ex45.htm


    Exhibit
4.5

    


    REGISTRATION RIGHTS
AGREEMENT

    


    


    This
Registration Rights Agreement (the “Agreement”) is made
and entered into as of this ___ day of ____, 2008 by and among Z Trim Holdings
Inc., an Illinois corporation (the “Company”),
______________ (“Placement Agent”),
and certain accredited investors purchasing Units consisting of a $100,000
24-month senior secured promissory note (each, a “Note” and
collectively, the “Notes”) convertible
at the rate of $0.26 per share into 384,615 shares of common stock, par value
$.00005 per share, of the Company (the “Common Stock”)
bearing interest at the rate of 8% per annum, which interest is payable
quarterly in Common Stock at the rate of $0.26 per share, and two five-year
warrants, one to purchase 230,769 shares of Common Stock with an exercise price
of $0.01 per share (the “$0.01 Warrants”), and
the other to purchase 153,846 shares of Common Stock with an exercise price of
$0.26 per share  (the “$0.26 Warrants” and,
together with the $0.01 Warrants, collectively, the “Warrants”) offered in
private placement (the “Offering”) by the
Company.  Such investors are each referred to herein as an “Investor”
and, collectively, as the “Investors”.

     

    WHEREAS,
in connection with certain Subscription Agreements among the Investors and the
Company (the “Subscription
Agreement”) which have been executed in connection with the consummation
of the transactions contemplated in that certain Confidential Private Placement
Memorandum dated ___________, 2008 (the “Memorandum”), the
Company has agreed, upon the terms and subject to the conditions of the
Subscription Agreements and the Memorandum to issue and sell to the Investors an
aggregate of up to 50 Units;

     

    WHEREAS,
to induce the Investors to execute and deliver the Subscription Agreement, the
Company has agreed to provide certain registration rights with respect to the
shares of Common Stock (i) issuable upon conversion of the Notes, or in payment
of interest thereon, and (ii) issuable upon exercise of the Warrants;
and

     

    WHEREAS,
the Company has agreed to provide certain registration rights with respect to
the shares (the “Placement Agent Warrant
Shares”) of Common Stock issuable upon exercise of the warrants issued to
the Placement Agent and its permitted transferees (the “Placement Agent
Warrants”) both on the terms and conditions provided herein.

     

    NOW,
THEREFORE, for good and valuable consideration, the parties hereby agree as
follows:

     

    1.           Certain
Definitions.

     

    As used
in this Agreement, the following terms shall have the following
meanings:

     

    “Affiliate” means,
with respect to any person, any other person which directly or indirectly
controls, is controlled by, or is under common control with, such
person.

     

    “Business Day” means a
day, other than a Saturday or Sunday, on which banks in Illinois are open for
the general transaction of business.

     

    “Common Stock” as
defined in the Preamble.

     

    “Investors” means the
Investors purchasing Registrable Securities pursuant to the Subscription
Agreements, the Placement Agent and any Affiliate or permitted transferee of any
Investor or the Placement Agent who is a subsequent holder of any Warrants or
Registrable Securities.

     

     

     

     

    
      
        
        

      

      
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    “Memorandum” as
defined in the Preamble.

     

    “Offering” as defined
in the Preamble.

     

    “Placement Agent
Warrants” as defined in the Preamble.

     

    “Placement Agent Warrant
Shares” as defined in the Preamble.

     

    “Prospectus” means the
prospectus included in any Registration Statement, as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration Statement and
by all other amendments and supplements to the prospectus, including
post-effective amendments and all material incorporated by reference in such
prospectus.

     

    “Register,” “registered” and
“registration”
refer to a registration made by preparing and filing a Registration Statement or
similar document in compliance with the 1933 Act (as defined below), and the
declaration or ordering of effectiveness of such Registration Statement or
document.

     

    “Registrable
Securities” shall mean (i) the Shares, (ii) the Warrant Shares, (iii) the
Placement Agent Warrant Shares and (iv) any other securities issued or issuable
with respect to or in exchange for Registrable Securities; provided, that, a
security shall cease to be a Registrable Security upon (A) sale pursuant to a
Registration Statement or Rule 144 under the 1933 Act, or (B) such security
becoming eligible for sale by the Investors pursuant to Rule 144(k) under the
1933 Act.

