Document:

ex42.htm

     

    Exhibit 4.2

     

    

      THE
SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY THE HOLDER HEREOF FOR ITS
OWN ACCOUNT FOR INVESTMENT WITH NO INTENTION OF MAKING OR CAUSING TO BE MADE A
PUBLIC DISTRIBUTION OF ALL OR ANY PORTION THEREOF.  SUCH SECURITIES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES
ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT.

      

      

      No.
____ 

       

      June___,
2010

      

      

      Z TRIM
HOLDINGS, INC.

      FORM OF
WARRANT TO PURCHASE COMMON STOCK

      

      Void
after June ____, 2015

      

      

      Z Trim Holdings, Inc.,
an Illinois corporation (the “Company”), hereby
certifies that, for value received, the investor whose name appears on the
signature page hereof (including any successors and assigns, the “Holder”), is
entitled, subject to the terms set forth below, to purchase from the Company at
any time or from time to time during the Exercise Period, defined below, and
prior to 5:00 PM Central time, on June ________, 2015 (the “Expiration Date”),
fully paid and nonassessable shares of Common Stock (the “Warrant Shares”)
under the terms set forth herein.

      

      This Warrant is issued pursuant to that
certain Subscription Agreement dated June____, 2010 by and between the Company
and the Holder (the “Subscription
Agreement”) that was executed and delivered in connection with that
certain Confidential Private Placement Memorandum of the Company dated as of May
1, 2010 and the Supplement thereto dated as of May 30, 2010, relating to the
sale of 500 Units consisting of 2,000 shares of the Company’s Series I, 8%
Convertible Preferred Stock(the “Preferred Stock”) and a Warrant for 15,000,
shares of Common Stock (the  “Private
Offering”).

      

      1. Number of Warrant Shares;
Exercise Price.  This Warrant shall evidence the right of the
Holder to purchase up to ________________ Warrant Shares at an exercise price
per Warrant Share of $1.50 per share (the “Exercise Price”),
subject to adjustment as provided in Section 6 below.

      

      2. Definitions.  As
used herein the following terms, unless the context otherwise requires, have the
following respective meanings:

      

      (a) The term
“Common Stock”
shall mean the common stock, par value $.00005 per share, of the
Company.

      

      (b) The term
“Company” shall
include any company which shall succeed to or assume the obligations of the
Company hereunder.

      

      (c) The term
“Corporate
Transaction” shall mean (i) a sale, lease transfer or conveyance of all
or substantially all of the assets of the Company; (ii) a consolidation of the
Company with, or merger of the Company with or into, another corporation or
other business entity in which the stockholders of the Company immediately prior
to such consolidation or merger own less than 50% of the voting power of the
surviving entity immediately after such consolidation or merger; or (iii) any
transaction or series of related transactions to which the Company is a party in
which in excess of 50% of the Company’s voting power is transferred, excluding
any consolidation or merger effected exclusively to change the domicile of the
Company.

      (d) The term
“Stock” shall
mean (i) Common Stock or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value.

      

      3. Exercise Date;
Expiration.  Subject to the terms hereof, this Warrant may be
exercised by the Holder at any time or from time to time before the Expiration
Date (the “Exercise
Period”).

      

      4. Exercise of Warrant; Partial
Exercise.  This Warrant may be exercised in full by the Holder
by surrender of this Warrant, together with the Holder’s duly executed form of
subscription attached hereto as Exhibit A, to the
Company at its principal office, accompanied by payment, in cash or by certified
or official bank check payable to the order of the Company, of the aggregate
exercise price (as determined above) of the number of Warrant Shares to be
purchased hereunder.  The exercise of this Warrant pursuant to this
Section 4 shall be deemed to have been effected immediately prior to the close
of business on the business day on which this Warrant is surrendered to the
Company as provided in this Section 4, and at such time the person in whose name
any certificate for Warrant Shares shall be issuable upon such exercise shall be
deemed to be the record holder of such Warrant Shares for all
purposes.  As soon as practicable after the exercise of this Warrant,
the Company at its expense will cause to be issued in the name of and delivered
to the Holder, or as the Holder may direct, a certificate or certificates for
the number of fully paid and nonassessable full shares of Warrant Shares to
which the Holder shall be entitled on such exercise, together with cash, in lieu
of any fraction of a share, equal to such fraction of the current fair market
value of one full Warrant Share as determined in good faith by the Board of
Directors of the Company (the “Board”), and, if
applicable, a new warrant evidencing the balance of the shares remaining subject
to the Warrant.

