therefore and fully understands that it must look to its own advisors with respect to the tax consequences of accepting the Warrants as Additional Consideration for making the Loan and consult with independent tax counsel or advisors regarding the tax consequences of making the Loan and accepting the Warrants;

(e)The Lender is acquiring the Warrants for long-term investment and not with a view toward resale, fractionalization or division or distribution thereof and the undersigned is familiar with the phrase "acquired for investment and not with a view to distribution" as it relates to the Act and the special meaning given to such term in various releases of the SEC;

(f)The Lender realizes that the Warrants cannot readily be sold as there will be no public market, that it may not be possible to sell or dispose of the Warrants and therefore the Warrants must not be accepted as Additional Consideration unless the Lender has liquid assets sufficient to assure that such acceptance will cause no undue financial difficulties and the Lender can provide for current needs and possible future contingencies;

(g)The Lender understands that the ability to transfer the Warrants will be restricted unless the transfer is not in violation of the Act and the Securities Exchange Act of 1934, and that a legend will be placed on documents evidencing the restrictions against transfer;

(h)The Lender understands that the books and records of the Company will be available upon reasonable notice for inspection during reasonable business hours at the Company's place of business to a representative of the Lender who will act for purposes of this clause (h) as the joint representative of Lender and each and all assignees (if any);

(i)The Lender has been provided access to all information requested in addition to the Investor Documents, including all documents referred to therein in evaluating its making of the Loan and accepting the Warrants as Additional Consideration;

(j)The Lender certifies that it is now and at the Effective Date will be (and each assignee, if any, at the Effective Date will be)  an "accredited investor" as that term is defined in Rule 501 of Regulation D promulgated under the Act and that the Warrants are being accepted by the Lender in the Lender's name solely for the Lender's own beneficial interest and not as nominee for, or on behalf of, or for the beneficial interest of, or with the intention to transfer to, any  Person;

(k)The Lender is willing and able to bear the economic risk and loss of an investment in the Company in an amount equal to the value of the Additional Consideration; in making this statement, consideration has been given to whether the Lender could afford a complete loss; and

(l)The Lender agrees that the Warrants shall not be sold, pledged, hypothecated, or otherwise transferred except as provided under the Securities Act of 1933,  unless registered under the Securities Act and all applicable state securities laws or exempted there from.

(m)The Lender agrees that a legend in substantially the form appearing at para. 3(a) of the Warrant Certificate will be placed on certificates representing shares of the Common Stock underlying the Warrants, in the event of their exercise.

9.Notices. Unless otherwise provided herein or by the terms of the Note or the Warrant Certificate, all notices, requests, reports or other communications pursuant to the Loan Agreement shall be in writing, either by letter (delivered by hand or commercial messenger service or sent by certified mail, return receipt requested) or by facsimile (receipt electronically confirmed, with copy by ordinary first-class mail) addressed as follows:

If to Borrower to:

Zion Oil & Gas, Inc.

6510 Abrams Rd., Suite 300

Dallas, Texas 75231

Attention: Eugene A. Soltero, President

Tel: +214-221-4610

Fax: +214-221-6510

If to Lender or any assignee to:

Robert E. Render Trust U/A DTD 2-15-94

P.O. Box 809

Lewiston, MI  49756

Attention:  Robert E. Render, Trustee

Tel: +989-786-3727

Fax: +989-786-5950

Any part may change the person or the address to whom or which notices may be given hereunder, by notice duly given hereunder; provided that such notice shall be deemed to have been given only when actually received by the party to which it is addressed.

10.Counterparts. This Loan Agreement may be signed in any number of counterparts with the same effect as if the signature thereto were upon the same instrument.

11.Binding Effect; Assignment. This Loan Agreement shall be binding upon and inure to the benefit of the Borrower, its successors and Permitted Assignees and to the benefit of the Lender, its successors and Permitted Assignees. The rights and obligations of the Lender under this Loan Agreement may be assigned in whole or in part to no more than three (3) assignees (each a "Permitted Assignee") : provided (a) that the assignee is an Affiliate of Lender and (b) that any such assignee shall prior to and as condition to the assignment becoming effective (i) be an "accredited investor" as such term is defined in section 8(j) above, (ii)  confirm in writing in a form satisfactory to Borrower the Representations, Warranties and Agreements made in its name and on its behalf in section 8 above, and (iii) appoint in writing in form satisfactory to Borrower Lender as its agent and attorney-in-fact  for all purposes of the Loan Agreement and those notes and Warrant Certificates issued or to be issued hereunder and all transactions contemplated hereby. Except as otherwise permitted under the provisions of this section 11, the rights and obligations of the parties under this Loan Agreement shall not be assigned or delegated without the prior written consent of the other party, and any purported assignment or delegation otherwise shall be void.

