Document:

ex431.htm

     

                                                                                            Exhibit Exhibit
4.31

     

     

    FORM OF WARRANT
AGREEMENT

     

    This
Warrant Agreement is made and entered into as of February 8, 2008, by and
between Z Trim Holdings, Inc. f/k/a Circle Group Holdings, Inc., an Illinois
corporation whose principal place of business is located at 1011 Campus Drive,
Mundelein, Illinois 60060 (“Z Trim”), and Farhad Zaghi, who resides in Los
Altos, California (“Farhad”), Farshad Zaghi, who resides in Los Altos,
California (“Farshad”), Nurieel Akhamzadeh, who resides in the Nation of Israel
(“Nurieel”), Zaghi Trading Partnership, whose principal place of business is
located in California, and Pac Bay, Inc. d/b/a Bay Financial, a California
corporation, whose principal place of business is located in California,
(collectively the “Zaghi Parties”).

     

    WHEREAS, Z Trim has issued
various warrants to the Zaghi Parties and the Parties now desire to cancel all
such warrants and issue warrants on the following terms and conditions, and the
terms and conditions of the Settlement Agreement and Mutual Releases between the
Parties as of February 8, 2008, (the “Agreement), and this Warrant Agreement is
made pursuant to the Agreement;

     

    NOW THEREFORE, in consideration of good
and valuable consideration, receipt of which is hereby acknowledged, the Parties
agree as follows:

     

    1. The
recitals and prefatory phrases set forth above, and the Agreement, are
incorporated fully by reference as if expressly set forth herein.

    2.  All
warrants previously issued to the Zaghi Parties (totaling 2,266,666) pursuant to
the Agreement to Issue Warrants dated March 27, 2007, unless this Warrant
Agreement is declared null and void by the Zaghi Parties pursuant to paragraph 7
of the Agreement in which case the Parties shall be returned to the status quo
as it existed prior to the execution of this Warrant Agreement, are deemed
cancelled and shall be considered null and void.  The Zaghi Parties
represent that they have not transferred, assigned or otherwise disposed of any
of the warrants referred to the Agreement to Issue Warrants. Pursuant to the
Agreement, Z Trim agrees to issue one or more warrants to purchase 2,500,000
shares of Z Trim common stock to the Zaghi Parties under the following
terms:

    (a) New
warrants will be available no sooner than 5 business days after the date of the
Closing of the Agreement and no later than 36 months after the date of this
Warrant Agreement at the request of the Zaghi Parties. Z Trim has provided the
Zaghi Parties with a sample warrant (attached hereto as Exhibit 1) leaving only
the names of the parties, number of shares and the strike price blank. Upon the
Zaghi Parties notifying Z Trim of the date they wish to use as the date to
calculate the strike price of the warrants, as well as the name of the party to
be issued the warrants, Z Trim will provide the Zaghi Parties with an executed
warrant within five (5) business days after Z Trim’s receipt of notice from the
Zaghi Parties.

    (b) The
strike price of the warrants shall be calculated as the 12 trading day trailing
average of the closing price of Z Trim stock during any 12 trading day selected
by the Zaghi Parties.  Such 12-day period to be selected by the Zaghi
Parties shall be any such time period from the date of this Warrant Agreement to
the date the Zaghi Parties notify Z Trim of the 12-day trading period they wish
to use as the date to calculate the strike price of the warrants.

    (c) The date
in which to start the calculation of the 12-day trading period (the “Calculation
Date”) will be the date chosen by the Zaghi parties within the date range set
forth in paragraph 2(a) and (b); provided, however, that Zaghi Parties’
designation of the Calculation Date shall be irrevocable.

    (d) The
warrants shall be exercisable for a period of 3 years from the date on which
this Agreement is executed and delivered.

    (e) The
warrants shall be transferable, subject to securities law
restrictions.

    (f) The
Parties agree that the warrants shall not be exercisable if the exercise of such
would result in the party making the exercise, at the time of exercise, a
greater than 4.99% shareholder of Z Trim. However, the Zaghi Parties shall be
allowed to exercise any amount of warrants that would not exceed the 4.99%
threshold.

