SUBSCRIPTION AGREEMENT
FOR
Z TRIM HOLDINGS, INC.
Xxxxxxxxx,
XX 00000
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 $10,000 per Unit, from Z
Trim Holdings, Inc., an Illinois corporation
(the “Company”). Each Unit consists of an 8%, 24 month-senior
secured convertible note (the “Note” or “Notes”) in the principal amount of
$10,000 convertible at the conversion price of $1.00 per share into 10,000
shares of common stock, $.00005 par value (the “Common Stock”) of Z Trim
Holdings, Inc., an Illinois corporation (the “Company” or “Z Trim”), with
interest on the Notes payable upon maturity in the form of Common Stock, and a
five year warrant exercisable for 15,000 shares of the Common Stock at an
exercise price of $1.50 per share (the
“Warrants”). 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 as of March 25, 2009, as supplemented and restated as of August 31,
2009 and as hereinafter 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 by the Company of a maximum
of 550 Units ($5,500,000) (the “Maximum Amount”) (the “Offering”).
(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 and/or the
Note.
2. Payment. The
Purchaser encloses herewith a check payable to, or will immediately make a
wire transfer payment to, Z Trim Holdings, Inc., pursuant to the wire
instructions provided by the Company, 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 Signature Page to this Subscription Agreement.
3. Deposit of
Funds. All payments made as provided in Section 2 hereof shall
be deposited by the Company as soon as practicable in its corporate bank
account. 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
one Unit; provided, however, that the Company may, in its sole discretion,
permit fractional Units to be purchased.
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, 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 on its behalf 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 the Notes, in payment of interest on the
Notes or the exercise of the Warrants or 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 and has advised each of its equity owners 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 Stock issuable upon conversion of the Notes, or in payment of
interest thereon 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 has carefully read the Memorandum including the section entitled Risk
Factors. 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 XXXXX
system, to true and complete copies of the Company’s most recent Annual
Report on Form 10-K for the fiscal year ended December 31, 2008 (the “10-K”) as
amended, and all other reports filed by the Company pursuant to
the Securities Exchange Act of 1934, as amended(the “Exchange Act”), since
the filing of the 10-K 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) Neither
the Purchaser nor any of its equity owners is aware of, or is in anyway 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 as 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 its 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, Warrants
or Common Stock issuable upon conversion of the Notes, in payment of the
interest accrued thereon, or upon exercise of the Warrants, and the Purchaser
has no plans to enter into any such agreement or arrangement;
(1) 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 Stock issuable upon conversion of the Notes,
in payment of the interest accrued thereon, or upon 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. It is not anticipated that there will be any
market for resale of the Units, the Notes or the Warrants and such
securities will not be freely transferable at any time in the foreseeable
future. Unless made the subject of an effective registration Statement
filed under the Securities Act of 1933 (the “1933 Act”), the Common Stock
issuable upon conversion of the Notes, the payment of the interest thereon or
upon exercise of the Warrants will not be transferable until at least 6 months
after conversion or payment in full upon exercise and then only upon compliance
with the conditions of Rule 144 promulgated under the 0000 Xxx.