12.   Effective Date.  The  "Effective Date" of this Loan Agreement shall be that date on which the John Brown, Chairman, or Eugene Soltero, President, of the Borrower shall confirm to Robert E. Render, Trustee on behalf of Lender  that all conditions of the Borrower's Board of Directors for entry into effect of the Loan Agreement have been met. 

13.Governing Law. The Loan Agreement and all other documents and instruments executed and delivered in connection herewith shall be governed by, and construed and interpreted in accordance with the laws of the State of Texas.

IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly executed as of the date first above written.

 

	
BORROWER:
	 	
LENDER:

	 	 	 
	
ZION OIL & GAS, INC.
	 	
ROBERT E. RENDER TRUST U/A DTD 2-15-94

	 	 	 
	
/s/ John M. Brown
	 	
/s/ Robert E. Render, Trustee

	
By: John M. Brown, Chairman and CEO
	 	
By: Robert E. Render, TrusteeNON-NEGOTIABLE PROMISSORY NOTE

EXHIBIT 10.1 (ii)

NON-NEGOTIABLE PROMISSORY NOTE

=====================================================================================

	
Borrower:
	
Zion Oil & Gas, Inc.
	
Lender
	
Robert E. Render Trust U/A DTD 2-15-94

	 	
6510 Abrams Road, Suite 300
	 	
P. O. Box 809

	 	
Dallas, Texas 75231
	 	
Lewiston, MI 49756 

	 	
U.S.A.
	 	
_______________

=====================================================================================

Principal Amount:$100,000                                              Date of Note: June 30, 2004

PROMISE TO PAY. Zion Oil & Gas, Inc. (the "Borrower") promises to pay Robert E. Render Trust U/A DTD 2-15-94 ("Lender"), or order, in lawful money of the United States of America, the principal amount of One Hundred Thousand Dollar ($100,000.00) (the "Loan") or so much thereof as may be outstanding, together with interest on the unpaid outstanding principal balance. 

LOAN AGREEMENT. This Note is made pursuant to that certain Loan Agreement dated as of June 30, 2004 between Lender and Borrower (the "Loan Agreement"). In the event of any discrepancy between this Note and the Loan Agreement, this Note shall prevail.

MATURITY AND PAYMENT OF PRINCIPAL. Borrower will pay the outstanding principal balance in accordance with the following payment schedule, subject to the Extension Option as provided below:

Six (6) monthly payments (due on the first day of each month) on account of principal of One Thousand Six Hundred and Sixty Six Dollars and 67/00 ($1,666.67) each commencing September 1, 2004 and through and including February 1, 2005, with the remaining principal amount of Eighty-Nine Thousand Nine Hundred and Ninety-Nine and 98/00 Dollars ($89,999.98) (the "Remaining Principal Amount") due on March 2, 2005.

OPTION TO EXTEND PRINCIPAL REPAYMENT: Lender shall have the option (the "Extension Option") to be exercised by written notice to Borrower no later than February 15, 2005 to convert the Loan into a five (5) year reducing principle term loan with final payment due on August 1, 2009. If the Extension Option is exercised, the Remaining Principal Amount shall be paid in fifty-four (54) monthly payments on account of principal in the amount of One Thousand Six Hundred and Sixty Six and 67/00 Dollars ($1,666.67) each commencing March 2, 2005 and terminating August 1, 2009.

INTEREST RATE AND PAYMENT. The interest rate to be applied prior to maturity to the unpaid principal balance of this Note shall be ten per cent (10%) per annum, payable monthly in arrears commencing September 1, 2004. Interest shall be computed on the basis of a 360-day year consisting of twelve (12) months of thirty (30) days each on the basis of the average daily principal balance during the preceding month. Interest for any partial monthly period shall be calculated at the daily rate of 0.0278% of the average daily principal balance during said partial monthly period. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law.

POST MATURITY RATE. Upon the occurrence of any Event of Default or if this Note is not paid at final maturity, Lender, at Lender's option, may add any unpaid accrued interest to principal and such sum will bear interest therefrom until paid at the Post Maturity Rate provided in this Note. The "Post Maturity Rate" on this Note is the lesser of the maximum rate allowed by applicable law or twenty per cent (20%) per annum. Borrower will pay interest on all sums due after final maturity whether by acceleration or otherwise, at that rate.

DEFAULT. Upon Borrower's failure to cure any of the following events within (3) days written notice from Lender to Borrower, each of the following shall constitute an event of default ("Event of Default") under this Note:

Payment Default. Borrower fails to make any payment when due under this Note.

