Document:

ex44.htm

    Exhibit
4.4

    

    SECURITY
AGREEMENT

    

    THIS SECURITY AGREEMENT (this
“Agreement”) dated as of June ___, 2008, is made by Z TRIM HOLDINGS, INC., an
Illinois corporation, with an address at 1011 Campus Drive, Mundelein, Illinois
60060 (“Debtor”) in favor of
[_________________], as collateral agent for
the benefit of the Secured Parties (as defined below), with an address of
[_________________] (in such capacity, the “Collateral
Agent”).

    

    R E C I T A L S

    

    A.           Pursuant
to the terms of an 8% Senior Secured Convertible Note by and between the Debtor
and each Holder (as amended, restated, supplemented or otherwise modified, the
“Note” and
collectively, the “Notes”; capitalized
terms used in this Agreement shall have the meanings set forth in the Note
unless specifically defined herein), the Holders have agreed to make loans to
the Debtor (the “Loans”), as offered
by that certain Private Placement Memorandum dated _______________, 2008 (the
“Offering”).

    

    B.           Each
Holder hereby designates and appoints [_____________] as the
Collateral Agent for the benefit of the Holders or any subsequent holders of the
Notes (collectively, the “Secured
Parties”).

    

    C.           In
order to induce the Secured Parties to make the Loans, the Debtor has agreed to
execute and deliver this Agreement granting a security interest in all of the
Debtor’s assets to the Collateral Agent for the benefit of the Secured
Parties.

    

    A G R E E M E N
T

    

    NOW THEREFORE, in
consideration of the foregoing recitals, the mutual agreements and covenants set
forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

    

     

    1.           Definitions.  The following
additional terms, when used in this Agreement, shall have the following
meanings:

     

    “Account Debtor” shall
mean any Person who is obligated under an Account.

    

    “Accounts” shall mean,
for any Person, all “accounts” (as defined in the UCC), now or hereafter owned
or acquired by such Person or in which such Person now or hereafter has or
acquires any rights
and, in any event, shall mean and include, without limitation, (a) all
accounts receivable, contract rights, book debts, notes, drafts and other
obligations or indebtedness owing to such Person arising from the sale or lease
of goods or other property by such Person or the performance of services by such
Person (including, without limitation, any such obligation which might be
characterized as an account or general intangible under the Uniform Commercial
Code in effect in any jurisdiction), (b) all of such Person’s rights in, to
and under all purchase and sales orders for goods, services or other property,
and all of such Person’s rights to any goods, services or other property
represented by any of the foregoing (including returned or repossessed goods and
unpaid sellers’ rights of rescission, replevin, reclamation and rights to
stoppage in transit), (c) all monies due to or to become due to such Person
under all contracts for the sale, lease or exchange of goods or other property
or the performance of services by such Person (whether or not yet earned by
performance on the part of such Person), and (d) all collateral security
and guarantees of any kind given to such Person with respect to any of the
foregoing.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    “Chattel Paper” shall
mean all “chattel paper” (as defined in the UCC) now owned or hereafter acquired
by the Debtor or in which the Debtor has or acquires any rights, or other
receipts of the Debtor, evidencing or representing rights or interest in such
chattel paper.

    

    “Collateral” shall
mean, collectively, all of the following:

    

    
      	
              (i)  

            	
              all
      Accounts;

            

    

    

    
      	
              (ii)  

            	
              all
      Chattel Paper;

            

    

    

    
      	
              (iii)  

            	
              all
      Deposit Accounts;

            

    

    

    
      	
              (iv)  

            	
              all
      Documents;

            

    

    
      

      
        	
                (v)  

              	all
    Equipment;

      

       

    

    
      	
              (vi)  

            	
              all
      Fixtures;

            

    

    

    
      	
              (vii)  

            	
              all
      General Intangibles;

            

    

    

    
      	
              (viii)  

            	
              all
      Instruments;

            

    

    

    
      	
              (ix)  

            	
              all
      Inventory;

            

    

    

    
      	
              (x)  

            	
              all
      Investment Property;

            

    

    

    
      	
              (xi)  

            	
              all
      Software;

            

    

    

    
      	
              (xii)  

            	
              all
      money, cash or cash equivalents;

            

    

    
      

      
        	
                (xii)  

              	all other goods and personal property, whether
      tangible orintangible;

      

    

    

    
      	
              (xiv)  

            	
              all
      Supporting Obligations and Letter-of-Credit Rights of the
      Debtor;

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      	
              (xv)  

            	
              all
      books and records pertaining to any of the Collateral (including, without
      limitation, credit files, Software, computer programs, printouts and other
      computer materials and records, including customer
  lists);

            

    

    

    
      	
              (xvi)  

            	
              the
      commercial tort claims; and

            

    

    

    
      	
              (xvii)  

            	
              All
      products and Proceeds of all or any of the Collateral described in clauses
      (i) through (xvi) hereof.

            

    

    

    “Collateral Agent”
shall have the meaning given to that term in the introductory paragraph
hereof.

    

    “Copyright License”
shall mean any and all rights of the Debtor under any written agreement granting
any right to use any Copyright or Copyright registration.

    

    “Copyrights” shall
mean all of the following now owned or hereafter acquired by the Debtor or in
which the Debtor now has or hereafter acquires any rights: (a) all
copyrights and general intangibles of like nature (whether registered or
unregistered), all registrations and recordings thereof, and all applications in
connection therewith, including all registrations, recordings and applications
in the United States Copyright Office or in any similar office or agency of the
United States, any state or territory thereof, or any other country or any
political subdivision thereof, and (b) all reissues, extensions or renewals
thereof.

    

    “Debtor” shall have
the meaning given to that term in the introductory paragraph
hereof.

    

    “Deposit Accounts”
shall mean all “deposit accounts” (as defined in the UCC) now owned or hereafter
acquired by the Debtor or in which the Debtor has or acquires any rights, or
other receipts, of the Debtor covering, evidencing or representing rights or
interest in such deposit accounts.

    

    “Documents” shall mean
all “documents” (as defined in the UCC) now owned or hereafter acquired by the
Debtor or in which the Debtor has or acquires any rights, or other receipts, of
the Debtor covering, evidencing or representing goods.

    

    “Equipment” shall mean
all “equipment” (as defined in the UCC) now owned or hereafter acquired by the
Debtor and wherever located, and, in any event, shall include all machinery,
equipment, furniture, furnishings, processing equipment, conveyors, machine
tools, engineering processing equipment, manufacturing equipment, materials
handling equipment, trade fixtures, trucks, trailers, forklifts, vehicles,
computers and other electronic data processing and other office equipment of the
Debtor, and any and all additions, substitutions and replacements of any of the
foregoing, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto, all leasehold improvements,
all fuel therefor and all manuals, drawings, instructions, warranties and rights
with respect thereto.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    “Event of Default”
shall have the meaning set forth for such term in Section 8
hereof.

    

    “Fixtures” shall mean
all “fixtures” (as defined in the UCC) now owned or hereafter acquired by the
Debtor or in which the Debtor has or acquires any rights, or other receipts, of
the Debtor covering, evidencing or representing rights or interest in such
fixtures.

    

    “GAAP” shall mean
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accounts and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination.

    

    “General Intangibles”
shall mean all “general intangibles” (as defined in the UCC) now owned or
hereafter acquired by the Debtor or in which the Debtor has or acquires any
rights and, in any event, shall include all right, title and interest in or
under all contracts, all customer lists, Licenses, Copyrights, Trademarks,
Patents, and all applications therefor and reissues, extensions or renewals
thereof, rights in Intellectual Property, interests in partnerships, joint
ventures and other business associations, licenses, permits, copyrights, trade
secrets, proprietary or confidential information, inventions (whether or not
patented or patentable), technical information, procedures, designs, knowledge,
know-how, software, data bases, data, skill, expertise, experience, processes,
models, drawings, materials and records, goodwill (including the goodwill
associated with any Trademark or Trademark License), all rights and claims in or
under insurance policies (including insurance for fire, damage, loss and
casualty, whether covering personal property, real property, tangible rights or
intangible rights, all liability, life, key man and business interruption
insurance, and all unearned premiums), un-certificated securities, choses in
action, deposit, checking and other bank accounts, rights to receive tax refunds
and other payments, rights of indemnification, all books and records,
correspondence, credit files, invoices, tapes, cards, computer runs, domain
names, prospect lists, customer lists and other papers and
documents.