     

    “Registration
Statement” shall mean any registration statement of the Company filed
under the 1933 Act that covers the resale of any of the Registrable Securities
pursuant to the provisions of this Agreement, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration
Statement.

     

    “Required Investors”
means the Investors holding a majority of the Registrable
Securities.

     

    “SEC” means the U.S.
Securities and Exchange Commission.

     

    “Shares” means the
shares of Common Stock issuable upon conversion of, or in payment of interest
on, the Notes sold in the Offering.

     

    “Subscription
Agreement” as defined in the Preamble.

     

    “1933 Act” means the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.

     

    “1934 Act” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

     

    “Warrants” as defined
in the Preamble.

     

    “Warrant Shares” means
the shares of Common Stock issuable upon the exercise of the
Warrants.

     

     

    
      
        
        

      

      
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    2.           Registration.

     

    (a)           Registration
Statements.

     

    (i)           Promptly
following the final closing of the purchase and sale of the securities
contemplated by the Memorandum (the “Closing Date”) but no
later than thirty (30) days after the Closing Date (the “Filing Deadline”),
the Company shall prepare and file with the SEC one Registration Statement 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 for resale
of the Registrable Securities), covering the resale of the Registrable
Securities in an amount at least equal to the Shares, the Warrant Shares and the
Placement Agent Warrant Shares.  Such Registration Statement shall
include the plan of distribution attached hereto as Exhibit
A.  Such Registration Statement also shall cover, to the extent
allowable under the 1933 Act and the rules promulgated thereunder (including
Rule 416), such indeterminate number of additional shares of Common Stock
resulting from stock splits, stock dividends or similar transactions with
respect to the Registrable Securities.  The Company shall use its
reasonable best efforts to obtain from each person who now has piggyback
registration rights a waiver of those rights with respect to the Registration
Statement.  The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided in accordance with Section 3(c) to the Investors and their
counsel prior to its filing or other submission.  If a Registration
Statement covering the Registrable Securities is not filed with the SEC on or
prior to the Filing Deadline, the Company will make pro rata payments to each
Investor, as liquidated damages and not as a penalty, in an amount equal to 1.5%
of the aggregate amount invested by such Investor for each 30-day period or pro
rata for any portion thereof following the Filing Deadline for which no
Registration Statement is filed with respect to the Registrable
Securities.  Such payments shall be in partial compensation to the
Investors, and shall not constitute the Investors’ exclusive remedy for such
events.  Such payments shall be made to each Investor in cash or
additional shares of Common Stock, as determined by each Investor, and shall be
paid monthly within three (3) Business Days after the last day of each month
following the Filing Deadline.

     

    (ii)           Additional Registrable
Securities.  Upon the written demand of any Investor and upon
any change in the Exercise Price (as defined in the Warrants and the Placement
Agent Warrants, respectively) such that additional shares of Common Stock become
issuable upon the exercise of the Warrants and/or Placement Agent Warrants, the
Company shall prepare and file with the SEC one or more Registration Statements
on Form S-3 or amend the Registration Statement filed pursuant to clause (i)
above, if such Registration Statement has not previously been declared effective
(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 for resale
of such additional shares of Common Stock (the “Additional Shares”)),
covering the resale of the Additional Shares, but only to the extent the
Additional Shares are not at the time covered by an effective Registration
Statement.  Such Registration Statement also shall cover, to the
extent allowable under the 1933 Act and the rules promulgated thereunder
(including Rule 416), such indeterminate number of additional shares of Common
Stock resulting from stock splits, stock dividends or similar transactions with
respect to the Additional Shares.  The Company shall use its
reasonable best efforts to obtain from each person who now has piggyback
registration rights a waiver of those rights with respect to such Registration
Statement.  The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided in accordance with Section 3(c) to the Investors and their
counsel prior to its filing or other submission.  If a Registration
Statement covering the Additional Shares is required to be filed under this
Section 2(a)(ii) and is not filed with the SEC within ten (10) Business Days
after the request of any Investor or the occurrence of any of the events
specified in this Section 2(a)(ii) (the “Additional Shares
Deadline”), the Company will make pro rata payments to each Investor, as
liquidated damages and not as a penalty, in an amount equal to 1.5% of the
aggregate amount invested by such Investor for each 30-day period or pro rata
for any portion thereof following the date by which such Registration Statement
should have been filed for which no Registration Statement is filed with respect
to the Additional Shares.  Such payments shall be in partial
compensation to the Investors, and shall not constitute the Investors’ exclusive
remedy for such events.  Such payments shall be made to each Investor
in cash or additional shares of Common Stock, as determined by each Investor,
and shall be paid monthly within three (3) Business Days after the last day of
each month following the Additional Shares Deadline.