      

      5. Net
Issuance.

      

      (a) Cashless
Exercise.  Only in the event that there is not in
effect  a registration statement with the SEC covering the Warrant
Shares, in addition to and without limiting the rights of the Holder under the
terms of this Warrant, the Holder shall have the right to convert this Warrant
(the “Conversion
Right”) into Warrant Shares as provided in this Section 5 at any time or
from time to time beginning on the 6-month anniversary of the date of this
Warrant and ending at the expiration of the Exercise Period.  Upon
exercise of the Conversion Right with respect to shares subject to the Warrant
(the “Converted
Warrant Shares”), the Company shall deliver to the Holder (without
payment by the Holder of any exercise price or any cash or other consideration)
that number of fully paid and nonassessable Warrant Shares computed using the
following formula:

      

      X = Y (A -
B)

      A

      

      Where:                   X
=           the number of
Warrant Shares to be delivered to the Holder;

      

      Y
=           the number of
Converted Warrant Shares;

      

      A
=           the fair
market value of one Warrant Share on the Conversion Date (as defined below);
and

      

      B
=           the Exercise
Price (as adjusted on the Conversion Date).

      

      No
fractional shares shall be issuable upon exercise of the Conversion Right, and
if the number of shares to be issued determined in accordance with the foregoing
formula is other than a whole number, the Company shall pay to the Holder an
amount in cash equal to the fair market value of the resulting fractional share
on the Conversion Date (as defined below).  Shares issued pursuant to
the Conversion Right shall be treated as if they were issued upon the exercise
of the Warrant.

      

      (b) Method of
Exercise.  The Conversion Right may be exercised by the Holder
by the surrender of the Warrant at the principal office of the Company together
with a written statement specifying that the Holder thereby intends to exercise
the Conversion Right and indicating the total number of shares under the Warrant
that the Holder is exercising through the Conversion Right.  Such
conversion shall be effective upon receipt by the Company of the Warrant
together with the aforesaid written statement, or on such later date as is
specified therein (the “Conversion
Date”).  Certificates for the shares issuable upon exercise of
the Conversion Right shall be delivered to the Holder promptly following the
Conversion Date.

      

      (c) Determination of Fair Market
Value.  For purposes of this Section 5, fair market value of a
Warrant Share on the Conversion Date shall be determined as
follows:

      

      (i) If this
Warrant is to be exercised contingent upon and effective immediately prior to
the initial public offering of the Company’s Common Stock pursuant to an
effective registration statement under the Securities Act  (an “Initial Public
Offering”), the fair market value of a Warrant Share shall be deemed to
be equal to the price per share to the public of the shares of Common Stock sold
in the Initial Public Offering as set forth on the front cover of the final
prospectus relating to the Initial Public Offering;

      

      (ii) If the
Common Stock is traded on a stock exchange or the Nasdaq Stock Market (or a
similar national quotation system), the fair market value of a Warrant Share
shall be deemed to be the average of the closing selling prices of the Common
Stock on the stock exchange or system determined by the Board to be the primary
market for the Common Stock over the ten (10) trading day period ending on the
date prior to the Conversion Date, as such prices are officially quoted in the
composite tape of transactions on such exchange or system;

      

      (iii) If the
Common Stock is traded over-the-counter, the fair market value of a Warrant
Share shall be deemed to be the average of the closing bid prices (or, if such
information is available, the closing selling prices) of the Common Stock over
the ten (10) trading day period ending on the date prior to the Conversion Date,
as such prices are reported by the National Quotation Bureau Incorporated or any
successor system ; and

      

      (iv) If there
is no public market for the Common Stock, then the fair market value of a
Warrant Share shall be determined by the Board in good faith and, upon request
of the Holder, the Board (or a representative thereof) shall, as promptly as
reasonably practicable but in any event not later than 15 days after such
request, notify the Holder of the Fair Market Value per share of Common
Stock.