    (g) Z Trim
agrees that it shall use its best efforts to register for resale the shares
underlying the warrants on a registration statement to be filed with the SEC and
declared effective within 3 months of the date in which the warrants are issued.
Z Trim shall further cause the shares underlying the warrants to be listed with
the American Stock Exchange. If Z Trim has a registration within the first 3
months following the issuance of the warrants, it agrees to register such
underlying shares on said registration. In no event shall the registration of
such shares take place later than 3 months from the date of issuance of the
warrants.  Z Trim shall take all reasonably necessary actions to cause
the registration statement to remain effective throughout the period in which
the Warrants remain exercisable.

    (h) The Zaghi
Parties shall be entitled to choose the strike price/Calculation Date(s) for the
warrants pursuant to paragraph 2(a) and (b) in blocks of no less than 150,000
shares (with the obvious exception of the last increment of warrants
remaining.)

    3. Upon the
Zaghi Parties delivery of a cashier’s or banker’s check payable to Z Trim to Law
Offices of Cathy A. Pilkington for the exercise any of these warrants referred
to herein, the stock certificate will be issued and released within five (5)
business days pursuant to directions provided by the Zaghi Parties, provided,
however, that the stock certificates cannot be issued prior to their
registration, as set forth in paragraph 2(g) hereinabove. The cashier’s or
bankers check will be held by Cathy Pilkington until the stock certificate is
produced to DWAC and confirmation of such is received by the Zaghi Parties as
well as receipt by them of an accompanying attorney opinion letter or any other
necessary documentation to ensure that the shares are free trading, which
opinion letter or other documentation Z Trim shall provide.

    4. Z Trim
shall provide to the Zaghi Parties information on a monthly basis of the status
of any registrations effecting the warrants issued under this
Agreement.

    5. The Zaghi
Parties agree on behalf of themselves and their affiliates that so long as there
exist outstanding warrants without an irrevocable strike price under this
Warrant Agreement that they will not, directly or indirectly, sell short or
contract to sell short, any Z Trim securities.

    6.  Z
Trim and the Zaghi Parties agree that any breach of the provisions of paragraphs
2 and 3 of this Warrant Agreement by Z Trim or the Zaghi Parties will cause the
non-breaching party substantial and significant injury and expense, but that the
amount of such injury and expense is difficult, if not impossible, to reasonably
calculate with certainty. Therefore, Z Trim and the Zaghi Parties agree that
upon a breach of paragraphs 2 and 3 of this Warrant Agreement by Z Trim or the
Zaghi Parties, the non-breaching party is entitled to damages in the amount of
$5,000 a day until the breach is cured and that this amount is not a penalty but
an agreed upon liquidated damages provision. Upon a breach by Z Trim or the
Zaghi Parties, the non-breaching party shall serve notice of the claimed breach
and the breaching party shall have ten (10) business days to cure the breach.
The $5,000 a day damages will accrue during the period of the cure and shall be
payable even upon a cure, but the non-breaching party cannot initiate any legal
action to recover these damages or enforce this provision during the period of
the cure. In the event the non-­breaching party initiates litigation to
enforce this provision or any other breach or default of this Warrant Agreement,
the prevailing party in such litigation shall be entitled to all attorneys’ fees
and costs incurred in enforcing this provision. However, this paragraph 5 shall
not apply to any breach by Z Trim of the above provisions of this Warrant
Agreement caused by events exclusively in control of the SEC, AMEX or any
regulatory authority. The Parties agree that a private placement by Z Trim for
the raising of funds or substantially similar transaction shall not justify or
excuse Z Trim’s failure to timely register shares pursuant to paragraphs 2 and
3.

    7. Notices. Any required notices,
statements or confirmations to be given under the terms of this Warrant
Agreement shall be served by e-mail or Federal Express Delivery to the following
or any other address designated by the parties in writing:

    
      	
              FOR
      Z TRIM

            	
              FOR
      THE ZAGHI PARTIES

            	 
      
	
              Z
      Trim Holdings, Inc.