(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 Stock
issuable upon conversion of the Notes or the payment of the interest thereon,
or 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 and each of its equity owners is an “accredited investor” as that term
is defined in Regulation D under the Securities Act, and the Purchaser 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, 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 authorized by, and will not result in a
violation of state law or its charter or other organizational documents, such
entity 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 and to purchase and hold the securities
constituting the Units, the execution and delivery of this Subscription
Agreement has been duly authorized by all necessary action, this Subscription
Agreement has been duly executed and delivered on behalf of such entity; or
(iii) if executing this Subscription Agreement in a representative or fiduciary
capacity, represents that it has full power and authority to execute and deliver
this Subscription Agreement in such capacity and on behalf of the subscribing
individual, xxxx, partnership, trust, estate, corporation, or limited liability
company or partnership, or other entity for whom the Purchaser is executing this
Subscription Agreement, and such individual, partnership, xxxx, trust,
estate, corporation, or limited liability company or partnership, or other
entity has full right and power to perform pursuant to this Subscription
Agreement and make an investment in the Company, and represents that this
Subscription Agreement constitutes a legal, valid and binding obligation of such
entity. The execution and delivery of this Subscription Agreement will not
violate or be in conflict with any order, judgment, injunction, agreement or
controlling document to which the Purchaser is a party or by which it is
bound;
(q) The
Purchaser and its advisors, if any, have had the opportunity to obtain any
additional information, to the extent the Company had such information in their
possession or could acquire it without unreasonable effort or expense, necessary
to verify the accuracy of the information contained in the Memorandum and all
documents received or reviewed in connection with the purchase of the Units and
have had the opportunity to have representatives of the Company provide them
with such additional information regarding the terms and conditions of this
particular investment and the financial condition, results of operations,
business and prospects of the Company deemed relevant by the Purchaser or its
Advisors, if any, and all such requested information, to the extent the Company
had such information in its possession or could acquire it without unreasonable
effort or expense, has been provided by the Company in writing to the full
satisfaction of the Purchaser and its Advisors, if any;
(r) The
Purchaser represents to the Company that any information which the undersigned
has heretofore furnished or is furnishing herewith to the Company is complete
and accurate and may be relied upon by the Company in determining the
availability of an exemption from registration under Federal and state
securities laws in connection with the offering of securities as described in
the Memorandum. The Purchaser further represents and warrants that it will
notify and supply corrective information to the Company immediately upon the
occurrence of any change therein occurring prior to the Company’s issuance of
the securities contained in the Units;
(s) The
Purchaser has significant prior investment experience, including investment in
non-listed and non-registered securities. Each of the equity owners of the
Purchaser is knowledgeable about investment considerations in public companies
and, in particular, public companies traded on the OTCBB. The Purchaser has a
sufficient net worth to sustain a loss of its entire investment in the Company
in the event such a loss should occur. The Purchaser’s overall commitment to
investments which are not readily marketable is not excessive in view of the
Purchaser’s net worth and financial circumstances and the purchase of the Units
will not cause such commitment to become excessive. This investment is a
suitable one for the Purchaser;
(t) The
Purchaser is satisfied that it has received adequate information with respect to
all matters which it or its Advisors, if any, consider material to its decision
to make this investment;
(u) The
Purchaser acknowledges that any estimates or forward-looking statements or
projections included in the Memorandum were prepared by the Company in good
faith, but that the attainment of any such projections, estimates or
forward-looking statements cannot be guaranteed by the Company and should not be
relied upon;
(v) No
oral or written representations have been made, or oral or written information
furnished, to the Purchaser or its Advisors, if any, in connection with the
offering of the Units which are in any way inconsistent with the information
contained in the Memorandum;
(w) Within
five days after receipt of a request from the Company, the Purchaser will
provide such information and deliver such documents as may reasonably be
necessary to comply with any and all laws and ordinances to which the Company is
subject;
(x) The
Purchaser’s substantive relationship with the Company predates the Company’s
contact with the Purchaser regarding an investment in the Units;
(y) THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR
THE SECURITIES LAWS OF CERTAIN STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE
ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE COMMISSION, ANY STATE SECURITIES COMMISSION OR
ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED
UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE
MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL;
(z) The
Purchaser acknowledges that none of the Units, the Notes, the Warrants or the
Common Stock issuable upon the conversion of the Notes, in payment of the
interest accrued thereon, or upon exercise of the Warrants have been recommended
by any Federal or state securities commission or regulatory authority. In making
an investment decision investors must rely on their own examination of the
Company and the terms of the Offering, including the merits and risks involved.