      

      6. Adjustments to Exercise
Price and Number of Warrant Shares.  For the purposes of this
Section 6, the term Exercise Price shall mean the Exercise Price per share set
forth on the first page of this Warrant as adjusted from time to time pursuant
to the provisions of this Section 6.  The number and kind of Warrant
Shares (or any shares of stock or other securities which may be) issuable upon
the exercise of this Warrant and the Exercise Price hereunder shall be subject
to adjustment from time to time upon the happening of certain events, as
follows:

      

      (a) Splits and Subdivisions.  In
the event the Company should at any time or from time to time fix a record date
for the effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of the holders of Common Stock entitled to
receive a dividend or other distribution payable in additional shares of Common
Stock or other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly, additional shares of Common Stock
(hereinafter referred to as the “Common Stock
Equivalents”) without payment of any consideration by such holder for the
additional shares of Common Stock or Common Stock Equivalents, then, as of such
record date (or the date of such distribution, split or subdivision if no record
date is fixed), the Exercise Price shall be appropriately decreased and the
number of Warrant Shares for which this Warrant is exercisable shall be
appropriately increased in proportion to such increase of outstanding
shares.

      

      (b) Combination of
Shares.  If the number of shares of Common Stock outstanding at
any time after the date hereof is decreased by a combination of the outstanding
shares of Common Stock, the Exercise Price shall be appropriately increased and
the number of Warrant Shares for which this Warrant is exercisable shall be
appropriately decreased in proportion to such decrease in outstanding
shares.

      

      (c) Reclassification or
Reorganization.  If the Warrant Shares issuable upon the
exercise of this Warrant shall be changed into the same or different number of
shares of any class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a split, subdivision or stock dividend
provided for in Section 6(a) above or a combination of shares provided for in
Section 6(b) above, or a reorganization, merger or consolidation provided for in
Section 6(d) below, then and in each such event the Holder shall be entitled to
receive upon the exercise of this Warrant the kind and amount of shares of stock
and other securities and property receivable upon such reorganization,
reclassification or other change, to which a holder of the number of Warrant
Shares issuable upon the exercise of this Warrant would have received if this
Warrant had been exercised immediately prior to such reorganization,
reclassification or other change, all subject to further adjustment as provided
herein.

      

      (d) Merger or
Consolidation.  If at any time or from time to time there shall
be a capital reclassification or reorganization of the Warrant Shares or a
Corporate Transaction (other than a subdivision, combination, reclassification
or exchange of shares provided for elsewhere in this Section 6) of the Company,
then as a part of such reorganization or Corporate Transaction, adequate
provision shall be made so that the Holder shall thereafter be entitled to
receive upon the exercise of this Warrant, the number of shares of stock or
other securities or property of the Company, resulting from such reorganization,
recapitalization or Corporate Transaction to which a holder of the number of
Warrant Shares issuable upon the exercise of this Warrant would have received if
this Warrant had been exercised immediately prior to such reorganization or
Corporate Transaction.  In any such case, the Company will make
appropriate provision to insure that the provisions of this Section 6(d) hereof
will thereafter be applicable as nearly as may be in relation to any shares of
stock or securities thereafter deliverable upon the exercise of this
Warrant.  The Company shall not effect any such Corporate Transaction
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such Corporate
Transaction or the corporation purchasing or acquiring such assets or other
appropriate corporation or entity shall assume the obligation to deliver to the
Holder, at the last address of the Holder appearing on the books of the Company,
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, the Holder may be entitled to purchase, and the other obligations
under this Warrant.  The provisions of this Section 6(d) shall
similarly apply to successive reorganizations, reclassifications, or Corporate
Transactions.

