SETTLEMENT AGREEMENT AND
AMENDMENT TO ENGAGEMENT LETTER DATED MAY 23, 2007
This Settlement Agreement and Amendment to
Engagement Letter Dated May 23, 2007 (the “Agreement”)
is dated May 13, 2009 and between Loeb & Loeb LLP
(“Loeb”) and Z Trim Holdings, Inc. (along with any of
its subsidiaries, affiliates and/or other related entities,
“ZTHI”). Loeb and ZTHI are hereinafter
referred to collectively as the “Parties,” or each
individually a “Party.”
RECITALS
A. ZTHI and Loeb are
parties to that certain engagement letter dated as of May 23, 2007
(the “Engagement Letter”);
B. Pursuant to the
terms and conditions of the Engagement Letter, Loeb from time to
time has performed legal services and incurred related expenses on
behalf of ZTHI;
C. ZTHI is in breach
of the Engagement Letter for non-payment of certain invoices
related to that certain litigation styled as Z Trim Holdings,
Inc. and Fibergel Technologies, Inc. v. Fiberstar, Inc. pending
in the United States District Court for the Western District of
Wisconsin as case number 07-C-0161-C (the “Patent Litigation
Invoices”);
D. The outstanding
amount of the Patent Litigation Invoices currently total
approximately $350,556.00 (the “Patent Litigation Invoice
Amount”);
E. Pursuant to the
Engagement Letter, Loeb has performed and also performs other legal
services and incurs other expenses on behalf of ZTHI (the
“Current Matters”);
F. ZTHI has requested
that Loeb temporarily forbear from exercising certain of its rights
under the Engagement Letter;
G. Loeb has agreed to
the temporary forbearance requested by ZTHI subject to the terms,
conditions and requirements set forth herein; and
H. ZTHI desires to
reaffirm its obligations and liabilities to Loeb as set forth
herein.
NOW, THEREFORE , in consideration of the recitals set forth
above, the covenants and agreements hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency
of which bare hereby acknowledged, the parties, intending to be
legally bound, hereby agree as follows:
1.
Recitals
. The recitals set forth
above constitute an integral part of this Agreement and are
incorporated herein by this reference with the same force and
effect as though restated herein.
2.
Time is of the
Essence . The Parties acknowledge that time
is of the essence to all matters pertaining to this
Agreement.
3.
Forbearance
. Loeb hereby agrees to
forbear temporarily from exercising its rights and remedies under
the Engagement Letter from the date hereof to and including
December 31, 2009 (the “Forbearance Period”), subject
to the full and timely compliance with the following terms,
conditions and requirements (each, a “Forbearance
Condition”):
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ZTHI fully pays
Loeb the Patent Litigation Invoice Amount within fourteen (14) days
of the execution of this Agreement, provided however, ZTHI may
elect to make a payment-in-kind, on a dollar for dollar basis
(e.g., ZTHI may issue $100,000 of secured debt to Loeb, which in
turn would reduce the Patent Litigation Invoice Amount by
$100,000), in ZTHI’s current convertible debt offering
(described in greater detail in that certain Private Placement
Memorandum dated March 25, 2009 and attached hereto as Exhibit A)
(the “PPM Option”); and
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ZTHI pays all
amounts for the Current Matters pursuant to the terms of the
Engagement Letter on a timely basis.
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If ZTHI fails to comply with any one of the
Forbearance Conditions set forth above, (i) the Forbearance Period
and ZTHI’s agreement to forbear hereunder shall immediately
terminate without further notice to ZTHI and (ii) Loeb may, at its
option, exercise all of its legal and equitable rights and remedies
against ZTHI.
4.
Reaffirmation
. ZTHI hereby (a)
consents to this Agreement, (b) ratifies and reaffirms all of its
payment and performance obligations, contingent or otherwise, under
the Engagement Letter; and (c) acknowledges that the Engagement
Letter remains in full force and effect and is hereby ratified and
reaffirmed. The execution of this Agreement shall not
operate as a waiver of any right, power or remedy of Loeb,
constitute a waiver of the Patent Litigation Invoices, Current
Matters or other provision of any of the Engagement Letter or serve
to effect a novation of any obligation from ZTHI to
Loeb.
5.
Inducement by
ZTHI . To
induce Loeb to enter into this Agreement:
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ZTHI represents
and warrants to Loeb that it has full power and authority to enter
into this Agreement and to incur and perform the obligations
provided for under this Agreement, all of which have been duly
authorized by all proper and necessary action, and that no consent
or approval of shareholders or creditors or of any public authority
or regulatory body is required as a condition to the validity or
enforceability of this Agreement which has not been obtained on or
prior to the date hereof.
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ZTHI represents
and warrants to Loeb that this Agreement, along with the Engagement
Letter, constitutes the valid and legally binding obligation of
ZTHI, fully enforceable against ZTHI in accordance with its
terms.
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ZTHI represents
and warrants to Loeb that the execution and performance by ZTHI of
this Agreement will not: (i) violate any provision of law, any
order of any court or other agency of government, or the operating
agreement or organizational documents of ZTHI; (ii) violate any
indenture, contract, agreement or other instrument to which ZTHI is
a party, or by which any of its property is bound, or be in
conflict with, result in a breach of or constitute (with due notice
and/or lapse of time) a default under, any such indenture,
contract, agreement or other instrument except for the current
default related to the PPM Option; or (iii) result in the creation
or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the property or assets of ZTHI.
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ZTHI represents
and warrants to Loeb that it has no “claims” (as such
term is defined in Section 101(5) of Title 11 of the United States
Code (the “Bankruptcy Code”)) against Loeb.
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6.
Conditions
Precedent . This Agreement shall become
effective as of the date hereof upon the satisfaction of each of
the following conditions precedent by the close of business on the
date hereof:
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Loeb shall have
received from ZTHI a fully executed original counterpart of this
Agreement; and
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Loeb shall have
received from ZTHI and other persons and entities such other
instruments, documents and agreements in connection herewith as
Loeb shall reasonably request.
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7.
Affirmation of
Indebtedness . ZTHI hereby agrees and acknowledges
that: (a) as of May 4, 2009, the aggregate outstanding balance of
the Patent Litigation Invoice Amount is $350,556.0
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