     

    “Instruments” shall
mean all “instruments” (as defined in the UCC) now owned or hereafter
acquired by the
Debtor or in which the Debtor has or acquires any rights and, in any event,
shall include all promissory notes, all certificates of deposit and all letters
of credit evidencing, representing, arising from or existing in respect of,
relating to, securing or otherwise supporting the payment of, any of the
Accounts or other obligations owed to the Debtor.

    

    “Intellectual
Property” shall mean all of the following now owned or hereafter
acquired by the
Debtor or in which the Debtor has or acquires any rights: (a) all Patents,
patent rights and patent applications, Copyrights and copyright applications,
Trademarks, trademark rights, trade names, trade name rights, service marks,
service mark rights, applications for registration of trademarks, trade names
and service marks, fictitious names registrations and trademark, trade name and
service mark registrations, and all derivations thereof; and (b) Patent
Licenses, Trademark Licenses, Copyright Licenses and other licenses to use any
of the items described in the preceding clause (a), and any other items
necessary to conduct or operate the business of the Debtor.

    

    “Inventory” shall mean
all “inventory” (as defined in the UCC) now owned or hereafter acquired by the
Debtor or in which the Debtor has or acquires any rights and, in any event,
shall include all goods owned or held for sale or lease to any other
Persons.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

    “Investment Property”
shall mean all “investment property” (as defined in the UCC) now owned [or
hereafter acquired] by the Debtor or in which the Debtor has or acquires any
rights and, in any event, shall include all “certificated securities”,
“uncertificated securities”, “security entitlements”, “securities accounts”,
“commodity contracts” and “commodity accounts” (as all such terms are defined in
the UCC) of the Debtor.

     

    “Letter-of-Credit
Rights” shall mean “letter-of-credit rights” (as defined in the UCC), now
owned or hereafter acquired by the Debtor, including rights to payment or
performance under a letter of credit, whether or not the Debtor, as beneficiary,
has demanded or is entitled to demand payment or performance.

    

    “License” shall mean
any Copyright License, Patent License, Trademark License or other license of
rights or interests of the Debtor in Intellectual Property or authorization by
any Person or political entity entitling the Debtor to sell products or perform
services.

    

    “Lien” shall have the
meaning given that term in Section 5(d) hereof.

    

    “Patent License” shall
mean any written agreement now owned or hereafter acquired by the Debtor or in
which the Debtor has or acquires any rights granting any right with respect to
any property, process or other invention on which a Patent is in
existence.

    

    “Patents” shall mean
all of the following now owned or hereafter acquired by the Debtor or in which
the Debtor has or acquires any rights: (a) all letters patent of the United
States or any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or any other country,
including registrations, recordings and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State or Territory thereof, or any other country; and (b) all reissues,
continuations, continuations-in-part and extensions thereof.

    

    “Permitted Liens”
shall have the meaning given that term in Section 5(d) hereof.

    

    “Person” shall mean an
individual, corporation, partnership, limited liability company, association,
trust or unincorporated organization, or a government or any agency or political
subdivision thereof.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    “Proceeds” shall mean
all “proceeds” (as defined in the UCC) of, and all other profits, rentals or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or realization upon, the
Collateral, and, in any event, shall mean and include all claims against third
parties for loss of, damage to or destruction of, or for proceeds payable under,
or unearned premiums with respect to, policies of insurance in respect of any
Collateral, and any condemnation or requisition payments with respect to any
Collateral and the following types of property acquired with cash
proceeds:  Accounts, Inventory, General Intangibles, Documents,
Instruments and Equipment.

    

    “Requisite Holders”
shall mean, as of any date, Secured Parties holding more than 50% of the
aggregate outstanding principal amount of the Loans.

    

    “Secured Obligations”
shall mean (i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations under the Notes and
this Agreement and all other indebtedness, liabilities, or other obligations of
the Debtor to the Collateral Agent, however and whenever incurred or evidenced,
whether direct or indirect, absolute or contingent, or due or to become due (the
“Additional
Obligations”) (including obligations under the Notes and this Agreement
and the Additional Obligations which, but for the automatic stay under Section
362(a) of Title 11 of the United States Code entitled “Bankruptcy,” as now or
hereafter in effect, or any successor thereto, would become due), indebtedness
and liabil­ities (including, without limitation, indemnities, fees and
interest thereon and all interest that accrues after the commencement of any
case, proceed­ing or other action relating to the bank­ruptcy,
insolvency, reorganization or similar proceeding of the Debtor at the rate
provided for in the Notes or with respect to the Additional Obligations, as
applicable, whether or not a claim for post-petition interest is allowed in any
such case, proceeding or other action) of the Debtor owing to the Collateral
Agent, now exist­ing or hereafter incurred under, arising out of or in
connection with the Notes and this Agreement and with respect to the Additional
Obligations and the due performance and compliance by the Debtor with the terms,
conditions and agreements of the Notes, this Agreement and any agreements with
respect to the Additional Obligations; (ii) any and all sums paid by the
Collateral Agent in order to preserve the Collateral or preserve its Security
Interest (as defined below) in the Collateral; and (iii) in the event of any
proceeding for the col­lection or enforcement of any indebtedness,
obliga­tions or liabilities of the Debtor referred to in the preceding
clause (i) after an Event of Default (as defined hereinafter) shall have
occurred and be continuing, the expenses of re-taking, holding, preparing for
sale or lease, selling or otherwise disposing of or realizing on the Collateral
(as defined below), or of any exercise by the Collateral Agent of its rights
here­under, together with attorneys’ fees actually incurred and court
costs.

    

    “Security Interests”
shall mean the security interests granted to the Collateral Agent pursuant to
Section 3, as
well as all other security interests created or assigned as additional security
for the Secured Obligations pursuant to the provisions of this
Agreement.

     

    “Software” shall mean
all “software” (as defined in the UCC), now owned or hereafter acquired by the
Debtor, including all computer programs, computer programming source code, and
all supporting information provided in connection with a transaction related to
any program.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    

    “Supporting
Obligations” means all “supporting obligations” (as defined in the UCC),
including letters of credit and guaranties issued in support of Accounts,
Chattel Paper, Documents, General Intangibles, Instruments, or Investment
Property.

    

    “Trademark License”
shall mean any written agreement now owned or hereafter acquired by the Debtor
or in which the Debtor has or acquires any such rights granting to the Debtor
any right to use any Trademark.

    

    “Trademarks” shall
mean all of the following now owned or hereafter acquired by the Debtor or in
which the Debtor has or acquires any such rights: (i) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, web addresses/url’s, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered), now owned or existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, (ii) all reissues, extensions or
renewals thereof and (iii) all goodwill associated with or symbolized by any of
the foregoing.

    

    “UCC” shall mean the
Uniform Commercial Code as in effect, from time to time, in the State of
Delaware; provided that if by
reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the Security Interests in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than Delaware, “UCC” shall mean the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.

    

    “United States” shall
mean the United States of America, any of the fifty states thereof, and the
District of Columbia.

    

    
      	
              2.

            	
              Appointment and
      Authorization of Collateral
Agent.

            

    

    

    (a)           Each
Secured Party appoints and authorizes the Collateral Agent to take such action
as collateral agent on its behalf and to exercise such powers and discretion
under this Agreement as are delegated to the Collateral Agent by the terms
hereof, together with such powers and discretion as are reasonably incidental
thereto.  The Collateral Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any of the Secured Parties, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or otherwise be deemed to exist for, be undertaken by, or
apply to or against the Collateral Agent.  Nothing in this Agreement
shall be interpreted as giving the Collateral Agent responsibility for or any
duty concerning the validity, perfection, priority or enforceability of any Lien
or security interest in any Collateral or giving the Collateral Agent any
obligation to take any action to procure or maintain such validity, perfection,
priority or enforceability.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    

    (b)           Whenever
pursuant to the provisions hereof it is required that any party hereto obtain
the consent or approval of the Collateral Agent, or that any matter prove
satisfactory to the Collateral Agent, or that any action be taken at the
request, discretion, option or determination of the Collateral Agent, the
Collateral Agent, prior to giving any such consent or approval or request, or
exercising any such option, discretion or determination, or indicating its
satisfaction with any such matter, shall (except where the failure to do so, in
its good faith judgment, could imperil the Collateral or the Liens thereon) be
required to consult with the Secured Parties in a manner deemed reasonable by
the Collateral Agent, and the Collateral Agent shall be protected in following
any direction of the Requisite Holders.