      

      (e) Computation of Adjusted
Exercise Price.  In the event that the Company sells or issues
shares of Stock at a price less than the Exercise Price in effect immediately
prior to such sale or issuance, then the Exercise Price shall be reduced
immediately thereafter so that it shall equal the price at which such shares of
Stock are sold or issued, as applicable.

      

       

      (f)           Options, Rights, Warrants
and Convertible and Exchangeable Securities.  Subject to
Section 6(h) hereof, in case the Company shall at any time after the date hereof
issue options, rights or warrants to subscribe for shares of Stock, or issue any
securities convertible into or exchangeable for shares of Stock (collectively
the “Rights”), for a consideration per share less than the Exercise Price in
effect immediately prior to the issuance of such Rights, or without
consideration, the Exercise Price in effect immediately prior to the issuance of
such, shall be reduced to the price established for such Rights that entitle the
holders thereof to receive a share of Stock. .   If (i)any change
shall occur in the price per share provided for in any of the Rights: (ii) any
change shall occur in the price per share at which the securities referred to in
this subsection are exchangeable; (iii) any of the Rights are exercised in an
amount or at a price different from the assumed aggregate maximum number of
shares or the minimum purchase price provided in this subsection; or (iv) any of
the Rights are cancelled or expire without being exercised, then (x) such
Rights, as the case may be, shall be deemed to have been cancelled, expired or
terminated on the date when such price change, exercise or expiration became
effective in respect to shares not theretofore issued pursuant to the exercise
or exchange thereof, (y) the Company shall be deemed to have issued upon such
date new Rights at the new price in respect of the number of shares issuable
upon the exercise of such Rights, and (z) the adjustment to Exercise Price
provided in this subsection shall be recalculated as if the original issuance
causing the prior adjustment to Exercise Price had not occurred. Consequently,
if the Rights are subsequently modified, cancelled or expire without exercise,
any adjustment previously made to the Exercise Price shall be readjusted to
reflect such modification, cancellation and or expiration.

       

      (g)           Adjustment in Number of
Warrant Shares.  Upon each adjustment of the Exercise Price
pursuant to the provisions of this Section 6, the number of Warrant Shares
issuable upon the exercise of this Warrant shall be adjusted to the nearest full
amount by multiplying a number equal to the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares issuable upon exercise
of the Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.

       

      (h)           No Adjustment of Exercise
Price in Certain Cases.  No adjustment of the Exercise Price
shall be made:

      

      (i)           Upon
issuance or sale of this Warrant or Warrant Shares, or the other warrants and
warrant shares, the Preferred Stock issued in connection with the Private
Offering pursuant to the Subscription Agreement, or shares of Common Stock
issuable upon conversion of the Preferred Stock, exercise of the other options,
warrants and convertible securities outstanding as of the date hereof,
including, without limitation, those that are being or will be issued in
connection with the closing of the Private Offering.

       

      (ii)           Upon
the issuance or sale of any shares of capital stock, or the grant of options
exercisable therefor, issued or issuable on or after the date of this Warrant,
to directors, officers, employees, advisers and consultants of the Company or
any subsidiary pursuant to any incentive or non-qualified stock option plan or
agreement, stock purchase plan or agreement, stock restriction agreement or
restricted stock plan, employee stock ownership plan (ESOP), consulting
agreement, stock appreciation right (SAR), stock depreciation right (SDR), bonus
stock arrangement, or such other similar compensatory options, issuances,
arrangements, agreements or plans approved by the Board.

       

      (iii)           Upon
the issuance of any shares of capital stock or the grant of warrants or options
(or the exercise thereof) as consideration for mergers, acquisitions, strategic
alliances and other commercial transactions, other than in connection with a
financing transaction.

       

      (iv)           If
the amount of said adjustment shall be less than one cent ($0.01) per security
issuable upon exercise of this Warrant; provided, however, that in such
case any adjustment that would otherwise be required then to be made shall be
carried forward and shall be made at the time of and together with the next
subsequent adjustment which, together with any adjustment so carried forward,
shall amount to at least one cent ($0.01) per security issuable upon exercise of
this Warrant.