Furthermore, the foregoing authorities have not confirmed the accuracy or
determined the adequacy of this Subscription Agreement. Any representation to
the contrary is a criminal offense. The Units, the Notes, the Warrants, and the
Common Stock issuable by the Company upon conversion of the Notes, in payment of
the interest accrued thereon, and upon the exercise of the Warrants,
are subject to restrictions on transferability and resale and may not be
transferred or resold except as permitted under the Securities Act, and the
applicable state securities laws, pursuant to registration or exemption
therefrom. Investors should be aware that they will be required to bear the
financial risks of this investment for an indefinite period of time;
and
(aa) (For ERISA plans only) The
fiduciary of the ER1SA plan (the “Plan”) represents that such fiduciary has been
informed of and understands the Company’s investment objectives, policies and
strategies, and that the decision to invest “plan assets” (as such term is
defined in ERISA) in the Company is consistent with the provisions of ERISA that
require diversification of plan assets and impose other fiduciary
responsibilities. The Purchaser or Plan fiduciary (a) is responsible for the
decision to invest in the Company; (b) is independent of the Company and any of
its affiliates; (c) is qualified to make such investment decision; and (d) in
making such decision, the Purchaser or Plan fiduciary has not relied on any
advice or recommendation of the Company or any of its affiliates.
(bb) The
Purchaser represents that it has complied with
applicable anti-terrorism/anti-money laundering measures, and The
Purchaser is not in violation of the Executive Order 13224 (the “Order”) or the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act or other
anti-terrorist/anti-money laundering measures. Neither the Purchaser nor any of
its equity owners is a Specially Designated National as defined in the
Order.
6. Representations and Warranties of the
Company. The Company hereby acknowledges, represents,
warrants, and agrees as follows:
(a) The
Company is duly organized, validly existing and in good standing under the laws
of the State of Illinois. The Company is duly qualified to transact business and
is in good standing in each jurisdiction in which failure to do so would
have a material adverse effect on the assets, business, properties, operations,
financial condition or prospects of the Company and has all requisite power to
own its respective properties and to carry on its
respective businesses as now being conducted and as proposed to be
conducted. The Company has all requisite power to execute, deliver
and perform its obligations under the Transaction documents (as defined in the
Note);
(b) The
execution and delivery of the Transaction Documents and
the performance by the Company of its obligations hereunder and
thereunder and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by the Company and no other proceedings on the
part of the Company are necessary. The person(s) executing the Transaction
Documents on behalf of the Company has all right, power and authority to execute
and deliver such agreements in the name and on behalf of the Company. The
Transaction Documents have been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery hereof by the subscriber
hereto, will constitute the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as the same
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the rights of creditors generally and the
availability of equitable remedies.
(c) The
security interests now or hereafter created pursuant to the Security Agreement
constitute and will constitute, together with the security interests created for
the 2008 Notes and the 2009 Notes previously issued, legal, valid perfected
first priority Liens and security interests in all of the collateral purported
to be covered thereby, subject to no superior Liens;
(d)
Neither the execution and delivery by the Company of this Subscription Agreement
or any of the other Transaction Documents to which it is a party, nor the
offering, issuance or sale of the Units, nor the Company Notes (as defined in
the Note) and any documents executed in connection therewith, nor the
fulfillment of or compliance with the terms and provisions hereof or thereof,
will conflict with, or result in a breach or violation of the terms, conditions
or provisions of, or constitute a default under, or result in the creation of
any Lien (other than Liens created pursuant to the Security Agreements) on any
properties or assets of the Company pursuant to the organizational documents of
the Company, or any material contract, agreement, mortgage, indenture, lease or
instrument to which it is a party or by which it is bound or to which its assets
are subject, or any requirement of law to which it or its assets are subject,
which conflict, breach, violate, default or could reasonably be expected to have
a material adverse effect;
(e) The
Company has filed in a timely manner all required registration statements,
reports, proxy statements and other filings required to be filed with or