     

     

     

    
      
        
        

      

      
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    (iii)           S-3
Qualification.  If the Company is not eligible to use a
registration statement on Form S-3 as provided in Sections 2(a)(i) and 2(a)(ii)
above, then, promptly following the date (the “Qualification Date”)
upon which the Company becomes eligible to use a registration statement on Form
S-3 to register the Registrable Securities or Additional Shares, as applicable,
for resale, but in no event more than ten (10) Business Days after the
Qualification Date (the “Qualification
Deadline”), the Company shall file a registration statement on Form S-3
covering the Registrable Securities or Additional Shares, as applicable (or a
post-effective amendment on Form S-3 to the registration statement on Form S-1)
(a “Shelf Registration
Statement”) and shall use commercially reasonable efforts to cause such
Shelf Registration Statement to be declared effective as promptly as practicable
thereafter.  If a Shelf Registration Statement covering the
Registrable Securities is not filed with the SEC on or prior to the
Qualification Deadline, the Company will make pro rata payments to each
Investor, as liquidated damages and not as a penalty, in an amount equal to 1.5%
of the aggregate amount invested by such Investor for each 30-day period or pro
rata for any portion thereof following the date by which such Shelf Registration
Statement should have been filed for which no such Shelf Registration Statement
is filed with respect to the Registrable Securities or Additional Shares, as
applicable.  Such payments shall be in partial compensation to the
Investors, and shall not constitute the Investors’ exclusive remedy for such
events.  Such payments shall be made to each Investor in cash or
additional shares of Common Stock, as determined by each Investor, and shall be
paid monthly within three (3) Business Days after the last day of each month
following the Qualification Deadline.

     

    (b)                      Expenses.  The
Company will pay all expenses associated with each registration, including
filing and printing fees, the Company’s counsel and accounting fees and
expenses, costs associated with clearing the Registrable Securities for sale
under applicable state securities laws, listing fees, and fees and expenses of
one counsel to the Investors (not to exceed $7,500).  Other than the
above, the Investors shall bear their respective expenses in connection with the
registration, including, without limitation, discounts, commissions, fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals with respect to the Registrable Securities being
sold.

     

    (c)                      Effectiveness.

     

    (i)           The
Company shall use commercially reasonable efforts to have the Registration
Statement declared effective as soon as practicable.  The Company
shall notify the Investors by facsimile or e-mail as promptly as practicable,
and in any event, within twenty-four (24) hours, after any Registration
Statement is declared effective and shall simultaneously provide the Investors
with copies of any related Prospectus to be used in connection with the sale or
other disposition of the securities covered thereby.  If after a
Registration Statement has been declared effective by the SEC, sales cannot be
made pursuant to such Registration Statement for any reason (including without
limitation by reason of a stop order, or the Company’s failure to update the
Registration Statement), but excluding the inability of any Investor to sell the
Registrable Securities covered thereby due to market conditions and except as
excused pursuant to subparagraph (ii) below, then the Company will make pro rata
payments to each Investor, as liquidated damages and not as a penalty, in an
amount equal to 1.5% of the aggregate amount invested by such Investor for each
30-day period or pro rata for any portion thereof following the date by which
such Registration Statement should have been effective (the “Blackout
Period”).  Such payments shall be in partial compensation to
the Investors, and shall not constitute the Investors’ exclusive remedy for such
events.  The amounts payable as liquidated damages pursuant to this
paragraph shall be paid monthly within three (3) Business Days after the last
day of each month following the commencement of the Blackout Period until the
termination of the Blackout Period.  Such payments shall be made to
each Investor in cash or in additional shares of Common Stock as determined by
each Investor.

