Exhibit 4.1
SUBSCRIPTION
AGREEMENT
FOR
Z TRIM HOLDINGS,
INC.
Z Trim
Holdings, Inc.
1011 Campus
Drive
Mundelein, IL
60060
Ladies and
Gentlemen:
1.
Subscription.
(a) The
undersigned (the “ Purchaser ”), intending to be
legally bound, hereby irrevocably agrees to purchase a unit or
units (each, a “ Unit ” and collectively, the
“ Units ”) at a purchase price of $100,000 per
Unit, from Z Trim Holdings, Inc., an Illinois corporation (the
“ Company ”). Each Unit consists of a
convertible senior secured note, due 24 months from issue (each a
“ Note ” and collectively, the “
Notes ”) convertible at the rate of $0.26 per share
into 384,615 shares of common stock, $.00005 par value per share
(“ Common Shares ”), of Z Trim Holdings, Inc.,
an Illinois corporation (the “ Company ”),
bearing interest at the rate of 8% per annum, which interest is
payable quarterly in Common Shares at the rate of $0.26 per share,
and two five-year warrants, one to purchase 230,769 Common Shares
at $0.01 per share (the “ $0.01 Warrants ”) and
the other to purchase 153,846 Common Shares at $0.26 per share (the
“$ 0.26 Warrants ”, and, together with the $0.01
Warrants, collectively, the “ Warrants
”). This subscription is submitted to you in
accordance with and subject to the terms and conditions described
in this Subscription Agreement, and the Confidential Private
Placement Memorandum of the Company dated June __, 2008, as amended
or supplemented from time to time, including all documents
incorporated by reference therein and all attachments, schedules
and exhibits thereto (the “ Memorandum ”),
relating to the offering (the “ Offering ”) by
the Company of a minimum of 14 Units ($1,400,000) (the “
Minimum Amount ”) and a maximum of ___ Units
($___________) (the “ Maximum Amount
”).
(b) The
terms of the Offering are more completely described in the
Memorandum and such terms are incorporated herein in their
entirety. Certain capitalized terms used, but not
otherwise defined herein, shall have the respective meanings
provided in the Memorandum.
2.
Payment. The Purchaser encloses herewith a check
payable to, or will immediately make a wire transfer payment to,
“American Chartered Bank, as Escrow Agent for Z Trim
Holdings, Inc.,” in the full amount of the purchase price of
the Units being subscribed for (the “ Subscription
Amount ”). Together with the check for, or
wire transfer of, the full Subscription Amount, the Purchaser is
delivering a completed and executed Omnibus Signature Page to this
Subscription Agreement and the Registration Rights
Agreement.
3.
Deposit of Funds. All payments made as provided
in Section 2 hereof shall be deposited by the Company as soon as
practicable with American Chartered Bank, as escrow agent (the
“ Escrow Agent ”) or such other escrow agent
appointed by ________ and the Company, in a non-interest bearing
escrow account (the “ Escrow Account
”). In the event that the Company does not succeed
in receiving and accepting subscriptions for the Minimum Amount on
or before July 31, 2008, which may be extended for up to two
additional 45-day periods at the discretion of ___________ and the
Company, the Company will refund all of the Purchaser’s
Subscription Amount, without interest accrued thereon or deduction
therefrom, and will return the subscription documents to the
Purchaser. If the Company rejects a Purchaser’s
subscription, either in whole or in part (which decision is in the
sole discretion of the Company), the rejected Subscription Amount
or the rejected portion thereof will be returned promptly to the
Purchaser without interest accrued thereon or deduction
therefrom. The minimum Subscription Amount for a
Purchaser in the Offering is 1 Unit ($100,000); provided ,
however , that _________ and the Company, in their sole
discretion, may waive such minimum Subscription Amount requirement
from time to time.
4.