    

    (c)           The
Collateral Agent shall be under no obligation to exercise or to honor any of the
rights or powers vested in it by this Agreement at the request or direction of
any Person hereunder unless such Person shall have offered to the Collateral
Agent reasonable security or indemnity against the costs, expenses and
liabilities which might reasonably be incurred by it in compliance with such
request or direction.  The Collateral Agent may consult with legal
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or
experts.

    

    (d)           Neither
the Collateral Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement, except for its or their own gross
negligence or willful misconduct.  The Collateral Agent shall not
incur any liability by acting in reliance upon any notice, consent, certificate,
statement, or other writing (which may be a bank wire, telex or similar writing)
reasonably believed by it to be genuine or to be signed by the proper party or
parties.

    

    (e)           The
Debtor agrees to reimburse the Collateral Agent for all its expenses, including
reasonable attorney’s fees, incurred in connection with this
Agreement.  The Debtor and Secured Parties agree to indemnify the
Collateral Agent and its directors, officers, agents and employees for, and to
hold them harmless against, any loss, liability or expense incurred without
gross negligence or willful misconduct on their part, arising out of or in
connection with this Agreement, including the costs and expenses of defending
themselves against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.

     

    (f)           The
Collateral Agent may at any time resign by giving at least thirty (30) days
prior written notice thereof to each Secured Party, provided that no
resignation shall be effective until a successor for the Collateral Agent is
appointed.  Upon such resignation, the Requisite Holders shall have
the right to appoint a successor Collateral Agent.  If no successor
Collateral Agent shall have been so appointed by the Requisite Holders and shall
have accepted such appointment within thirty (30) days after the retiring
Collateral Agent’s giving of notice of resignation, then the retiring Collateral
Agent may, on behalf of the Secured Parties, appoint a successor Collateral
Agent.  Upon the acceptance of any appointment as Collateral Agent
hereunder by a successor Collateral Agent, such successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Collateral Agent, and the retiring Collateral Agent
shall be discharged from its duties and obligations hereunder.  After
any retiring Collateral Agent’s resignation, the provisions of this Agreement
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Collateral Agent.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    

    (g)           All
notices and other communications provided for hereunder shall be in writing (i)
with respect to the Collateral Agent, sent to the address set forth in
introductory paragraph hereof and (ii) with respect to each Secured Party, sent
to the address set forth in the Note, and delivered in the manner required by
each Note.

    

    
      	
              3.

            	
              Grant of Security
      Interest.

            

    

    

    As
security for the prompt and complete payment and performance when due of the
Secured Obligations, Debtor hereby collaterally assigns and pledges to the
Collateral Agent for the benefit of the Secured Parties and grants a continuing
security interest to the Collateral Agent for the benefit of the Secured Parties
in and to all of the Debtor’s right, title and interest in to and under all of
the Collateral (and all rights therein), or in which or to which the Debtor has
any rights, in each case, whether now existing or hereafter from time to time
acquired.

    

    4.           Authorization
to File Financing Statement and other Actions.

    

    (a)           Debtor
hereby authorizes the Collateral Agent or its counsel at any time and from time
to time to file one or more financing statements, continuation statements or
other documents in any Uniform Commercial Code jurisdiction as Collateral Agent
may deem necessary or desirable, which financing statements, continuation
statements or other documents (a) indicate the Collateral (i) as all assets of
the Debtor or words of similar effect, regardless of whether any particular
asset comprised in the Collateral falls within the scope of Article 9 of the
UCC, or (ii) as being of an equal or lesser scope or with greater detail, and
(b) contain any other information required by part 5 of Article 9 of the UCC for
the sufficiency or filing office acceptance of any financing statement or
amendment.  The Debtor agrees to furnish any such information to the
Collateral Agent promptly upon request.

    

    (b)           If
the Debtor shall at any time hold or acquire a commercial tort claim, the Debtor
shall immediately notify the Collateral Agent in a writing signed by the Debtor
of the brief details thereof and grant to the Collateral Agent in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement.

    

    (c)           The
Debtor agrees to take any other action reasonably requested by the Collateral
Agent, including, without limitation, delivery of certain Collateral or a
control agreement granting control of certain Collateral to the Collateral
Agent, to insure the attachment, perfection and priority of, and the ability of
the Collateral Agent to maintain or enforce, the Security Interest in any and
all of the Collateral.

     

    (d)           The
Debtor hereby irrevocably makes, constitutes and appoints the Collateral Agent
as the Debtor’s true and lawful attorney-in-fact (with full power of
substitution or re-substitution, in the name of the Debtor, the Collateral Agent
or otherwise) upon an Event of Default with the power (i) to do any and every
act that the Debtor is obligated by this Agreement to do, (ii) to do all things
necessary to preserve and protect the Collateral, and to preserve, protect, and
keep perfected the Collateral Agent’s security interest in the Collateral, (iii)
to demand, sue for, collect, receive and give acquittance for any and all monies
due or to become due with respect to any Collateral, (iv) to settle, compromise,
compound, prosecute or defend any action or proceeding with respect to any
Collateral, (v) to sell, transfer, assign or otherwise deal in or with the
collateral or the proceeds or avails thereof, as fully and effectually as if the
Collateral Agent were the absolute owner thereof, and (vi) to extend the time of
payment of any or all thereof and to make any allowance and other adjustments
with reference to the Collateral.  The Debtor acknowledges and agrees
that the power of attorney granted herein is a power coupled with an interest
and shall be irrevocable.  The powers conferred on the Collateral
Agent hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers.  The
Collateral Agent shall be accountable only for the amounts it actually receives
as a result of the exercise of such powers and neither it nor any of its
officers, directors, employees or agents shall be responsible to the Debtor for
any act or failure to act pursuant to the foregoing power of
attorney.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    

    
      	
              5.

            	
              Representations
      and Warranties.  Debtor represents, warrants and agrees
      as follows:

            

    

    

    (a)           Debtor
has full power and authority to enter into this Agreement;

    

    (b)           All
corporate action on the part of the Debtor, its directors and its stockholders
necessary for the authorization, execution, delivery and performance of this
Agreement by the Debtor has been taken.  This Agreement shall
constitute the valid and binding obligation of the Debtor enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors;

    

    (c)           All
material consents, approvals, orders, or authorizations of, or registrations,
qualifications, designations, declarations, or filings required on the part of
the Debtor in connection with the valid execution and delivery of this Agreement
have been obtained and are effective, other than such filings to be made or to
become effective after the date hereof with respect to the Security
Interests.  The Debtor has the right to pledge and grant the Security
Interests or otherwise transfer the Collateral free and clear of any liens,
claims, encumbrances or other security interests, other than the Permitted Liens
(as defined below);

    

    (d)           The
Debtor is the owner of the Collateral, free from any lien, mortgage, pledge,
charge, security interest, hypothecation or encumbrance of any kind (“Liens”) except (i)
Liens imposed by law for taxes not yet due which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves are
being maintained in accordance with GAAP, (ii) statutory Liens of landlords and
Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed
by law created in the ordinary course of business for amounts not yet due which
are being contested in good faith by appropriate proceedings and with respect to
which adequate reserves are being maintained in accordance with GAAP, (iii)
pledges and deposits made in the ordinary course of business in compliance with
workers’ compensation, unemployment insurance and other social security laws or
regulations, (iv) Liens constituting encumbrances in the nature of zoning
restrictions, easements and rights or restrictions of record on the use of real
property, which in the aggregate are not substantial in amount and which do not,
in any case, detract from the value of such property or impair the use thereof
in the ordinary conduct of business, (v) purchase money Liens incurred prior to
[the date of the offering
memo] upon or in any fixed or capital assets to secure the purchase price
or the cost of construction or improvement of such fixed or capital assets or to
secure indebtedness incurred solely for the purpose of financing the
acquisition, construction or improvement of such fixed or capital assets
(including Liens securing any capital lease obligations); provided, that (x)
such Lien attached to such asset concurrently or within 90 days after the
acquisition, improvement or completion of the construction thereof; (y) such
Lien does not extend to any other asset; and (z) the debt secured thereby does
not exceed the cost of acquiring, constructing or improving such fixed or
capital assets and (vi) Liens in favor of the Collateral Agent for the benefit
of the Secured Parties granted pursuant to this Agreement (the Liens described
in the preceding clauses (i) – (vi) collectively, “Permitted
Liens”)

    

    (e)           None
of the account debtors or other persons obligated on any of the Collateral is a
governmental authority covered by the Federal Assignment of Claims Act or like
federal, state or local statute or rule in respect of such
Collateral;

    

    (f)           The
exact legal name of the Debtor and its state of incorporation is set forth
below:

    Z Trim Holdings,
Inc.                          Illinois

    

