EDEN INNOVATIONS LTD — Capital/Financing Update 2011

Nov 10, 2011

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ACN 109 200 900
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ASX ANNOUNCEMENT

11 November 2011

US $3 million Convertible Note Facility

On 11 November 2011, Eden Energy Ltd ( Company ) and La Jolla Cove Investors Inc. ( La Jolla ), a US-based private investment company, entered into the Eden Energy Funding Agreement ( Funding Agreement ) pursuant to which the Company has agreed to issue, and La Jolla has agreed to acquire, up to 3 convertible notes ( Notes ), each with an issue price (or face value) of US $1,000,000.00 ( Purchase Price ). Interest is payable on the principal amount actually advanced by La Jolla under a Note (to the extent not converted into ordinary fully paid shares in the Company ( Shares )) at the rate of 4.75% per annum.

The purpose of this facility is to provide a flexible backstop funding agreement to the Company which can be used as required to supplement the funds to be raised under the pro-rata Nonrenounceable Rights Issue that the Company recently announced.

Under the Funding Agreement, the Notes will be issued sequentially. In each case, the obligation of La Jolla to subscribe for, and the Company to issue, a Note will only arise following the satisfaction of certain conditions precedent. Subject to the due satisfaction of each of these conditions, the first Note will be issued on or around 14 November 2011 ( Initial Closing Date ) and the Company will receive the first instalment of the Purchase Price under that Note, in the sum of US $250,000.00. The payment of the balance of the Purchase Price for the Note is to be made by La Jolla by three further instalments of US $250,000.00 (each, a Monthly Payment ). The obligation of La Jolla to make each Monthly Payment is conditional on the satisfaction of certain conditions at the time payment of that Monthly Payment is required to be made under the Funding Agreement.

The Company must issue the first Note, but has the right to elect whether or not to issue the second and third Notes. The second and third Notes are able to be issued in the period commencing on the date that the Company has fully drawn down all of the Purchase Price under the Note most recently issued or has obtained all necessary approvals required for the issue of that Note (whichever occurs last) and ending two (2) months thereafter. If the Company does not issue the second and/or third Note, either party may terminate the Funding Agreement and La Jolla may redeem the principal amount actually advanced by La Jolla (and which has not then been converted into Shares) ( Principal Amount ), and any accrued but unpaid interest, on any Note then on issue at a cash price of 120% of the Principal Amount or to convert the said amount into Shares.

In consideration of La Jolla agreeing to enter into the Funding Agreement, the Company will pay to La Jolla a facility fee equal to US $60,000.00, to be payable by the issue of Shares at an issue price per Share being the VWAP for the five trading days prior to the execution of the Funding Agreement ( Issue Price ). In addition, the Company has agreed to pay La Jolla a further facility fee of $60,000.00 (which is also to be satisfied by the issue of Shares at the Issue Price) on the closing date for the issue of the second Note.

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The Company is issuing the first Note and the Shares in satisfaction of the first facility fee by utilising its placement capacity under Listing Rule 7.1. The Company intends to seek shareholder approval to the issue of the second and third Notes (one of the conditions to the issue of the Notes is that all necessary shareholder approvals have been obtained).

Subject to the due satisfaction of all conditions, the first Note issued by the Company will raise US $1,000,000.00 (less the expenses associated with the issue of the first Note). The funds raised from the issue of the Note will be used for working capital purposes. The Directors consider that the raising of capital by the issue of the Note is in the best interests of the Company as it secures, on acceptable terms and at an important time to it, the funding likely to be required by the Company in the ordinary course of the development and growth of its business in the short to medium term. This funding will be supplemented by the amount raised by the Company under the rights issue announced on 31 October 2011.

If La Jolla elects to convert the Note, the number of new Shares to be issued to La Jolla will depend on whether the Note is converted in whole or in part, the applicable conversion price and the prevailing US$/AU$ exchange rate at the time of conversion.

The terms of issue of the first Note (and any subsequent Notes which may be issued by the Company to La Jolla) are governed by the Funding Agreement. The key terms of the Note facility are as follows:

1. The Purchase Price of each Note is US $1,000,000.00 (being US $3,000,000 in aggregate), in each case payable by four instalments of US $250,000.