       

      (h)           Notice of Record Dates;
Adjustments.  In the event of an Initial Public Offering or a
Corporate Transaction, the Company shall provide to the Holder twenty (20) days
advance written notice of such Initial Public Offering or Corporate
Transaction.  The Company shall promptly notify the Holder in writing
of each adjustment or readjustment of the Exercise Price hereunder and the
number of Warrant Shares issuable upon the exercise of this
Warrant.  Such notice shall state the adjustment or readjustment and
show in reasonable detail the facts on which that adjustment or readjustment is
based.

       

      7. Registration
Rights.  The Company hereby agrees that the Holder shall be
entitled, with respect to all Warrant Shares issued upon the exercise of this
Warrant, to the registration rights set forth in the Registration Rights
Agreement, dated as of the date hereof, by and among the Company, the Holder and
the investors in the Private Offering, as may be amended or supplemented from
time to time, the terms of which are hereby incorporated by this reference, with
the same force and effect as if specifically set forth herein.

      

      8. Replacement of
Warrants.  On receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of such Warrant, the Company at its expense will execute and
deliver to the Holder, in lieu thereof, a new Warrant of like
tenor.

      

      9. No Rights or Liability as a
Stockholder.  This Warrant does not entitle the Holder hereof
to any voting rights or other rights as a stockholder of the
Company.  No provisions hereof, in the absence of affirmative action
by the Holder to purchase Warrant Shares, and no enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of the
Holder as a stockholder of the Company.

      

      10. Miscellaneous.

      

      (a) Transfer of Warrant;
Permitted Designees.  The Holder agrees not to make any
disposition of this Warrant, the Warrant Shares or any rights hereunder without
the prior written consent of the Company.  Any such permitted transfer
must be made by the Holder in person or by duly authorized attorney, upon
delivery of this Warrant and the form of assignment attached hereto as Exhibit B to any such
permitted transferee.  As a condition precedent to such transfer, the
transferee shall sign an investment letter in form and substance satisfactory to
the Company.  Subject to the foregoing, the provisions of this Warrant
shall inure to the benefit of and be binding upon any successor to the Company
and shall extend to any holder hereof. Notwithstanding anything contained
herein, the Company shall, upon written instructions to be delivered to the
Company within fifteen (15) business days following the date hereof, transfer
all or a portion of this Warrant to officers, directors, employees and other
registered agents or associated persons of the Holder (collectively, “Permitted Designees”)
in accordance with this Section 10; provided, however, the Company shall not be
required to issue such Warrants to any person who is not an “accredited
investor” within the meaning of Regulation D promulgated under the Securities
Act and provided, further, such transfer must be in compliance with applicable
Federal and state securities laws.  Each Permitted Designee shall be
required to execute fully and completely the Investor Representation Letter in
the form attached hereto as Exhibit C prior to
the issuance of the Warrant to such person.

      

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

      

      (c) Notices.  Any
notice required or permitted to be given to a party pursuant to the provisions
of this Warrant shall be in writing and shall be effective and deemed given to
such party under this Warrant on the earliest of the following: (i) the date of
personal delivery; (ii) two (2) business days after transmission by facsimile,
addressed to the other party at its facsimile number, with confirmation of
transmission; (iii) four (4) business days after deposit with a return receipt
express courier for United States deliveries; or (iv) five (5) business days
after deposit in the United States mail by registered or certified mail (return
receipt requested) for United States deliveries.  All notices not
delivered personally or by facsimile will be sent with postage and/or other
charges prepaid and properly addressed to such party at the address set forth on
the signature page hereto, or at such other address as such party may designate
by ten (10) days advance written notice to the other party
hereto.  Notices to the Company will be marked “Attention: Chief
Financial Officer.”

      

      (d) Attorneys’
Fees.  If any action at law or in equity is necessary to
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to reasonable attorneys’ fees, costs and disbursements in addition to
any other relief to which such party may be entitled.