    (g)           The
Debtor has at all times operated its business in compliance in all material
respects with all applicable provisions of federal, state and local statutes and
ordinances, including, without limitation, those dealing with the control,
shipment, storage or disposal of hazardous materials or substances;

    

    (h)           When
the UCC financing statement in appropriate form is filed in the Office of the
Secretary of State of the State of Illinois, the Security Interests shall
constitute valid and perfected security interests in the Collateral in favor of
the Collateral Agent for the benefit of the Secured Parties, to the extent that
a security interest therein may be perfected by filing pursuant to the UCC,
assuming the proper filing and indexing thereof; and

    

    (i)       
     Except as set forth on Schedule I attached
hereto, the Debtor does not have any interest in, or title to, any registration
or pending application for any Patent, Trademark or Copyright.  This
Security Agreement is effective to create a valid and continuing Lien on
Debtor’s Intellectual Property.  Upon filing of the Patent Security
Agreement in the form attached hereto as Exhibit A and the
Trademark Security Agreement in the form attached hereto as Exhibit B with the
United States Patent and Trademark Office and the filing of an appropriate
financing statement referenced in subsection (h) above, all action necessary or
desirable to protect and perfect the Collateral Agent’s Lien on Debtor’s
Intellectual Property shall have been duly taken.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

    
      	
              6.

            	
              Covenants.

            

    

    

    (a)           Except
for the Permitted Liens, the Debtor shall be the owner of the Collateral free
from any lien, security interest or other encumbrance.  Debtor agrees
that Debtor will not create, permit or suffer to exist any lien, security
interest or encumbrance on any of the Collateral other than Permitted Liens and
will defend the right, title and interest of the Collateral Agent in and to any
of its right, title and interest in and to the Collateral against the claims and
demands of all other persons.

    

    (b)           The
Debtor agrees that (i) without providing at least twenty (20) days prior written
notice to the Collateral Agent, the Debtor will not change its name, its place
of business or, if more than one, chief executive office, or its mailing address
or organizational identification number if it has one, and (ii) the Debtor will
not change its type of organization, jurisdiction of organization or other legal
structure.

    

    (c)           The
Collateral, except for sales of inventory in the ordinary course of business,
will be kept at the collateral locations listed on Schedule II, and the
Debtor will not remove the Collateral from such locations, without providing at
least twenty (20) days prior written notice to the Collateral
Agent.

    

    (d)           The
Debtor shall keep the Collateral in good order and repair and will not use the
same in violation of law or any policy of insurance thereon.

    

    (e)           The
Debtor shall permit the Collateral Agent, or its designee, to inspect the
Collateral during business hours with reasonable prior written notice, wherever
located.

    

    (f)           The
Debtor will promptly pay when due all taxes, assessments, governmental charges
and levies upon the Collateral or incurred in connection with the use or
operation of the Collateral or incurred in connection
therewith.  Furthermore, the Debtor shall maintain current all fees
and licenses on all Intellectual Property.

    

    (g)           The
Debtor shall continue to operate its business in compliance in all material
respects with all applicable provisions of federal, state and local statutes and
ordinances, including, without limitation, those dealing with the control,
shipment, storage or disposal of hazardous materials or substances.

    

    (h)           The
Debtor shall not sell, transfer or otherwise dispose, or offer to sell, transfer
or otherwise dispose, of the Collateral or any interest therein except in the
ordinary course of the Debtor’s business, and in the event of any sale not in
the ordinary course of Debtor’s business, the Security Interest and Lien created
herein shall continue in the Collateral itself.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

    (i)   
        The Debtor shall notify the
Collateral Agent immediately upon the occurrence of each of the following (i)
acquisition after the date of this Agreement of any material Intellectual
Property, (ii) registration of any of the Debtor’s Intellectual Property with
the Untied States Copyright Office, the United States Patent and Trademark
Office or any other office or court, or (iii) Debtor’s obtaining knowledge, or
reason to know, that any application or registration relating to any material
Intellectual Property owned by or licensed to the Debtor is reasonably likely to
become abandoned or dedicated, or of any material adverse determination or
development (including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United States Copyright
Office, the United States Patent and Trademark Office or any court) regarding
the Debtor’s ownership of any material Intellectual Property, its right to
register the same, or to keep and maintain the same.

    

    (j)      
     The Debtor shall notify the Collateral Agent
immediately upon awareness of any potential or actual lawsuit against the Debtor
or any material adverse or positive business development.

    

    (k)           The
Debtor shall take such action and provide such assistance as the Collateral
Agent may request to transfer any Licenses or enter into any agreement or
document required with a licensor to transfer any interest in or obligation
under any Licenses to enable the Collateral Agent to enforce the rights and
remedies under this Agreement.

    

    7.           Insurance.  The Debtor shall
at all times maintain insurance on the Collateral with reputable insurance
companies against loss or damage by fire, theft, burglary, pilferage, loss in
transit and such other hazards and risks and in such amounts as is customarily
maintained by similar businesses or as may be required by applicable
law.  All premiums on such insurance shall be paid by the Debtor and
certified copies of the policies, or other evidence of insurance, shall be
delivered to the Collateral Agent promptly upon its request. At the request of
the Collateral Agent, all insurance policies required under this Section shall
contain standard lender’s loss payable clauses, naming the Collateral Agent for
the benefit of the Secured Parties as loss payee, and providing
that:  (a) no such insurance shall be affected by any act or neglect
of the insured or owner of the property described in such policy; and (b) such
policies and loss payable clauses may not be canceled, amended or terminated
with respect to the Collateral Agent unless at least thirty (30) days’ prior
written notice is given to the Collateral Agent.

    

    8.           Event of
Default.  Failure of the
Debtor to pay any of the Secured Obligations when due shall constitute an Event
of Default.

    

    9.           Rights and
Remedies.

    

    (a)           If
any Event of Default has occurred and is continuing, the Collateral Agent may,
without further notice, exercise all rights and remedies under this Agreement or
the Notes or that are available to a secured creditor under the UCC or that are
otherwise available at law or in equity, at any time, in any order and in any
combination, including to collect any and all Secured Obligations from the
Debtor, and, in addition, the Collateral Agent may sell the Collateral or any
part thereof at public or private sale, for cash, upon credit or for future
delivery, and at such price or prices as the Collateral Agent may deem
satisfactory.  The Collateral Agent shall give Debtor not less than
ten (10) days’ prior written notice of the time and place of any sale or other
intended disposition of Collateral, except any Collateral which is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market.  The Debtor agrees that any such notice constitutes
“reasonable notification” within the meaning of Section 9-611 of the UCC
(to the extent such Section or any successor provision under the UCC is
applicable).

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

    (b)   The
Collateral Agent may be the purchaser of any or all of the Collateral so sold at
any public sale (or, if such Collateral is of a type customarily sold in a
recognized market or is of a type that is the subject of widely distributed
standard price quotations or if otherwise permitted under applicable law, at any
private sale) and thereafter hold the same, absolutely, free from any right or
claim of whatsoever kind.  The Debtor agrees to execute and deliver
such documents and take such other action as the Collateral Agent deems
necessary or advisable in order that any such sale may be made in compliance
with law.  Upon any such sale the Collateral Agent shall have the
right to deliver, assign and transfer to the purchaser thereof the Collateral so
sold.  Each purchaser at any such sale shall hold the Collateral so
sold to it absolutely, free from any claim or right of any kind, including any
equity or right of redemption of the Debtor.  To the extent permitted
by law, the Debtor hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any law now existing or hereafter
adopted.  The notice (if any) of such sale shall (i) in case of a
public sale, state the time and place fixed for such sale, and (ii) in the case
of a private sale, state the day after which such sale may be
consummated.  Any such public sale shall be held at such time or times
within ordinary business hours and at such place or places as the Collateral
Agent may fix in the notice of such sale.  At any such sale Collateral
may be sold in one lot as an entirety or in separate parcels, as the Collateral
Agent may determine.  The Collateral Agent shall not be obligated to
make any such sale pursuant to any such notice.  The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
same may be so adjourned.  In case of any sale of all or any part of
the Collateral on credit or for future delivery, such Collateral so sold may be
retained by the Collateral Agent until the selling price is paid by the
purchaser thereof, but the Collateral Agent shall not incur any liability in
case of the failure of such purchaser to take up and pay for such Collateral so
sold and, in case of any such failure, such Collateral may again be sold upon
like notice.  The Collateral Agent, instead of exercising the power of
sale herein conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.  The Debtor shall remain liable for any
deficiency.