     

    (ii)           For
not more than twenty (20) consecutive days or for a total of not more than
forty-five (45) days in any twelve (12) month period, the Company may delay the
disclosure of material non-public information concerning the Company, by
suspending the use of any Prospectus included in any registration contemplated
by this Section containing such information, the disclosure of which at the time
is not, in the good faith opinion of the Company, in the best interests of the
Company (an “Allowed
Delay”); provided, that the
Company shall promptly (a) notify the Investors and the Placement Agent in
writing of the existence of (but in no event, without the prior written consent
of an Investor and the Placement Agent, shall the Company disclose to such
Investor any of the facts or circumstances regarding) material non-public
information giving rise to an Allowed Delay, (b) advise the Investors and the
Placement Agent in writing to cease all sales under the Registration Statement
until the end of the Allowed Delay and (c) use commercially reasonable efforts
to terminate an Allowed Delay as promptly as practicable.

     

     

    
      
        
        

      

      
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    3.           Company
Obligations.  The Company will use commercially reasonable
efforts to effect the registration of the Registrable Securities in accordance
with the terms hereof, and pursuant thereto the Company will, as expeditiously
as possible:

     

    (a)                      use
commercially reasonable efforts to cause such Registration Statement to become
effective and to remain continuously effective for a period that will terminate
upon the earlier of (i) the date on which all Registrable Securities covered by
such Registration Statement as amended from time to time, have been sold, and
(ii) the date on which all Registrable Securities covered by such Registration
Statement may be sold pursuant to Rule 144(k) (the “Effectiveness
Period”) and advise the Investors in writing when the Effectiveness
Period has expired;

     

    (b)                      prepare
and file with the SEC such amendments and post-effective amendments to the
Registration Statement and the Prospectus as may be necessary to keep the
Registration Statement effective for the Effectiveness Period and to comply with
the provisions of the 1933 Act and the 1934 Act with respect to the distribution
of all of the Registrable Securities covered thereby;

     

    (c)                      provide
copies to and permit counsel designated by the Investors to review each
Registration Statement and all amendments and supplements thereto no fewer than
seven (7) days prior to their filing with the SEC and not file any document to
which such counsel reasonably objects;

     

    (d)                      furnish
to the Investors and their legal counsel (i) promptly after the same is prepared
and publicly distributed, filed with the SEC, or received by the Company (but
not later than two (2) Business Days after the filing date, receipt date or
sending date, as the case may be) one (1) copy of any Registration Statement and
any amendment thereto, each preliminary prospectus and Prospectus and each
amendment or supplement thereto, and each letter written by or on behalf of the
Company to the SEC or the staff of the SEC, and each item of correspondence from
the SEC or the staff of the SEC, in each case relating to such Registration
Statement (other than any portion of any thereof which contains information for
which the Company has sought confidential treatment), and (ii) such number of
copies of a Prospectus, including a preliminary prospectus, and all amendments
and supplements thereto and such other documents as each Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor that are covered by the related Registration
Statement;

     

    (e)                      use
commercially reasonable efforts to (i) prevent the issuance of any stop order or
other suspension of effectiveness and, (ii) if such order is issued, use
commercially reasonable best efforts to obtain the withdrawal of any such order
at the earliest possible moment;

     

    (f)                      prior
to any public offering of Registrable Securities, use commercially reasonable
efforts to register or qualify or cooperate with the Investors and their counsel
in connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions requested by the Investors and do any and all other commercially
reasonable acts or things necessary or advisable to enable the distribution in
such jurisdictions of the Registrable Securities covered by the Registration
Statement; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (i) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(f), (ii) subject itself to general taxation in any jurisdiction
where it would not otherwise be so subject but for this Section 3(f), or (iii)
file a general consent to service of process in any such
jurisdiction;

     

    (g)                      use
commercially reasonable efforts to cause all Registrable Securities covered by a
Registration Statement to be listed on each securities exchange, interdealer
quotation system or other market on which similar securities issued by the
Company are then listed;

     

     

    
      
        
        

      

      
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    (h)                      immediately
notify the Investors, at any time when a Prospectus relating to Registrable
Securities is required to be delivered under the 1933 Act, upon discovery that,
or upon the happening of any event as a result of which, the Prospectus included
in a Registration Statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing, and at the request of any such holder, promptly
prepare and furnish to such holder a reasonable number of copies of a supplement
to or an amendment of such Prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such Prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
and

     

    (i)                      otherwise
use commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC under the 1933 Act and the 1934 Act, and take such other
actions as may be reasonably necessary to facilitate the registration of the
Registrable Securities hereunder; and make available to its security holders, as
soon as reasonably practicable, but not later than the Availability Date (as
defined below), an earnings statement covering a period of at least twelve (12)
months, beginning after the effective date of each Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the 1933
Act, including Rule 158 promulgated thereunder (for the purpose of this
subsection 3(i), “Availability Date” means the 45th day following the end of the
fourth fiscal quarter that includes the effective date of such Registration
Statement, except that, if such fourth fiscal quarter is the last quarter of the
Company’s fiscal year, “Availability Date” means the 90th day after the end of
such fourth fiscal quarter).