      

      (e) Amendments and
Waivers.  Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively) with the written
consent of the Holder and the Company.  Any amendment or waiver
effected in accordance with this Section 10(e) shall be binding upon the Holder
of this Warrant (and of any securities into which this Warrant is convertible),
each future holder of all such securities, and the Company.

      

      (f) Severability.  If
one or more provisions of this Warrant are held to be unenforceable under
applicable law, such provision shall be excluded from this Warrant and the
balance of the Warrant shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.

      

      (g) Governing
Law.  This Warrant shall be governed by and construed and
enforced in accordance with the laws of the State of Illinois, without giving
effect to its conflicts of laws principles.

      

      (h) Counterparts.  This
Warrant may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

      

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      In Witness Whereof, the
Company has caused this Warrant to be executed by its duly authorized officer as
of the date first written above.

      

      

      Z TRIM
HOLDINGS, INC.,

      an
Illinois corporation

      

      

      By:

      Name:
Steven J. Cohen

      Title:
Chief Executive Officer

      

      Address:                 1011
Campus Drive

      Mundelein, IL 60060

       

      Holder/Investor:     __________________

       

      

      

      By:                                                      

      Name:                                                      

      Title:                                                      

       
 

       

      

      

      

      

      

      

      

      

      

      

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      EXHIBIT
A

      

      FORM OF
SUBSCRIPTION

      

      (To be
signed only on exercise of Warrant)

      

      

      

      To:           Z-TRIM
HOLDINGS, INC.

      

      The undersigned, pursuant to the
provisions set forth in the attached Warrant, hereby irrevocably elects to (a)
purchase _____ shares of the Common Stock covered by such Warrant and herewith
makes payment of $ _________, representing the full purchase price for such
shares at the price per share provided for in such Warrant, or (b) exercise such
Warrant for _______ shares purchasable under the Warrant pursuant to the Net
Issue Exercise provisions of Section 5 of such Warrant.

      

      Please issue a certificate or
certificates representing ________ shares in the name of the undersigned or in
such other name or names as are specified below:

       

      

      (Name)

       

      

      

      (Address)

      

      The undersigned represents that the
aforesaid shares are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of
distributing or reselling such shares, all except as in compliance with
applicable securities laws.

      

      

      (Signature
must conform in all respects to name of the Holder as specified on the face of
the Warrant)

      

      

      (Print Name)

      

      

      (Address)

      Dated:                                                      

      

      

      

      

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

       

      EXHIBIT
B

      

      FORM OF
ASSIGNMENT

       

      (To
assign the foregoing Warrant, execute this form and supply required
information.  Do not use this form to purchase shares.)

       

      For Value Received, the
foregoing Warrant and all rights evidenced thereby are hereby assigned
to:

       

      Name:                                                                                                                                          

      (Please
Print)

      Address:                                                                                                                                          

      (Please
Print)

      

      Dated:  __________,
20__

      

      Holder’s

      Signature:                                                                                     

      

      Holder’s

      Address:                                                                                     

       

      NOTE:  The
signature to this Form of Assignment must correspond with the name as it appears
on the face of the Warrant, without alteration or enlargement or any change
whatever.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
C

      

      FORM OF INVESTOR
REPRESENTATION LETTER

      

      DATE

      

      Z Trim
Holdings, Inc.

      1011
Campus Drive

      Mundelein,
IL 60060

      

      Gentlemen:

      

      In
connection with my receipt of warrants (“Warrants”) to
purchase the number of shares of common stock referred to below, I hereby
represent, warrant and covenant as follows:

      

      
        	
                 
      

              	
                1.   Check
      each one which is applicable:

              

      

      

      
        	
                    

              	
                I
      am an “accredited investor” within the meaning of Regulation D promulgated
      under the Securities Act of 1933 (the “Act”);

              

      

      

      
        	
                    

              	
                I
      have such knowledge and experience in financial, tax, and business matters
      so as to utilize information made available to me in order to evaluate the
      merits and risks of an investment decision with respect
      thereto;

              

      

      

      
        	
                2.
      