    

    (c)   For the
purpose of enforcing any and all rights and remedies under this Agreement, the
Collateral Agent may (i) require the Debtor to, and the Debtor agrees that it
will, at the  expense of the Debtor, and upon the request of the
Collateral Agent, forthwith assemble all or any part of its Collateral as
directed by the Collateral Agent and make it available at a place designated by
the Collateral Agent which is, in the Collateral Agent's opinion, reasonably
convenient to the Collateral Agent and the Debtor, whether at the premises of
the Debtor or otherwise, (ii) to the extent permitted by applicable law, enter,
with or without process of law and without breach of the peace, any premise
where any such Collateral is or may be located and, without charge or liability
to the Collateral Agent, seize and remove such Collateral from such premises,
(iii) have access to and use such Debtor’s books and records, computers and
software relating to the Collateral, and (iv) prior to the disposition of
any of the Collateral, store or transfer such Collateral without charge in or by
means of any storage or transportation facility owned or leased by the Debtor,
process, repair or recondition such Collateral or otherwise prepare it for
disposition in any manner and to the extent the Collateral Agent deems
appropriate and, in connection with such preparation and disposition, use
without charge any trademark, trade name, copyright, patent or technical process
used by the Debtor.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (d)   Without
limiting the generality of the foregoing, if any Event of Default has occurred
and is continuing:

    

    (i) the
Collateral Agent may (without assuming any obligations or liability thereunder),
at any time and from time to time, enforce (and shall have the exclusive right
to enforce) against any licensee or sublicensee all rights and remedies of the
Debtor in, to and under any Licenses and take or refrain from taking any action
under any thereof, and the Debtor hereby releases the Collateral Agent from, and
agrees to hold the Collateral Agent free and harmless from and against any
claims arising out of, any lawful action so taken or omitted to be taken with
respect thereto except
for the Collateral Agent’s gross negligence or willful misconduct as
determined by a final and nonappealable decision of a court of competent
jurisdiction; and

    

    (ii) upon
request by the Collateral Agent, the Debtor agrees to execute and deliver to the
Collateral Agent powers of attorney, in form and substance satisfactory to the
Collateral Agent, for the implementation of any lease, assignment, license,
sublicense, grant of option, sale or other disposition of any Intellectual
Property.  In the event of any such disposition pursuant to this
Section, the Debtor shall supply its know-how and expertise relating to the
manufacture and sale of the products bearing Trademarks or the products or
services made or rendered in connection with Patents or Copyrights, and its
customer lists and other records relating to such Intellectual Property and to
the distribution of said products, to the Collateral Agent.

    

    10.         No Waiver
by Collateral Agent, etc.  The Collateral Agent shall not be
deemed to have waived any of their rights and remedies in respect of the Secured
Obligations or the Collateral unless such waiver shall be in writing and signed
by the Collateral Agent.  No delay or omission on the part of the
Collateral Agent in exercising any right or remedy shall operate as a waiver of
such right or remedy or any other right or remedy.  A waiver on any
one occasion shall not be construed as a bar to or waiver of any right or remedy
on any future occasion.  All rights and remedies of the Collateral
Agent with respect to the Secured Obligations or the Collateral, whether
evidenced hereby or by any other instrument or papers, shall be cumulative and
may be exercised singularly, alternatively, successively or concurrently at such
time or at such times as the Collateral Agent deems expedient.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

    11.         Marshalling.  The
Collateral Agent shall not be required to marshal any present or future
collateral security (including but not limited to the Collateral) for, or other
assurances of payment of, the Secured Obligations or any of them or to resort to
such collateral security or other assurances of payment in any particular order,
and all of the rights and remedies of the Collateral Agent hereunder in respect
of such collateral security and other assurances of payment shall be cumulative
and in addition to all other rights and remedies, however existing or
arising.  To the extent that it lawfully may, the Debtor hereby agrees
that it will not invoke any law relating to the marshalling of collateral which
might cause delay in or impede the enforcement of Collateral Agent’s rights and
remedies under this Agreement or under any other instrument creating or
evidencing any of the Secured Obligations or under which any of the Secured
Obligations is outstanding or by which any of the Secured Obligations is secured
or payment thereof is otherwise assured, and, to the extent that it lawfully
may, the Debtor hereby irrevocably waives the benefits of all such
laws.

    

    12.         Application
of Proceeds.  The proceeds of any sale of, or other realization
upon, all or any part of the Collateral of the Debtor shall be applied by the
Collateral Agent to the Secured Obligations as follows:

    

    (a)           First,
to the payment of, or reimbursement of the Collateral Agent for or in respect of
all reasonable costs, expenses, disbursements and losses which shall have been
incurred or sustained by the Collateral Agent in connection with the exercise or
enforcement of all or any of the rights, remedies, powers under this
Agreement;

    

    (b)           Second,
to the payment of interest on the Secured Obligations, to be applied for the
ratable benefit of the Secured Parties;

    

    (c)           Third,
to the payment of principal in respect of the Secured Obligations, to be applied
for the ratable benefit of the Secured Parties;

    

    (d)           Fourth,
to the payment of all other Secured Obligations, if any, to be applied for the
ratable benefit of the Secured Parties; and

    

    (e)           Fifth,
the excess, if any, shall be returned to the Debtor or to such other Persons as
are legally entitled thereto.

    

    It is
understood and agreed that the Debtor shall remain liable to the Collateral
Agent to the extent of any deficiency between (a) the amount of the proceeds of
the Collateral received by the Collateral Agent hereunder and (b) the aggregate
amount of the Secured Obligations.

    

    13.         Limitations
on Duty of  the Collateral Agent in Respect of
Collateral.  Anything herein to the contrary notwithstanding,
the Debtor shall remain obligated and liable under each contract or agreement
comprised in the Collateral to be observed or performed by the Debtor
thereunder. The Collateral Agent shall not have any obligation or liability
under any such contract or agreement by reason of or arising out of this
Agreement or the receipt by the Collateral Agent of any payment relating to any
of the Collateral; nor shall the Collateral Agent be obligated in any manner to
perform any of the obligations of the Debtor under or pursuant to any such
contract or agreement, to make inquiry as to the nature or sufficiency of any
payment received by the Collateral Agent in respect of the Collateral or as to
the sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Collateral Agent or to which the Collateral Agent may be
entitled at any time or times.  The Collateral Agent’s sole duty with
respect to the custody, safe keeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the UCC or otherwise, shall be to
deal with such Collateral in the same manner as the Collateral Agent deals with
similar property for its own account.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    14.         Expenses;
Indemnification.  The Debtor agrees
to pay to the Collateral Agent on demand any and all reasonable expenses,
including reasonable attorneys’ fees and disbursements, incurred or paid by the
Collateral Agent in protecting or preserving the Collateral Agent’s rights and
remedies under or in respect of any of the Secured Obligations or any of the
Collateral. The Debtor agrees to pay to the Collateral Agent on demand any and
all expenses, including attorneys’ fees and disbursements, incurred or paid by
the Collateral Agent in enforcing the Collateral Agent’s rights and remedies
under or in respect of any of the Secured Obligations or any of the Collateral.
The Debtor agrees to indemnify and hold the Collateral Agent harmless from and
against any claim, loss, damage, action, cause of action, liability, cost and
expense or suit of any kind or nature whatsoever, brought against or incurred by
the Collateral Agent, in any manner arising out of or, directly or indirectly,
related to or connected with any action taken by the Collateral Agent pursuant
to the terms of this Agreement.

    

    15.         Term;
Termination.  This Agreement shall remain in full force and
effect with respect to the Notes, throughout the term of the Notes, and until
all of the Secured Obligations have been fully paid or satisfied and such Notes
have been terminated and canceled.  Upon the termination of this
Agreement as provided above (other than as a result of the sale of the
Collateral), Collateral Agent will release the security interests and liens
created hereunder (including, without limitation, the execution and delivery to
Debtor of UCC termination statements and any related documents, agreements or
instruments that Debtor may reasonably request).

    

    16.         Assignment.  This Agreement
and all obligations of the Debtor hereunder shall be binding upon the successors
and assigns of the Debtor (including any debtor-in-possession on behalf of such
Debtor) and shall, together with the rights and remedies of the Collateral Agent
hereunder, inure to the benefit of the Collateral Agent, all future holders of
any instrument evidencing any of the Secured Obligations and their respective
successors and assigns.  No sales of participations, other sales,
assignments, transfers or other dispositions of any agreement governing or
instrument evidencing the Secured Obligations or any portion thereof or interest
therein shall in any manner affect the Security Interest granted to the
Collateral Agent hereunder.  The Debtor shall not assign, sell,
hypothecate or otherwise transfer any interest in or obligation under this
Agreement.