     

    (j)                      With
a view to making available to the Investors the benefits of Rule 144 (or its
successor rule) and any other rule or regulation of the SEC that may at any time
permit the Investors to sell shares of Common Stock to the public without
registration, the Company covenants and agrees to:  (i) make and keep
public information available, as those terms are understood and defined in Rule
144, until the earlier of (A) six months after such date as all of the
Registrable Securities may be resold pursuant to Rule 144(k) or any other rule
of similar effect or (B) such date as all of the Registrable Securities shall
have been resold; (ii) file with the SEC in a timely manner all reports and
other documents required of the Company under the 1934 Act; and (iii) furnish to
each Investor upon request, as long as such Investor owns any Registrable
Securities, (A) a written statement by the Company that it has complied with the
reporting requirements of the 1934 Act, (B) a copy of the Company’s most recent
Annual Report on Form 10-KSB or Quarterly Report on Form 10-QSB, and (C) such
other information as may be reasonably requested in order to avail such Investor
of any rule or regulation of the SEC that permits the selling of any such
Registrable Securities without registration.

     

    4.                 Due Diligence Review;
Information.  The Company shall make available, during normal
business hours, for inspection and review by the Investors, advisors to and
representatives of the Investors (who may or may not be affiliated with the
Investors and who are reasonably acceptable to the Company), all financial and
other records, all SEC filings, and all other corporate documents and properties
of the Company as may be reasonably necessary for the purpose of such review,
and cause the Company’s officers, directors and employees, within a reasonable
time period, to supply all such information reasonably requested by the
Investors or any such representative, advisor or underwriter in connection with
such Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investors and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of such Registration Statement.

     

    The
Company shall not disclose material nonpublic information to the Investors, or
to advisors to or representatives of the Investors, unless prior to disclosure
of such information the Company identifies such information as being material
nonpublic information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review and any Investor wishing to obtain such
information enters into an appropriate confidentiality agreement with the
Company with respect thereto.

     

    
      
        
        

      

      
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    5.           Obligations of the
Investors.

     

    (a)                      Each
Investor shall furnish in writing to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it, as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.  At least five (5) Business Days prior to the
first anticipated filing date of any Registration Statement, the Company shall
notify each Investor of the information the Company requires from such Investor
if such Investor elects to have any of the Registrable Securities included in
the Registration Statement.  An Investor shall provide such
information to the Company at least two (2) Business Days prior to the first
anticipated filing date of such Registration Statement if such Investor elects
to have any of the Registrable Securities included in the Registration
Statement.

     

    (b)                      Each
Investor, by its acceptance of the Registrable Securities agrees to cooperate
with the Company as reasonably requested by the Company in connection with the
preparation and filing of a Registration Statement hereunder, unless such
Investor has notified the Company in writing of its election to exclude all of
its Registrable Securities from such Registration Statement.

     

    (c)                      Each
Investor agrees that, upon receipt of any notice from the Company of either (i)
the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the
happening of an event pursuant to Section 3(h) hereof, such Investor will
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities, until the
Investor’s receipt of the copies of the supplemented or amended prospectus filed
with the SEC and until any related post-effective amendment is declared
effective and, if so directed by the Company, the Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Investor’s possession of the
Prospectus covering the Registrable Securities current at the time of receipt of
such notice.