              1011
      Campus Drive

              Mundelein,
      IL 60060

              Attn:           Brian
      Chaiken, Esq.

              (847)
      549-6028

              brian.chaiken@ztrim.com

               

            	
              Farhad
      Zaghi

              4020
      Moorpark Avenue, #17

              San
      Jose, CA 95117

              (408)
      296-5287

              fzaghi@aol.com

               

               

            
	
              Cathy
      A. Pilkington, Esq.

              Law
      Offices of Cathy A. Pilkington

              161
      N. Clark Street, Suite 4700

              Chicago,
      IL 60601

              (312)
      346-2762

              cpilkington@pilkingtonlaw.com

               

            	
              William
      M. McErlean

              Barnes
      & Thornburg LLP

              One
      N. Wacker Drive, Suite 4400

              Chicago,
      IL 60606

              (312)
      214-8820

              wmcerlean@btlaw.com

               

            

    

    

    8. In
entering into the Agreement, the Parties acknowledge that the terms of this
Warrant Agreement have been completely read and that the terms are fully
understood and voluntarily accepted by them.  Each Party agrees and
represents that this Warrant Agreement is made on its or his sole judgment,
belief, and knowledge as to all phases of its alleged claims.  Except
as is set forth herein, no Party is relying on any representations or statements
made by the other Party or anyone representing the other Party or by any person
employed by the other Party.

     

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    9. Neither
this Warrant Agreement nor any negotiations or proceedings in connection
therewith may be used in any proceeding against any Party for any purpose
whatsoever, except with respect to the effectuation and enforcement of this
Agreement.  Each Party agrees not to introduce this Warrant Agreement
into evidence in any action involving any other Party for the purpose of
establishing or attempting to prove liability, any admission of liability, or
otherwise.  Provided that nothing herein shall prevent any Party from
taking necessary legal action to enforce the terms of this Warrant
Agreement.

    10. This
Warrant Agreement may not be changed, altered, amended or otherwise modified
except by agreement in writing signed by all Parties hereto.

    11. Each
Party represents and warrants that it has all necessary capacity, power, and
authority to enter into, and perform its obligations under this Warrant
Agreement, and each individual executing this Warrant Agreement on behalf of an
entity represents and warrants by his or her signature that he or she has been
fully authorized by such entity to execute this Agreement on behalf of such
entity.  Upon execution and delivery of this Warrant Agreement, the
Warrant Agreement and such instruments will represent the valid, legal, and
binding obligations of each such Party, enforceable in accordance with their
terms, except as enforcement thereof may be limited by bankruptcy, insolvency,
or similar laws affecting creditors’ rights generally.

    11. This
Warrant Agreement and the covenants contained herein shall be binding on and
inure to the benefit of the successors, assigns, and legal representatives of
each Party hereto, whether by way of merger, consolidation, operation of law,
assignment, purchase or other acquisition.

    12.  If
any term or other provision of this Warrant Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
terms, conditions and provisions of this Warrant Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Warrant Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the fullest extent possible.

    13. Waiver of
any one breach of any provision of this Warrant Agreement shall not be deemed a
waiver of any other breach of the same or any other provision of this Warrant
Agreement.

    14. Each
Party to this Warrant Agreement and their counsel has reviewed and revised this
Warrant Agreement, and the normal rule of construction to the effect that any
ambiguities in this Warrant Agreement are to be resolved against the drafting
party shall not be employed in the interpretation of this Warrant Agreement, and
this Warrant Agreement shall not be construed or interpreted strictly against or
in favor of any party.

    15.  This
Warrant Agreement shall be governed by and construed under the laws of the State
of Illinois and applicable Federal law, (without regard to the laws as to choice
or conflict of laws), provided that in the event that all or any part of this
Warrant Agreement should be held to be invalid or unenforceable for any reason
under such laws, this Warrant Agreement shall be governed by and/or construed
under the laws of any other jurisdiction which would validate and make
enforceable the provisions contained in this Warrant Agreement. It is the intent
of the parties to choose the law of one or more jurisdictions (including
application of the laws of different jurisdictions to different provisions if
necessary), so as to validate and make enforceable the provisions contained in
this Warrant Agreement. In the event that all provisions cannot be validated and
made enforceable by application of the laws of one or more such jurisdictions,
then the provisions hereof shall be severable and enforced to the greatest
extent possible.