    

    17.         Notices.  All notices and
other communications provided for hereunder shall be in writing sent to the
address set forth in introductory paragraph hereof and delivered in the manner
required by each Note.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    

    18.         Further
Documents and Cooperation.  The Debtor and
the Collateral Agent agree to execute, acknowledge and deliver to each other all
instructions, agreements, documents and other instruments reasonably required to
consummate the transactions contemplated by and the purposes of this
Agreement.  The Debtor and the Collateral Agent further agree that
they will take such action and execute such further documents and agreements as
may be reasonably necessary or appropriate to fulfill the purposes expressed in
this Agreement and to perform the terms and conditions of this
Agreement.

    

    19.         Governing
Law; Waiver of Jury Trial.

    

    (a)           THIS
AGREEMENT AND THE RIGHTS AND SECURED OBLIGATIONS OF THE PARTIES HEREUNDER SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW (WITHOUT GIVING EFFECT
TO THE CONFLICT OF LAW PRINCIPLES THEREOF) OF THE STATE OF DELAWARE, EXCEPT TO
THE EXTENT THAT PERFECTION (AND THE EFFECT OF PERFECTION AND NONPERFECTION) AND
CERTAIN REMEDIES MAY BE GOVERNED BY THE LAWS OF ANY JURISDICTION OTHER THAN
DELAWARE.

    

    (b)           THE
DEBTOR IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSSELF AND ITS PROPERTY, TO
THE NON-EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT OF THE
NORTHERN DISTRICT OF DELAWARE, AND OF ANY STATE COURT LOCATED IN FULTON COUNTY
AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, OR
FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH DELAWARE STATE
COURT OR, TO THE EXTENT PERMITTED BY APPLICABLE LAW, SUCH FEDERAL
COURT.  THE DEBTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS
AGREEMENT SHALL AFFECT ANY RIGHT THAT THE LENDER MAY OTHERWISE HAVE TO BRING ANY
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST THE DEBTOR OR ITS
PROPERTIES IN THE COURTS OF ANY JURISDICTION IN WHICH THE PROPERTY THAT IS THE
SUBJECT OF SUCH ACTION OR PROCEEDING IS LOCATED.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    

    (c)           THE
DEBTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION
OR PROCEEDING DESCRIBED IN PARAGRAPH (b) OF THIS SECTION AND BROUGHT IN ANY
COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION.  THE DEBTOR
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT.

    

    (d)           THE
DEBTOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN THE MANNER PROVIDED FOR
NOTICES IN EACH NOTE.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT
OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW.

    

    (e)           THE
DEBTOR HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY (WHICH THE LENDER ALSO WAIVES) IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY).  THE DEBTOR (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER, AND (ii) ACKNOWLEDGES THAT IT HAS NOT BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

    

    20.         Section
Headings.  The section
headings herein are for convenience of reference only, and shall not affect in
any way the interpretation of any of the provisions hereof.

    

    21.         Counterparts.  This Agreement
may be executed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one
instrument.

    

    [SIGNATURES
ON FOLLOWING PAGE]

     

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the Debtor
has each executed and delivered this Security Agreement as of the date first
written above.

     

     

    
      
        	 	Z TRIM HOLDINGS,
      INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ 	 
	 	 	Name:
      	 
	 	 	Title:
      	 
	 	 	 	 

      

       

    

    

    Acknowledged
and Agreed:

    

    [___________________________],

    as
Collateral Agent

    

    
      
        	 	 	 	 	 	 
	By:	
                /s/

              	 	 	
                 

              	 
	 	
                Name:

              	 	 	
                 

              	 
	 	
                Title:

              	 	 	
                 

              	 

      

    

                                                                   

    

    
      	
              The
      Secured Parties:

            	
              [Contained
      in Omnibus Signature Date in Subscription
  Agreement]

            

    

    

     

    [Signature
Page to Security Agreement]

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
 

    Schedule
I

    

    Intellectual
Property

    

     

     

     

     

     

     

     

     

     

    
 

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    Schedule
II

    

    Locations
of Collateral

    

    

     

     

     

     

     

     

     

     

     

    
 

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

    
      Exhibit
A

      

      FORM
OF PATENT SECURITY AGREEMENT

      

      

      THIS PATENT SECURITY AGREEMENT
(this “Agreement”), dated as
of June __, 2008, executed by Z TRIM HOLDINGS, INC., an Illinois
corporation (the “Grantor”), in favor
of [____________________] for the
benefit of the Secured Parties (the “Collateral
Agent”).  Capitalized terms used in this Agreement shall have
the meanings set forth in the Security Agreement (as defined below) unless
specifically defined herein.

      

      

      W I T N E S S E T
H:

      

      WHEREAS, the Grantor and the
Secured Parties are parties to an 8% Senior Secured Convertible Note (as
amended, restated, supplemented or otherwise modified, the “Note”) pursuant to
which the Secured Parties have agreed to make loans to the Grantor (the “Loans”) as offered by
that certain Private Placement Memorandum dated _______________, 2008 (the
“Offering”);

      

      WHEREAS, the Grantor has
entered into a Security Agreement dated the date hereof (the “Security Agreement”)
pursuant to which the Grantor has granted to the Collateral Agent for the
benefit of the Secured Parties a continuing security interest in, among other
things, the Intellectual Property of the Grantor, including, without limitation,
(a) all of the Grantor’s Patents (as herein defined), whether presently existing
or hereafter acquired or arising, or in which the Grantor now has or hereafter
acquires rights and wherever located; (b) all of the Grantor’s Patent Licenses
(as herein defined), whether presently existing or hereafter acquired or in
which the Grantor now has or hereafter acquires rights and wherever located; and
(c) all products and proceeds of any of the foregoing, as security for all of
the Secured Obligations;

      

      NOW, THEREFORE, in consideration of
the premises and of the mutual covenants herein contained and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

      

      1. For
purposes of this Agreement and in addition to terms defined elsewhere in this
Agreement, the following terms shall have the meanings herein specified (such
meaning to be equally applicable to both the singular and plural forms of the
terms defined):

      

      “Patent License” shall
mean any written agreement now owned or hereafter acquired by the Grantor or in
which the Grantor has or acquires any rights granting any right with respect to
any property, process or other invention on which a Patent is in existence,
including, without limitation, the agreements listed on Schedule I attached
hereto.

       

      
        
          
          

        

        
          A-1

          
            

          

        

        
          
          

        

      

      

      “Patents” shall mean
all of the following now owned or hereafter acquired by the Grantor or in which
the Grantor has or acquires any rights: (a) all letters patent of the United
States or any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or any other country,
including registrations, recordings and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State or Territory thereof, or any other country or political subdivision
thereof (except in any jurisdiction in which the grant of a security interest in
the patents is prohibited and except for any intent to use application unless or
until a statement of use or amendment to assert use has been filed with the
United States Patent and Trademark Office), including, without limitation, those
letters patent and applications for letters patent listed on Schedule I attached
hereto, together with all the rights, benefits and privileges derived therefrom
and the goodwill of the business symbolized thereby; and (b) all reissues,
continuations, continuations-in-part and extensions thereof.

      

      2. As
security for all of the Secured Obligations, the Grantor hereby pledges,
hypothecates, sets over and conveys a security interest to the Collateral Agent
for the benefit of the Secured Parties in, and does hereby grant to Collateral
Agent for the benefit of the Secured Parties, a continuing security interest in
all of the Grantor’s right, title and interest in, to and under the following
(collectively, the “Property”):

      

      (a)           each
Patent now or hereafter owned by the Grantor or in which the Grantor now has or
hereafter acquires rights and wherever located, including, without limitation,
each Patent referred to in Schedule I
hereto and any renewals of registrations thereof; and

      

      (b)           each
Patent License now or hereafter held by the Grantor or in which the Grantor now
has or hereafter acquires rights and wherever located, including, without
limitation, the Patent Licenses, if any, referred to in Schedule I
hereto; and

      

      (c)           all
products and proceeds of the foregoing, includ­ing, without limitation, any
claim by the Grantor against third par­ties for past, present or future
infringement of any Patent or breach of Patent Licenses, if any, includ­ing,
without limitation, any Patent or Patent License referred to in Schedule I
hereto.