     

    6.           Indemnification.

     

    (a)                      Indemnification by the
Company.  The Company will indemnify and hold harmless each
Investor and its officers, directors, members, employees and agents, successors
and assigns, and each other person, if any, who controls such Investor within
the meaning of the 1933 Act, against any losses, claims, damages or liabilities,
joint or several, to which they may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon: (i) any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof; (ii) any blue sky application or other
document executed by the Company specifically for that purpose or based upon
written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Registrable Securities under
the securities laws thereof (any such application, document or information
herein called a “Blue Sky Application”); (iii) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; (iv) any violation by the Company or
its agents of any rule or regulation promulgated under the 1933 Act applicable
to the Company or its agents and relating to action or inaction required of the
Company in connection with such registration; or (v) any failure to register or
qualify the Registrable Securities included in any such Registration in any
state where the Company or its agents has affirmatively undertaken or agreed in
writing that the Company will undertake such registration or qualification on an
Investor’s behalf and will reimburse such Investor, and each such officer,
director or member and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by such Investor or any such controlling
person in writing specifically for use in such Registration Statement or
Prospectus.

     

     

    
      
        
        

      

      
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    (b)                      Indemnification by the
Investors.  Each Investor agrees, severally but not jointly, to
indemnify and hold harmless, to the fullest extent permitted by law, the
Company, its directors, officers, employees, stockholders and each person who
controls the Company (within the meaning of the 1933 Act) against any losses,
claims, damages, liabilities and expense (including reasonable attorney fees)
resulting from any untrue statement of a material fact or any omission of a
material fact required to be stated in the Registration Statement or Prospectus
or preliminary prospectus or amendment or supplement thereto or necessary to
make the statements therein not misleading, to the extent, but only to the
extent that such untrue statement or omission is contained in any information
furnished in writing by such Investor to the Company specifically for inclusion
in such Registration Statement or Prospectus or amendment or supplement
thereto.  In no event shall the liability of an Investor be greater in
amount than the dollar amount of the proceeds (net of all expense paid by such
Investor in connection with any claim relating to this Section 6 and the amount
of any damages such Investor has otherwise been required to pay by reason of
such untrue statement or omission) received by such Investor upon the sale of
the Registrable Securities included in the Registration Statement giving rise to
such indemnification obligation.

     

    (c)                      Conduct of Indemnification
Proceedings.  Any person entitled to indemnification hereunder
shall (i) give prompt notice to the indemnifying party of any claim with respect
to which it seeks indemnification and (ii) permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party; provided, that any
person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such person unless (a)
the indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party with
respect to such claims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such person); and provided, further, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations hereunder, except to the
extent that such failure to give notice shall materially adversely affect the
indemnifying party in the defense of any such claim or litigation.  It
is understood that the indemnifying party shall not, in connection with any
proceeding in the same jurisdiction, be liable for fees or expenses of more than
one separate firm of attorneys at any time for all such indemnified
parties.  No indemnifying party will, except with the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect of such claim or litigation.

     

    (d)                      Contribution.  If
for any reason the indemnification provided for in the preceding paragraphs (a)
and (b) is unavailable to an indemnified party or insufficient to hold it
harmless, other than as expressly specified therein, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable
considerations.  No person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the 1933 Act shall be entitled to
contribution from any person not guilty of such fraudulent
misrepresentation.  In no event shall the contribution obligation of a
holder of Registrable Securities be greater in amount than the dollar amount of
the proceeds (net of all expenses paid by such holder in connection with any
claim relating to this Section 6 and the amount of any damages such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission) received by it upon the sale of the
Registrable Securities giving rise to such contribution obligation.

     

    7.           Miscellaneous.

     

    (a)                      Amendments and
Waivers.  This Agreement may be amended only by a writing
signed by the Company and the Required Investors.  The Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, only if the Company shall have obtained the written consent
to such amendment, action or omission to act, of the Required
Investors.

     

     

    
      
        
        

      

      
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    (b)                      Notices.  All
notices and other communications provided for or permitted hereunder shall be
made in accordance with the provisions of the Subscription
Agreement.

     

    (c)                      Assignments and Transfers by
Investors.  The provisions of this Agreement shall be binding
upon and inure to the benefit of the Investors and their respective successors
and assigns.  An Investor may transfer or assign, in whole or from
time to time in part, to one or more persons its rights hereunder in connection
with the transfer of Registrable Securities by such Investor to such person,
provided that such Investor complies with all laws applicable thereto and
provides written notice of assignment to the Company promptly after such
assignment is effected.