    16.  Collective
or singular nouns used herein refer to one or more of the defined persons or
entities, whether singularly, collectively, jointly and/or severally, as the
context may require. The masculine includes the feminine and vice versa, as the
context may require.

    17.  This
Warrant Agreement may be executed in multiple counterparts, each of which shall
be deemed to be an original. A copy of a signature (including but not limited to
a signature transmitted by fax or other electronic means) shall have the same
force and effect as an original signature.

    IN
WITNESS WHEREOF, the parties hereto have executed this Warrant Agreement the day
and year first set forth above.

    

    
      	
              Z
      TRIM HOLDINGS, INC.

              an
      Illinois corporation

               

              By:                                                                

            	 
      	
              FARHAD
      ZAGHI

               

               

              By:                                                                

            
	 
      	 
      	
              Its:                                                                

            
	 
      	 
      	
              Individually,
      and on behalf of Pac Bay, Inc. and Zaghi Trading
    Partnership

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
              FARSHAD
      ZAGHI

               

               

              By:                                                                

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
              NURIEEL
      AKHAMZADEH

               

               

              By:                                                                

            
	 
      	 
      	 
      
	 
      	 
      	 
      

    

     

     

    
 

    2ex433.htm

     

    Exhibit 4.33

     

    

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

    

    

    No.
____ __________, 2009

    

    

    Z
TRIM HOLDINGS, INC.

    FORM
OF WARRANT TO PURCHASE COMMON STOCK

    

    Void
after ___________, [2014]

    

    

    Z
Trim Holdings, Inc., an Illinois corporation (the “Company”), hereby
certifies that, for value received, ______________________ (including any
successors and assigns, “Holder”), is
entitled, subject to the terms set forth below, to purchase from the Company at
any time or from time to time during the Exercise Period, defined below, and
prior to 5:00 PM Central time, on ________, [2012] (the “Expiration Date”),
fully paid and nonassessable shares of Common Stock (the “Warrant Shares”)
under the terms set forth herein.

    

    This Warrant is issued pursuant to that
certain Subscription Agreement dated _______________, 2008 by and between the
Company and the Holder (the “Subscription
Agreement”) that was executed and delivered in connection with that
certain Confidential Private Placement Memorandum of the Company dated ________,
2008 (the “Private
Offering”).

    

    1. Number of Warrant Shares;
Exercise Price.  This Warrant shall evidence the right of the
Holder to purchase up to
[         ] Warrant Shares at an
exercise price per Warrant Share of $0.01 per share (the “Exercise Price”),
subject to adjustment as provided in Section 6 below.

    

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

    

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

    

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

    

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

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

    

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

    

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

     

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    5. Net
Issuance.

    

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

    

    X = Y (A -
B)

                              A

    

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

    

    Y
=           the number of
Converted Warrant Shares;

    

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

    

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

    

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

    

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

    

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

    

    (i) If this
Warrant is to be exercised contingent upon and effective immediately prior to
the initial public offering of the Company’s Common Stock pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(an “Initial Public
Offering”), the fair market value of a Warrant Share shall be deemed to
be equal to the price per share to the public of the shares of Common Stock sold
in the Initial Public Offering as set forth on the front cover of the final
prospectus relating to the Initial Public Offering;

    

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

    

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

    

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

    

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

    

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

    

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

    

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

     

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

    

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

    

    (f) Options, Rights, Warrants
and Convertible and Exchangeable Securities.  Subject to
Section 6(h) hereof, in case the Company shall at any time after the date hereof
issue options, rights or warrants to subscribe for shares of Stock, or issue any
securities convertible into or exchangeable for shares of Stock, for a
consideration per share less than the Exercise Price in effect immediately prior
to the issuance of such options, rights, warrants or such convertible or
exchangeable securities, or without consideration, the Exercise Price in effect
immediately prior to the issuance of such options, rights, warrants or such
convertible or exchangeable securities, as the case may be, shall be reduced to
the price established for such options, rights, warrants or convertible or
exchangeable securities that entitle the holders thereof to receive a share of
Stock.