      

      Notwithstanding
the foregoing or anything else contained in this Agreement to the contrary the
grant set forth above shall not be effective as a transfer of title to the
Property unless and until the Collateral Agent exercises the rights and remedies
accorded to it under the Security Agreement and by law with respect to the
realization upon its security interest in the Property, and until such time, the
Grantor shall own and may use and enjoy the Property in connection with its
business operations and exercise all incidents of ownership, including, without
limitation, enforcement of its rights and remedies with respect to the Property,
but with respect to all Property being used in Grantor’s businesses, only in a
manner consistent with the preservation of the current substance, validity and
registration of, and the security interest granted in, such Property; provided,
however, that the foregoing shall not impose an obligation on the Grantor to
continue to use any of the Property in the Grantor’s businesses to the extent
that such Property is not necessary in the normal conduct of its
businesses.  The Grantor agrees not to sell or assign its interest in,
or grant any sublicense under, the Property, except that the Grantor may
sublicense the Property in the ordinary course of the Grantor’s businesses,
including, without limitation, licensing or cross-licensing any of the Property
to others in connection with settlement of claims or counterclaims for
infringement of intellectual property rights, but only in a manner consistent
with the preservation of the current substance, validity, and registration, and
the security interest granted in, such Property. Upon the exercise by the
Collateral Agent of the rights and remedies accorded to it under the Security
Agreement and by law with respect to the realization upon its security interest
in the Property, Grantor’s ownership of the Collateral, in which a continuing
security interest under this paragraph has been granted to the Collateral Agent
shall be terminated.

       

      
        
          
          

        

        
          A-2

          
            

          

        

        
          
          

        

      

      

      3. The
Grantor does hereby further acknowledge and affirm that the representations,
warranties and covenants of the Grantor with respect to the Property and the
rights and remedies of the Collateral Agent with respect to the security
interest in the Property made and granted hereby are more fully set forth in the
Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.

      

      4. This
Agreement shall terminate upon termination of the Security
Agreement.  At any time and from time to time prior to such
termination, the Collateral Agent may, in accordance with the terms of the
Security Agreement, terminate its security interest in or reconvey to the
Grantor any rights with respect to any or all of the Property.  Upon
termination of this Agreement and following a request from the Grantor, the
Collateral Agent shall, at the expense of the Grantor, execute and deliver to
the Grantor all deeds, releases and other instruments as the Grantor may
reasonably request (but without recourse or warranty by the Collateral Agent) in
order to evidence such termination.

      

      5. If at any
time before the termination of this Agreement in accordance with Section 4, the
Grantor shall obtain or acquire rights to any new patent (including any Patent
application), whether under a Patent License or otherwise, the provisions of
Section 2 shall automatically apply thereto and the Grantor shall comply with
the terms of the Security Agreement with respect to such new
Patent.  The Grantor authorizes the Collateral Agent to modify this
Agreement by amending Schedule I to include
any future Patents and Patent Licenses covered by Section 2 or by this Section
5.

      

      6. The
Grantor further agrees that (a) the Collateral Agent shall not have any
obligation or responsibility to protect, defend, file, prosecute, obtain or
maintain the Property and the Grantor shall, at its own expense protect, defend,
file, prosecute, obtain and maintain the same in accordance with the terms and
conditions set forth in the Security Agreement and in accordance with its
prudent business judgment, (b) the Grantor shall forthwith advise the Collateral
Agent promptly in writing upon detection of infringements of any of the Property
being used in the Grantor’s businesses and (c) if the Grantor fails to (i)
comply with the requirements of the preceding clause (a) with regard to the
maintenance of any registered Property or, (ii) with regard to infringements of
or actions against any Property, commence efforts to comply with the
requirements of the preceding clause (a) within thirty (30) days after the
Grantor gives notice of such infringement or action to the Collateral Agent (or
such shorter time determined by the Collateral Agent if waiting thirty days
would diminish the Collateral Agent’s security interest in or other rights in
and to the Property), the Collateral Agent may do so in the Grantor’s name or in
its own name, but in any case at the Grantor’s expense, and the Grantor hereby
agrees to reimburse the Collateral Agent for all reasonable expenses, including
attorneys’ fees incurred by the Collateral Agent in protecting, defending and
maintaining the Property.  For the purpose of permitting the
Collateral Agent to fulfill its obligations set forth above, the Grantor hereby
appoints Collateral Agent as its agent for the purpose of filing, prosecuting,
obtaining, and maintaining, at its own expense, any new patent (including any
patent application), and appointing attorneys and/or agents to appear before the
U.S. Patent & Trademark Office and before corresponding foreign patent
offices, to file, prosecute, obtain, and maintain Patents (including any Patent
applications) on behalf of the Grantor and the Collateral Agent, and the
Collateral Agent, to the extent necessary under the Security Agreement, on
behalf of the Grantor.

       

      
        
          
          

        

        
          A-3

          
            

          

        

        
          
          

        

      

      

      7. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.

      

      8. THE
VALIDITY OF THIS AGREEMENT, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING
HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, EXCEPT TO THE
EXTENT THAT PERFECTION (AND THE EFFECT OF PERFECTION AND NONPERFECTION) AND
CERTAIN REMEDIES MAY BE GOVERNED BY THE LAWS OF ANY JURISDICTION OTHER THAN
DELAWARE.

      

      [Signatures
on Following Page]

       

       

       

       

       

       

       

       

      
 

      
        
           

        

        
          A-4

          
            

          

        

        
           

        

      

    

    IN
WITNESS WHEREOF, the Grantor has caused this Patent Security Agreement to be
duly executed under seal and delivered by its duly authorized officer as of the
date first above written.

    

    
      
        	 	Z TRIM HOLDINGS,
      INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ 	 
	 	Name: 	 	 
	 	Title:	 	 
	 	 	 	 

      

     

    

    Signed,
sealed and delivered

    this ___
day of _____, 2008

    

    
       

      
        

      

    

    Notary
Public

    

    

    
      

    

    My
Commission expires:

    

    

    
      

    

    Witness

    
 

    
      

    

    Witness

    

    

     

    

    

    [Signature
Page to Patent Security Agreement]

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    SCHEDULE
I

     

    to
Patent Security Agreement

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    
      Exhibit
B

      

      FORM
OF TRADEMARK SECURITY AGREEMENT

      

      THIS TRADEMARK SECURITY
AGREEMENT (this “Agreement”), dated as
of June ___, 2008, executed by Z TRIM HOLDINGS, INC., an Illinois corporation
(the “Grantor”)
in favor of [____________________] (the
“Collateral Agent”).  Capitalized terms used in this Agreement shall
have the meanings set forth in the Security Agreement (as defined below) unless
specifically defined herein.

      

      

      W I T N E S S E T
H:

      

      WHEREAS, the Grantor and the
Secured Parties are parties to an 8% Senior Secured Convertible Note (as
amended, restated, supplemented or otherwise modified, the “Note”) pursuant to
which the Secured Parties have agreed to make loans to the Grantor (the “Loans”) as offered by
that certain Private Placement Memorandum dated _______________, 2008 (the
“Offering”);

      

      WHEREAS, the Grantor has
entered into a Security Agreement dated the dated hereof (the “Security Agreement”)
pursuant to which the Grantor has granted to the Collateral Agent  for
the benefit of the Secured Parties a continuing security interest in, among
other things, the Intellectual Property of the Grantor, including, without
limitation, (a) all of the Grantor’s Trademarks (as herein defined), whether
presently existing or hereafter acquired or arising, or in which the Grantor now
has or hereafter acquires rights and wherever located; (b) all of the Grantor’s
Trademark Licenses (as herein defined),
whether presently existing or hereafter acquired or in which the Grantor now has
or hereafter acquires rights and wherever located; and (c) all products and
proceeds of any of the foregoing, as security for all of the Secured
Obligations;

       

      NOW, THEREFORE, in consideration
of the premises and of the mutual covenants herein contained and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as
follows:

       

      1. For
purposes of this Agreement and in addition to terms defined elsewhere in this
Agreement, the following terms shall have the meanings herein specified (such
meaning to be equally applicable to both the singular and plural forms of the
terms defined):

       

      “Trademark
License” means any written agreement now or hereafter acquired by the Grantor or
in which the Grantor has or acquires any right, title or interest and wherever
located granting to the Grantor any right to use any Trademark, including,
without limitation, the agreements listed on Schedule
I attached hereto.