     

    (d)                      Assignments and Transfers by
the Company.  This Agreement may not be assigned by the Company
(whether by operation of law or otherwise) without the prior written consent of
the Required Investors, provided, however, that the Company may assign its
rights and delegate its duties hereunder to any surviving or successor
corporation in connection with a merger or consolidation of the Company with
another corporation, or a sale, transfer or other disposition of all or
substantially all of the Company’s assets to another corporation, without the
prior written consent of the Required Investors, after notice duly given by the
Company to each Investor.

     

    (e)                      Benefits of the
Agreement.  The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective permitted successors
and assigns of the parties.  Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

     

    (f)                      Counterparts;
Faxes.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  This Agreement
may also be executed via facsimile, which shall be deemed an
original.

     

    (g)                      Titles and
Subtitles.  The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.

     

    (h)                      Severability.  Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.  To the
extent permitted by applicable law, the parties hereby waive any provision of
law which renders any provisions hereof prohibited or unenforceable in any
respect.

     

    (i)                      Further
Assurances.  The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.

     

    (j)                      Entire
Agreement.  This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein.  This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.

     

     

    
      
        
        

      

      
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    (k)                      Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial.  This Agreement
shall be governed by, and construed in accordance with, the internal laws of the
State of Illinois without regard to the choice of law principles
thereof.  Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the courts of the State of Illinois located in Lake
County and the United States District Court for the Northern District of
Illinois for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement and the transactions contemplated
hereby.  Service of process in connection with any such suit, action
or proceeding may be served on each party hereto anywhere in the world by the
same methods as are specified for the giving of notices under this
Agreement.  Each of the parties hereto irrevocably consents to the
jurisdiction of any such court in any such suit, action or proceeding and to the
laying of venue in such court.  Each party hereto irrevocably waives
any objection to the laying of venue of any such suit, action or proceeding
brought in such courts and irrevocably waives any claim that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum.  EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO
REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS
WAIVER.

     

     

     

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of page intentionally left blank]

     

     

     

     

     

     

     

    
      
        
        

      

      
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    IN
WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
authorized officers to execute this Agreement as of the date first above
written.

     

     

    
      	
              The
      Company:  

            	
              Z
      TRIM HOLDINGS, INC.

            	 
      
	 
      	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/ 

            	 
      
	 
      	 
      	
              Name:
      Steven J. Cohen

            	 
      
	 
      	 
      	
              Title: Chief
      Executive Officer

            	 
      
	 
      	 
      	 
      	 
      


    

     

    
      	
              The
      Placement Agent: 

            	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/ 

            	 
      
	 
      	 
      	
              Name 

            	 
      
	 
      	 
      	
              Title 

            	 
      
	 
      	 
      	 
      	 
      


    

    


     

    The
Investors:                                           [Contained
in Omnibus Signature Page in Subscription Agreement]

     

     

     

    
      
        
        

      

      
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    Exhibit
A

    


    Plan
of Distribution

    


    The
selling stockholders (the “Selling
Stockholders”, which as used herein includes donees, pledgees,
transferees or other successors-in-interest of a Selling Stockholder selling
shares of Common Stock or interests in shares of Common Stock received after the
date of this prospectus from a Selling Stockholder as a gift, pledge,
partnership distribution or other transfer) may, from time to time, sell,
transfer or otherwise dispose of any or all of their shares of Common Stock or
interests in shares of Common Stock on any stock exchange, market or trading
facility on which the shares are traded or in private
transactions.  These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale, or at
negotiated prices.

    


    The
Selling Stockholders may use any one or more of the following methods when
disposing of shares or interests therein:

    


    -
ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

    


    - block
trades in which the broker-dealer will attempt to sell the shares as agent, but
may position and resell a portion of the block as principal to facilitate the
transaction;

    


    -
purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;

    


    - an
exchange distribution in accordance with the rules of the applicable
exchange;

    


    -
privately negotiated transactions;

    


    - short
sales effected after the date the registration statement of which this
Prospectus is a part is declared effective by the SEC;

    


    - through
the writing or settlement of options or other hedging transactions, whether
through an options exchange or otherwise;

    


    -
broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share; and

    


    - a
combination of any such methods of sale.