Acceptance of Subscription. The Purchaser
understands and agrees that the Company in its sole discretion
reserves the right to accept or reject this or any other
subscription for the Units, in whole or in part, notwithstanding
prior receipt by the Purchaser of notice of acceptance of this or
any other subscription. The Company shall have no
obligation hereunder until the Company shall execute and deliver to
the Purchaser an executed copy of this Subscription
Agreement. If Purchaser’s subscription is rejected
in whole, or the Offering is terminated or the Minimum Amount is
not subscribed for and accepted, all funds received from the
Purchaser will be returned without interest, penalty, expense or
deduction, and this Subscription Agreement shall thereafter be of
no further force or effect. If Purchaser’s
subscription is rejected in part, the funds for the rejected
portion of such subscription will be returned without interest,
penalty, expense or deduction, and this Subscription Agreement will
continue in full force and effect to the extent such subscription
was accepted.
5.
Representations and Warranties of the Purchaser.
The Purchaser hereby acknowledges, represents,
warrants, and agrees as follows:
(a) None
of the Units, the Notes, the Warrants or any of the shares of
Common Stock issuable upon conversion of, or payment of interest
on, the Notes or issuable upon exercise of the Warrants offered
pursuant to the Memorandum are registered under the Securities Act
of 1933, as amended (the “ Securities Act ”), or
any state securities laws. The Purchaser understands
that the offering and sale of the Units is intended to be exempt
from registration under the Securities Act, by virtue of Section
4(2) thereof and the provisions of Regulation D promulgated
thereunder, based, in part, upon the representations, warranties
and agreements of the Purchaser contained in this Subscription
Agreement;
(b) The
Purchaser and the Purchaser’s attorney, accountant, purchaser
representative and/or tax advisor, if any (collectively, “
Advisors ”), have received the Memorandum and all
other documents requested by the Purchaser or its Advisors, if any,
have carefully reviewed them and understand the information
contained therein, prior to the execution of this Subscription
Agreement;
(c) Neither
the Securities and Exchange Commission (the “
Commission ”) nor any state securities commission has
approved the Units, the Notes, the Warrants or any of the Common
Shares issuable upon conversion of, or payment of interest on, the
Notes or exercise of the Warrants, or passed upon or endorsed the
merits of the Offering or confirmed the accuracy or determined the
adequacy of the Memorandum. The Memorandum has not been
reviewed by any Federal, state or other regulatory
authority;
(d) All
documents, records, and books pertaining to the investment in the
Units (including, without limitation, the Memorandum) have been
made available for inspection by the Purchaser and its Advisors, if
any;
(e) The
Purchaser and its Advisors, if any, have had a reasonable
opportunity to ask questions of and receive answers from a person
or persons acting on behalf of the Company concerning the offering
of the Units and the business, financial condition, results of
operations and prospects of the Company, and all such questions
have been answered by the Company to the full satisfaction of the
Purchaser and its Advisors, if any, and the Purchaser and its
Advisors have had access, through the EDGAR system, to true and
complete copies of the Company’s most recent Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2007 (the
“ 10-KSB ”), as amended, and all other reports
filed by the Company pursuant to the Securities Exchange Act of
1934, as amended, since the filing of the 10-KSB and prior to the
date hereof and have reviewed such filings;
(f) In
evaluating the suitability of an investment in the Company, the
Purchaser has not relied upon any representation or other
information (oral or written) other than as stated in the
Memorandum or as contained in documents so furnished to the
Purchaser or its Advisors, if any, by the Company in
writing;
(g) The
Purchaser is unaware of, is in no way relying on, and did not
become aware of the offering of the Units through or as a result
of, any form of general solicitation or general advertising
including, without limitation, any article, notice, advertisement
or other communication published in any newspaper, magazine or
similar media or broadcast over television, radio or over the
Internet, in connection with the offering and sale of the Units and
is not subscribing for Units and did not become aware of the
offering of the Units through or as a result of any seminar or
meeting to which the Purchaser was invited by, or any solicitation
of a subscription by, a person not previously known to the
Purchaser in connection with investments in securities
generally;
(h) The
Purchaser has taken no action which would give rise to any claim by