       

      “Trademarks”
means all of the following now owned or hereafter acquired by the Grantor or in
which the Grantor has or acquires any right, title or interest and wherever
located:  (i) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service marks,
logos, other source or business identifiers, prints and labels on which any of
the foregoing have appeared or appear, designs and general intangibles of like
nature, now existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all applications in connection therewith, including,
without limitation, registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof (except in any jurisdiction in which the grant of a security
interest in trademarks is prohibited and except for any intent to use
applications unless or until a statement of use or amendment to assert use has
been filed with the United States Patent and Trademark Office), including,
without limitation, those U.S. registrations and applications for registration
listed on Schedule
I attached hereto, together with all the rights, benefits and privileges
derived therefrom and the goodwill of the business relating thereto or
symbolized thereby, (ii) all renewals thereof and (iii) all proceeds of the
foregoing.

       

      
        
          
          

        

        
          B-1

          
            

          

        

        
          
          

        

      

       

      2. For
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, to secure all of the Secured Obligations, the Grantor hereby
pledges, mortgages, hypothecates, sets over and conveys a security interest to
the Collateral Agent for the benefit of the Secured Parties, and does hereby
grant to the Collateral Agent for the benefit of the Secured Parties, a
continuing security interest in, all of the Grantor’s right, title and interest
in, to and under the following (collectively, the
“Property”):

       

      (a)           each
Trademark; and

       

      (b)           each
Trademark License; and

       

      (c)           all
products and proceeds of, and rights associated with, the foregoing,
includ­ing, without limitation, any claim by the Grantor against third
par­ties for past, present or future infringement or dilution of any
Trademark or Trademark registration, for breach or enforcement of any Trademark
License or for any injury to the goodwill associated with the use of any such
Trademark, and all rights corresponding thereto throughout the world, if any,
includ­ing, without limitation, with respect to any Trademark or Trademark
License referred to in Schedule
I hereto.

       

      Notwithstanding
the foregoing or anything else contained in this Agreement to the contrary, the
grant set forth above shall not be effective as a transfer of title to the
Property unless and until the Collateral Agent exercises the rights and remedies
accorded to it under the Security Agreement and by law with respect to the
realization upon its security interest in the Property, and until such time, the
Grantor shall own, and may use and enjoy the Property in connection with its
business operations, and exercise all incidents of ownership, including, without
limitation, enforcement of its rights and remedies with respect to the Property,
but with respect to all Property being used in the Grantor’s business, only in a
manner consistent with the preservation of the current substance, validity and
registration of, and the security interest granted in, such Property; provided,
however, that the foregoing shall not impose an obligation on the Grantor to
continue to use any of the Property in the Grantor’s business to the extent that
such Property is not necessary in the normal conduct of its business. The
Grantor agrees not to sell or assign its interest in, or grant any sublicense
under, the Property, except that the Grantor may sublicense the Property in the
ordinary course of the Grantor’s business but only in a manner consistent with
the preservation of the current substance, validity and registration, and the
security interest granted in, such Property. Upon the exercise by the Collateral
Agent of the rights and remedies accorded to it under the Security Agreement and
by law with respect to the realization upon its security interest in the
Property, the Grantor’s ownership of the Property, in which a continuing
security interest under this paragraph has been granted to the Collateral Agent
shall be terminated.

       

      
        
          
          

        

        
          B-2

          
            

          

        

        
          
          

        

      

       

      3. This
Agreement has been executed and delivered by the Grantor for the purpose of
registering the security interest of the Collateral Agent for the benefit of the
Secured Parties in the Property with the United States Patent and Trademark
Office.  The security interest granted hereby has been granted as a
supplement to, and not in limitation of, the security interest granted to the
Collateral Agent for the benefit of the Secured Parties under the Security
Agreement.  The Security Agreement (and all rights and remedies of the
Collateral Agent thereunder) shall remain in full force and effect in accordance
with its terms.

       

      4. The
Grantor does hereby further acknowledge and affirm that the representations,
warranties and covenants of the Grantor with respect to the Property and the
rights and remedies of the Collateral Agent with respect to the security
interest in and collateral assignment of the Property made and granted hereby
are more fully set forth in the Security Agreement, the terms and provisions of
which are incorporated by reference herein as if fully set forth
herein.

       

      5. This
Agreement shall terminate upon termination of the Security
Agreement.  At any time and from time to time prior to such
termination, the Collateral Agent may, in accordance with the terms of the
Security Agreement, terminate its security interest in or reconvey to the
Grantor any rights with respect to any or all of the Property.  Upon
termination of this Agreement and following a request from the Grantor, the
Collateral Agent shall, at the expense of the Grantor, execute and deliver to
the Grantor all deeds, releases and other instruments as the Grantor may
reasonably request (but without recourse or warranty by the Collateral Agent) in
order to evidence such termination.

       

      6. If
at any time before the termination of this Agreement in accordance with Section
5, the Grantor shall obtain or acquire rights to any new Trademark or Trademark
License, the provisions of Section 2 shall automatically apply thereto and the
Grantor shall comply with the terms of the Security Agreement with respect to
such new Trademark or Trademark License.  The Grantor authorizes the
Collateral Agent to modify this Agreement by amending Schedule
I to include any future Trademarks and Trademark Licenses covered by
Section 2 or by this Section 6.

       

      
        
          
          

        

        
          B-3

          
            

          

        

        
          
          

        

      

       

      7. The
Grantor further agrees that (a) the Collateral Agent shall not have any
obligation or responsibility to protect, defend, file, prosecute, obtain or
maintain the Property and the Grantor shall, at its own expense, protect,
defend, file, prosecute, obtain and maintain the same in accordance with the
terms and conditions set forth in the Security Agreement and in accordance with
its prudent business judgment, (b) the Grantor shall forthwith advise the
Collateral Agent promptly in writing upon detection of infringements of any of
the Property being used in the Grantor’s businesses and (c) if the Grantor fails
to (i) comply with the requirements of the preceding clause (a) with regard to
the maintenance of any registered Property or, (ii) with regard to infringements
of or actions against any Property, commence efforts to comply with the
requirements of the preceding clause (a) within thirty days after the Grantor
gives notice of such infringement or action to the Collateral Agent (or such
shorter time determined by the Collateral Agent if waiting thirty days would
diminish the Collateral Agent’s security interest in or other rights in and to
the Property), the Collateral Agent may do so in the Grantor’s name or in its
own name, but in any case at the Grantor’s expense, and the Grantor hereby
agrees to reimburse the Collateral Agent for all reasonable expenses, including
attorneys’ fees incurred by the Collateral Agent in protecting, defending and
maintaining the Property.  For the purpose of permitting the
Collateral Agent to fulfill its obligations set forth above, the Grantor hereby
appoints Collateral Agent as its agent for the purpose of filing, prosecuting,
obtaining, and maintaining, at its own expense, any new trademark (including any
trademark application), and appointing attorneys and/or agents to appear before
the U.S. Patent & Trademark Office and before corresponding foreign
trademark offices, to file, prosecute, obtain, and maintain Trademarks
(including any Trademark applications) on behalf of the Grantor and the
Collateral Agent, and the Collateral Agent, to the extent necessary under the
Security Agreement, on behalf of the Grantor.

       

      8. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.

       

      9. THE
VALIDITY OF THIS AGREEMENT, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING
HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS (WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF) OF THE STATE OF DELAWARE, EXCEPT TO THE EXTENT THAT
PERFECTION (AND THE EFFECT OF PERFECTION AND NONPERFECTION) AND CERTAIN REMEDIES
MAY BE GOVERNED BY THE LAWS OF ANY JURISDICTION OTHER THAN
DELAWARE.

       

       [Signatures
on Following Page]

      
        
           

        

        
          B-4

          
            

          

        

        
           

        

      

    
      IN WITNESS WHEREOF, the Grantor has
caused this Trademark Security Agreement to be duly executed under seal and
delivered by its duly authorized officer as of the date first above
written.

    

    

    
      
        
          	 	Z TRIM HOLDINGS,
      INC.	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/ 	 
	 	Name: 	 	 
	 	Title:	 	 
	 	 	 	 

        

       

      

      Signed,
sealed and delivered

      this ___
day of _____, 2008

      

      
         

        
          

        

      

      Notary
Public

      

      

      
        

      

      My
Commission expires:

      

      

      
        

      

      Witness

      
 

      
        

      

      Witness

    

    

    [Signature
Page to Trademark Security Agreement]

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    Schedule
I

    

    Trademarksex45.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.

     

     

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

     

    “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.

     

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    (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.

     

    [remainder
of page intentionally left blank]

     

     

     

     

     

     

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

     

     

     

     

     

    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]

     

     

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

     

     

    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.

     

     

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    
 

    [_________ 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

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