    


    The
Selling Stockholders may, from time to time, pledge or grant a security interest
in some or all of the shares of Common Stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of Common Stock, from time to time, under this
Prospectus, or under an amendment to this Prospectus under Rule 424(b)(3) or
other applicable provision of the 1933 Act amending the list of Selling
Stockholders to include the pledgee, transferee or other successors-in-interest
as Selling Stockholders under this Prospectus.  The Selling
Stockholders also may transfer the shares of Common Stock in other
circumstances, in which case the transferees, pledgees or other
successors-in-interest will be the selling beneficial owners for purposes of
this Prospectus.

    


    Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
Selling Stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.

     

    
      
        
        

      

      
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    [_________
has indicated to us its willingness to act as selling agent on behalf of the
Selling Stockholders named in the Prospectus under “Selling Security Holders”
that purchased our privately placed securities.  All shares sold, if
any, on behalf of Selling Stockholders by ___________ would be in transactions
executed by ____________ on an agency basis and commissions charged to its
customers in connection with each transaction shall not exceed a maximum of
[__%] of the gross
proceeds.  ___________ does not have an underwriting agreement with us
and/or the Selling Stockholders and no Selling Stockholders are required to
execute transactions through ___________.]

    


    In
connection with the sale of our Common Stock or interests therein, the Selling
Stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume.  The Selling
Stockholders may also sell shares of our Common Stock short and deliver these
securities to close out their short positions, or loan or pledge the Common
Stock to broker-dealers that in turn may sell these securities.  The
Selling Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this Prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
Prospectus (as supplemented or amended to reflect such
transaction).

    


    The
Selling Stockholders will receive the aggregate proceeds from the sale of the
Common Stock offered by them.  The aggregate proceeds to the Selling
Stockholders from the sale of the Common Stock offered by them will be the
purchase price of the Common Stock less discounts or commissions, if
any.  Each of the Selling Stockholders reserves the right to accept
and, together with their agents from time to time, to reject, in whole or in
part, any proposed purchase of Common Stock to be made directly or through
agents.  We will not receive any of the proceeds from the sale of
Common Stock in this offering.  We may receive proceeds from holders
who exercise their warrants and pay the applicable cash exercise price in
connection with those exercises.

    


    The
Selling Stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act of 1933,
provided that they meet the criteria and conform to the requirements of that
rule.

    


    The
Selling Stockholders and any underwriters, broker-dealers or agents that
participate in the sale of the Common Stock or interests therein may be
“underwriters” within the meaning of Section 2(11) of the 1933
Act.  Any discounts, commissions, concessions or profit they earn on
any resale of the shares may be underwriting discounts and commissions under the
1933 Act.  Selling Stockholders who are “underwriters” within the
meaning of Section 2(11) of the 1933 Act will be subject to the prospectus
delivery requirements of the 1933 Act.

    


    To the
extent required, the shares of our common stock to be sold, the names of the
Selling Stockholders, the respective purchase prices and public offering prices,
the names of any agent, dealer or underwriter, any applicable commissions or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this
Prospectus.

    


    In order
to comply with the securities laws of some states, if applicable, the Common
Stock may be sold in these jurisdictions only through registered or licensed
brokers or dealers.  In addition, in some states the Common Stock may
not be sold unless it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.

    


    We have
advised the Selling Stockholders that the anti-manipulation rules of Regulation
M under the 1934 Act may apply to sales of shares in the market and to the
activities of the Selling Stockholders and their affiliates.  In
addition, we will make copies of this Prospectus (as it may be supplemented or
amended from time to time) available to the Selling Stockholders for the purpose
of satisfying the prospectus delivery requirements of the 1933
Act.  The Selling Stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares of Common Stock
against certain liabilities, including liabilities arising under the 1933
Act.

    


    We will
pay all of the expenses incident to registration other than commissions, fees
and discounts of underwriters, brokers, dealers and agents.  We will
pay for offering expenses including the SEC registration fee, accounting fees,
legal fees, printing expenses and other related miscellaneous expenses. We have
agreed to indemnify the Selling Stockholders against liabilities, including
liabilities under the 1933 Act and state securities laws, relating to the
registration of the shares offered by this Prospectus.

    


    We have
agreed with the Selling Stockholders to keep the registration statement of which
this Prospectus constitutes a part effective until the earlier of (1) such time
as all of the shares covered by this Prospectus have been disposed of pursuant
to and in accordance with the registration statement or (2) the date on which
the shares may be sold pursuant to Rule 144(k) of the 1933 Act.

    


     

     

     

    


     

    


    13