    

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

    

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

    

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

     

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

     

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

    

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

    

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

    

    7. Registration
Rights.  The Company hereby agrees that the Holder shall be
entitled, with respect to all Warrant Shares issued upon the exercise of this
Warrant, to the registration rights set forth in the Registration Rights
Agreement, dated as of [__________], 2008, by and among the Company, the Holder
and the investors in the Private Offering, as may be amended or supplemented
from time to time, the terms of which are hereby incorporated by this reference,
with the same force and effect as if specifically set forth herein.

     
 

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

    

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

     

    3

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    10. Miscellaneous.

    

    (a) Transfer of Warrant;
Permitted Designees.  The Holder agrees not to make any
disposition of this Warrant, the Warrant Shares or any rights hereunder without
the prior written consent of the Company.  Any such permitted transfer
must be made by the Holder in person or by duly authorized attorney, upon
delivery of this Warrant and the form of assignment attached hereto as Exhibit B to any such
permitted transferee.  As a condition precedent to such transfer, the
transferee shall sign an investment letter in form and substance satisfactory to
the Company.  Subject to the foregoing, the provisions of this Warrant
shall inure to the benefit of and be binding upon any successor to the Company
and shall extend to any holder hereof. Notwithstanding anything contained
herein, the Company shall, upon written instructions to be delivered to the
Company within fifteen (15) business days following the date hereof, transfer
all or a portion of this Warrant to officers, directors, employees and other
registered agents or associated persons of the Holder (collectively, “Permitted Designees”)
in accordance with this Section 10; provided, however, the Company shall not be
required to issue such Warrants to any person who is not an “accredited
investor” within the meaning of Regulation D promulgated under the Securities
Act of 1933, as amended, and provided, further, such transfer must be in
compliance with applicable Federal and state securities laws.  Each
Permitted Designee shall be required to execute fully and completely the
Investor Representation Letter in the form attached hereto as Exhibit C prior to
the issuance of the Warrant to such person.

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    [REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]

    
 

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

    

    

    Z
TRIM HOLDINGS, INC.,

    an
Illinois corporation

    

    

    By:

    Name:
Steven J. Cohen

    Title:
Chief Executive Officer

    

    Address:                 1011
Campus Drive

    Mundelein, IL 60060

     

    

     

    

    

    

    

    

    

    

    

    

    

    

    

     

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    EXHIBIT
A

    

    FORM OF
SUBSCRIPTION

    

    (To be
signed only on exercise of Warrant)

     

    

    To:           Z-TRIM
HOLDINGS, INC.

    

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

    

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

     

    

    (Name)

     

    

    

    (Address)

    

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

    

    

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

    

    

    (Print Name)

    

    

    (Address)

    Dated:                                                      

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
B

    

    FORM OF
ASSIGNMENT

     

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

     

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

     

    Name:        
(Please
Print)

    Address:    (Please
Print)

    

    Dated:  __________,
20__

    

    Holder’s

    Signature:                                                                                     

    

    Holder’s

    Address:                                                                                     

     

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

    

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
C

    

    FORM OF INVESTOR
REPRESENTATION LETTER

    DATE

    

    Z Trim
Holdings, Inc.

    1011
Campus Drive

    Mundelein,
IL 60060

    

    Gentlemen:

    

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

    

    
      	
               
      1.

            	
                 Check
      each one which is applicable:

            

    

    

    
      	
                  

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

            

    

    

    
      	
                  

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

            

    

    

    
      	
              2.
      

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

            

    

    

    
      	
              3.
      

            	
              I
      am not relying on the Issuer or J.P. Turner & Company, L.L.C.
      respecting the tax and other economic considerations of an investment in
      the Issuer;

            

    

    

    
      	
              4.
      

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

            

    

    

    

    _______________________

    Name:

     
 

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

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