any person for brokerage commissions, finders’ fees or the
like relating to this Subscription Agreement or the transactions
contemplated hereby (other than commissions to be paid by the
Company to _________ as described in the Memorandum or as otherwise
described in the Memorandum);
(i) The
Purchaser, either alone or together with its Advisor(s), if any,
have such knowledge and experience in financial, tax, and business
matters, and, in particular, investments in securities, so as to
enable them to utilize the information made available to them in
connection with the offering of the Units to evaluate the merits
and risks of an investment in the Units and the Company and to make
an informed investment decision with respect thereto;
(j) The
Purchaser is not relying on the Company, _________ or any of their
respective employees or agents with respect to the legal, tax,
economic and related considerations of an investment in the Units,
and the Purchaser has relied on the advice of, or has consulted
with, only its own Advisors;
(k) The
Purchaser is acquiring the Units solely for such Purchaser’s
own account for investment and not with a view to resale or
distribution thereof, in whole or in part. The Purchaser
has no agreement or arrangement, formal or informal, with any
person to sell or transfer all or any of the Units, the Notes, the
Warrants or Common Shares issuable upon conversion of, or payment
of interest on, the Notes or issuable upon exercise of the
Warrants, and the Purchaser has no plans to enter into any such
agreement or arrangement;
(l) The
purchase of the Units represents high risk capital and the
Purchaser is able to afford an investment in a speculative venture
having the risks and objectives of the Company. The
Purchaser must bear the substantial economic risks of the
investment in the Units indefinitely because none of the Units, the
Notes, the Warrants, or the Common Shares issuable upon conversion
of, or payment of interest on, the Notes or exercise of the
Warrants may be sold, hypothecated or otherwise disposed of unless
subsequently registered under the Securities Act and applicable
state securities laws or an exemption from such registration is
available. Legends shall be placed on the securities
included in the Units to the effect that they have not been
registered under the Securities Act or applicable state securities
laws and appropriate notations thereof will be made in the
Company’s stock books. Stop transfer instructions
will be placed with the transfer agent of the securities
constituting the Units. The Company has agreed that
purchasers of the Units will have, with respect to the Common
Shares issuable upon conversion of, or payment of interest on, the
Notes and issuable upon exercise of the Warrants, the registration
rights described in the Registration Rights Agreement in the form
annexed to the Memorandum. Notwithstanding such
registration rights, it is not anticipated that there will be any
market for resale of the Units, the Notes, the Warrants or any of
the Common Shares issuable upon conversion of, or payment of
interest on, the Notes or issuable upon exercise of the Warrants,
and such securities will not be freely transferable at any time in
the foreseeable future;
(m) The
Purchaser has adequate means of providing for such
Purchaser’s current financial needs and foreseeable
contingencies and has no need for liquidity of the investment in
the Units, the Notes, the Warrants or any of the Common Shares
issuable upon conversion of, or payment of interest on, the Notes
or issuable upon exercise of the Warrants for an indefinite period
of time;
(n) The
Purchaser is aware that an investment in the Units involves a
number of very significant risks and has carefully read and
considered the matters set forth in the Memorandum and, in
particular, the matters under the caption “Risk
Factors” therein, and, in particular, acknowledges that such
risks may materially adversely affect the Company’s results
of operations and future prospects;
(o) The
Purchaser is an “accredited investor” as that term is
defined in Regulation D under the Securities Act, and has
truthfully and accurately completed the Accredited Investor
Certification contained herein;
(p) The
Purchaser: (i) if a natural person, represents that the Purchaser
has reached the age of 21 and has full power and authority to
execute and deliver this Subscription Agreement and all other
related agreements or certificates and to carry out the provisions
hereof and thereof; (ii) if a corporation, partnership, or limited
liability company or partnership, or association, joint stock
company, trust, unincorporated organization or other entity,
represents that such entity was not formed for the specific purpose
of acquiring the Units, such entity is duly organized, validly
existing and in good standing under the laws of the state of its
organization, the consummation of the transactions contemplated
hereby is authori