Entry into Senior Credit Agreements. Except with the prior written agreement of Lender, Borrower shall enter into any credit agreement which by its terms shall provide a security interest in any asset of the Borrower or provide that, in the event of the insolvency, dissolution or liquidation of the Borrower, the creditor under such agreement shall have preference rights, other than as provided by law, over the rights of the Lender under this Note (such agreements, "Senior Credit Agreements"); provided, however, that indebtedness of the Borrower outstanding on the date of issuance of this Note and arrangements of Borrower with directors, employees and trade creditors in connection with salary, fees and trade debt shall not be considered Senior Credit Agreements.

Other Defaults. Borrower fails to comply with or to pay or perform any other term, obligation, covenant or condition contained in this Note or the Loan Agreement.

Transfer of Assets. Borrower leases, sells, or otherwise conveys, or agrees to lease, sell, or otherwise convey, a material part of its assets or business outside of the ordinary course of business.

Judgments or Decrees. One or more judgments or decrees shall be entered against the Borrower in aggregate amounts exceeding $300,000, and such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal.

Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.

Creditor or Forfeiture Proceedings. Commencement of foreclosure, repossession, attachment, levy, execution, or forfeiture proceedings, whether by judicial proceeding, self-help, or any other method, by any creditor of Borrower, or by any governmental agency against any assets of Borrower. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonability of the claim that is the basis of the creditor or forfeiture proceeding.

Failure to Comply with Laws. Borrower fails to comply with all applicable statutes, laws, ordinances and governmental rules, regulations and orders to which it is subject or which are applicable to its business, property and assets, and such failure results in a material adverse consequence to Borrower.

LENDER'S RIGHTS. Upon the occurrence of any Event of Default, Lender may declare the entire unpaid principal balance on this Note and the Indebtedness and all accrued unpaid interest immediately due, without notice (except that in the case of any Event of Default of the type described in the DEFAULT - Insolvency section herein, such acceleration shall be automatic and not at Lender's option), and then Borrower will pay that amount.

ATTORNEY'S FEES. Lender may hire an attorney to help collect the Loan if Borrower does not pay, and Borrower will pay Lender's reasonable attorney's fees. Borrower also will pay Lender all other amounts Lender actually incurs as court costs.

GOVERNING LAW. This Note will be governed by, construed and enforced in accordance with the laws of the State of Texas.

INDEBTEDNESS. The word "Indebtedness" means all principal, interest, and other amounts, costs and expenses payable under the Note or the Loan Agreement, together with all renewals of, extensions of, modifications of, consolidations of and substitutions for the Note or the Loan Agreement, together with interest on such amounts as provided in this Note.

JURY WAIVER. THE UNDERSIGNED AND LENDER (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THE UNDERSIGNED AND LENDER ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE OR THE LOAN AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDERTO PROVIDE THE FINANCING EVIDENCED BY THIS DOCUMENT AND THE LOAN AGREEMENT.

GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Borrower does not agree or intend to pay, and Lender does  not agree or intend to contract for, charge, collect, take, reserve or receive (collectively referred to herein as "charge or collect") any amount in the nature of interest or in the nature of a fee for this loan, which would in any way or event (including demand, prepayment, or acceleration) cause Lender to charge or collect more for this loan than the maximum Lender would be permitted to charge or collect by the law of the State of Texas. Any such excess interest or unauthorized fee shall, instead of anything stated to the contrary, be applied first to reduce the principal balance of this loan, and when the principal has been paid in full, be refunded to Borrower. The right to accelerate maturity of sums due under this Note does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and Lender does not intend to charge or collect any unearned interest in the event of acceleration. All sums paid or agreed to be paid to Lender for the use, forbearance or detention of sums due hereunder shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of the loan evidenced by this Note until payment in full so that the rate or amount of interest on account of the loan evidenced hereby does not exceed the applicable usury ceiling. It is agreed that any payment which would otherwise for any reason be deemed unlawful interest under applicable law shall be deemed to have been applied to the unpaid principal balance of this Note, or to other indebtedness. The unpaid balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower to the extent allowed by law, waives presentment, demand for payment, notice of dishonor, notice of intent to accelerate the maturity of this Note, and notice of acceleration of the maturity of this Note. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. Unless specifically permitted otherwise by  the terms and conditions of this Note, no alteration of or amendment to this Note shall be effective unless given in writing and conditions of this Note, no alteration of or amendment to this Note shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. This Note is not assignable except with the prior written consent of the Borrower.

BORROWER

Zion Oil & Gas, Inc.

By:  /s/  E A Soltero                                                     Attest: /s/ William H. Avery               

     Eugene A. Soltero, PresidentWilliam H. Avery, Assistant Secretary

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