2. Interest is payable on each Note on the Principal Amount at the rate of 4.75% per annum, and is payable monthly in arrears in cash or, at the option of the Company, in Shares issued at the then applicable conversion price.

3. The maturity date of each Note is the date which is three (3) years from the date of issue of that Note ( Maturity Date ).

4. The Note is unsecured and the Principal Amount ranks equally with all other unsecured debts owed by the Company.

5. La Jolla may convert each Note, either in whole or in part, by the delivery to the Company of a conversion notice.

6. If on the day La Jolla issues a conversion notice the Volume Weighted Average Share Price is below AU $0.07, the Company will have the right, by no later than 3:00pm Sydney time on the date that is seven (7) Business Days after its receipt of such conversion notice, to prepay that portion of the Principal Amount of the Note that La Jolla has sought to convert pursuant to the conversion notice, plus any accrued and unpaid interest, at 105% of such amount. The Funding Agreement provides for the downward adjustment of the Floor Price in certain circumstances.

7. The number of new Shares into which the Note may be converted is equal to the Principal Amount that is to be converted (as specified in the conversion notice) divided by the conversion price. The conversion price is equal to the lesser of:

8. 7.1. AU $0.50 (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalisations or the like); or

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• 7.2. 80% of the average of the three (3) lowest Volume Weighted Average Share Price during the twenty-one (21) trading days prior to La Jolla's election to convert (the Funding Agreement provides for this percentage figure to be adjusted downwards in certain circumstances).

• In the event the Company is prohibited from issuing Shares for any reason, or fails to timely deliver Shares within 2 business days of receipt by the Company of a conversion notice ( Delivery Date ), or upon the occurrence of an event of default under the Funding Agreement, then at La Jolla's election, the Company must pay to La Jolla ten (10) Business Days after request by La Jolla or on the Delivery Date (if requested by La Jolla) a sum of money determined by multiplying the Principal Amount of the Note designated by La Jolla (but not exceeding the Principal Amount the subject of the conversion notice or where the amount does exceed the Principal Amount, the portion of the Principal Amount which cannot be converted into Ordinary Shares) by 120%, together with accrued but unpaid interest thereon in redemption of such portion of the Note.

• Further to the above paragraph, if the Company commits any of the events of default specified in the Funding Agreement, La Jolla may in its sole and absolute discretion rescind any conversion notice it has issued and require the immediate repayment of all amounts owing or otherwise outstanding under the Note(s) it has purchased. In these circumstances, the Company must pay 120% of the outstanding Principal Amount, together with all accrued and unpaid interest.

• Unless converted, the Principal Amount must be paid to La Jolla on the Maturity Date. The Company may not make any prepayments on the Note without the consent of La Jolla.

• If a "Fundamental Corporate Change" occurs, then La Jolla will have the right to:

• 11.1. require the Company to prepay a Note for cash at one hundred and twenty percent (120%) of the Principal Amount, together with all accrued and unpaid interest payable to the date of prepayment; or

• 11.2. receive upon conversion of the Principal Amount of the Note which was outstanding immediately prior to such Fundamental Corporate Change (or any portion thereof) the number of securities of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and certain other property as is receivable upon or as a result of such Fundamental Corporate Change by a holder of the number of Shares into which the outstanding portion of the Note so converted would have been able to be converted at the Conversion Price applicable immediately prior to such Fundamental Corporate Change.

A Fundamental Corporate Change includes a reorganisation or reclassification of capital, consolidation or merger of the Company with a third party, the sale, transfer or disposal of substantially all of the assets and business of the Company, or any transaction or series of transactions whereby more than 50% of the voting power of the Company is disposed of.

1. The Notes shall not be transferable by La Jolla unless La Jolla first obtains the written consent of the Company.

2. Conversion of the Notes will not be permitted if that would cause La Jolla’s (together with any affiliates) voting power in the Company to increase to more than 19.99%.

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1. The Note will not be quoted on ASX or any other securities exchange.

The Company has given all usual representations and warranties to, and indemnities in favour of, La Jolla which one would ordinarily expect to find in a funding agreement similar to the Funding Agreement.

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Gregory H Solomon

Executive Chairman

For further information please contact Greg Solomon (+618 9282 5889) or visit our website (www.edenenergy.com.au).

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