              	
                I
      have had the opportunity to ask questions and receive and review such
      answers and information concerning Z Trim Holdings, Inc. (the “Issuer”) as I
      have deemed pertinent;

              

      

      

      
        	
                3.
      

              	
                I
      am not relying on the Issuer respecting the tax and other economic
      considerations of an investment in the
Issuer;

              

      

      

      
        	
                4.
      

              	
                I
      am acquiring the Warrants and the underlying securities related thereto
      solely for my own account for investment and not with a view to resale or
      distribution.  I acknowledge that neither the Warrants nor the
      underlying securities have been registered under the Act and may not be
      resold except pursuant to an effective registration statement thereunder
      or an exemption therefrom;

              

      

      

      

      ____________________________________

      Name:

      

      Holder of
Warrants to purchase _____ shares of the
common stock of Z Trim Holdings, Inc. pursuant to the terms of the Common Stock
Purchase Warrant of even date herewithex43.htm

     

    Exhibit 4.3

     

    

      REGISTRATION RIGHTS
AGREEMENT

      

      

      This
Registration Rights Agreement (the “Agreement”) is made
and entered into as of this ______ day of June, 2010 by and among Z Trim
Holdings Inc., an Illinois corporation (the “Company”) and the
investors whose names appear on the signature page hereof (the “Investor” and collectively
the “Investors”), who have purchased Units consisting of 2,000 shares of
the Series I, 8%, convertible preferred stock, par value $0.01 per share with an
original issue price of $5.00 per share (the “Preferred Stock”),
convertible at the rate of $1.00 per share of common stock into shares of common
stock, $.00005 par value (the “Common Stock”) of the
Company and a five year warrant exercisable for 15,000 shares of the Common
Stock at an exercise price of $1.50 per share (the “Warrants”), offered in
private placement (the “Offering”) by the
Company.  Such Investors and any of their Affiliates or permitted
transferees who are subsequent holders of any Warrant or Registrable Securities
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 as of May 1, 2010 and as subsequently supplemented and amended,
including Supplement No. 1, dated as of May 30, 2010, (the “Memorandum”), the
Company has agreed, upon the terms and subject to the conditions of the
Subscription Agreement and the Memorandum to issue and sell to the Investors an
aggregate of up to 500 Units; and

       

      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.

       

      “Memorandum” as
defined in the Preamble.

       

      “Offering” 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, and (iii)
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 without volume limitations or other
restriction pursuant to Rule 144 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 dividends
on, the Preferred Stock 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.

       

      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 sixty (60) days after an S-1 Registration Statement covering the
Company’s registration obligations with respect to Company securities sold in
2008 and 2009 is declared effective by the SEC (the “S- 1 Registration
Statement”) or, within 60 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 and the 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 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) such that
additional shares of Common Stock become issuable upon the exercise of the
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 the later of 60 days after
the S-1 Registration Statement, referred to above, is declared
effective  or twenty (20) 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.

       

      (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 twenty (20) 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 in writing of the existence of
(but in no event, without the prior written consent of an Investor , 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 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.

       

      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 without volume limitations or other
restrictions (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 its 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) one copy of a Prospectus,
and all amendments and supplements thereto and such other documents as the
Investors may reasonably request in order to facilitate the disposition of the
Registrable Securities 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;

       

      (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) the date as of which all of the Registrable Securities
may be resold without volume limitations or other restrictions pursuant to Rule
144 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-K or Quarterly Report on
Form 10-Q, 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.

       

      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.

       

      (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.

       

      (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 prior to any transfer or attempted transfer, such Investor has
obtained the Company’s consent as required under the provisions of the Preferred
Stock and the Warrant, 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.

       

      (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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      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:_________________________

      Name:
Steven J. Cohen

      Title:           Chief
Executive Officer

      

      

      

      The
Investor:                                                                ____________________________

      

      

      

      By:                                                      

      Name:                                                                

      Title:                                                      

      

      

      

      

      

      

      

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      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.

      

      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 without volume limitations or other restrictions pursuant to Rule
144 of the 1933 Act.

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