furnished to the Commission during the twelve (12) months prior to the date of
this Agreement (the “Exchange Act Filings”). On their respective
dates of filing, the Exchange Act Filings complied as to form in all material
respects with the requirements of the Exchange Act applicable to such Exchange
Act Filings and the Exchange Act Filings did not contain any 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, in light of the circumstances in
which they were made, not misleading, and all financial statements contained in
the Exchange Act Filings fairly present in all material respects the financial
position of the Company on the dates of such statements and the results of
operations for the periods covered thereby in accordance with GAAP consistently
applied throughout the periods involved and prior periods, except as otherwise
indicated in the Exchange Act Filings including the notes to such financial
statements;
(f)
Trading in the Company’s Common Stock has not have been suspended by the
Commission or any trading market and at any time prior to the Closing, trading
in securities generally as reported by Bloomberg Financial Markets (“Bloomberg”)
has not have been suspended or limited, and minimum prices have not have been
established on securities whose trades are reported by Bloomberg. Except as set
forth in the Exchange Act Filings, the Company is, and has no reason to believe
that it will not in the foreseeable future continue to be, in compliance with
all such listing and maintenance requirements;
(g) Since
December 31, 2008 and through the date of this Agreement except as otherwise
reflected in the Exchange Act Filings,, (a) the business of the Company and its
Subsidiaries has been carried on and conducted in all material respects, in the
ordinary course of business consistent with past practice and (b) there has
not been any material adverse effect or any fact, circumstance, event, change,
occurrence or effect that, individually or in the aggregate, would be reasonably
expected to have a material adverse effect, and (c) there has not been:
(i) any declaration, setting aside or payment of any dividend or other
distribution in cash, stock, property or otherwise in respect of the Company’s
or any of its Subsidiaries’ capital stock, except for any dividend or
distribution by a Subsidiary to the Company; (ii) any redemption, repurchase or
other acquisition of any shares of capital stock of the Company or any of its
Subsidiaries; (iii) any material change by the Company in its accounting
principles; or (iv) any material tax election made by the Company or any of its
Subsidiaries or any settlement or compromise of any material tax liability by
the Company or any of its Subsidiaries;
(h) The
Company has previously furnished to the Purchaser a true and correct copy of the
Company’s capitalization table as set forth in Schedule 6.1(h). The
capitalization table is true and complete. The Company has also
previously furnished the Purchaser its Quarterly Report on Form 10Q for the
quarter ended June 30,2009 as filed with the Securities and Exchange Commission
and the unaudited financial statements therein contained present fairly, in all
material respects, the financial position of the Company as of June 30,
2009.
(i) All
consents, approvals or authorizations of or declarations, registrations or
filings with any agency, authority, instrumentality, regulatory body, court,
administrative tribunal or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
(including any central bank or similar monetary or regulatory authority), and
any corporation or other entity owned or controlled, through stock or capital
ownership or otherwise, by any of the foregoing (“Governmental Authority”) or
any other Person, including the holders of the Company Notes, including any
creditor or stockholder of the Company, required in connection with the
execution or delivery by the Company of the Transaction Documents and the Notes
to which the Company is a party, or the performance by the Company of its
obligations hereunder and thereunder, or as a condition to the legality,
validity or enforceability of Transaction Documents and the Notes have been
obtained or effected on or prior to the date hereof;
(j) There
are no actions, suits, or proceedings pending, or, to the Company’s knowledge,
threatened against or affecting the Company, its Subsidiaries, or any properties
or rights of any of them which, if adversely determined, individually or in the
aggregate would have a material adverse effect. There are no actions,
suits or proceedings pending, or, to the Company’s knowledge, threatened in
writing against the Company which seek to enjoin, or otherwise prevent the
consummation of, the transactions contemplated herein or to recover any damages
or obtain any relief as a result of any of the transactions contemplated herein
in any court or before any arbitrator of any kind or before or by any
governmental authority;
(k) All
material agreements to which the Company or any of its Subsidiary are a party or
to which the property or assets of the Company or any of its Subsidiaries are
subject are included as part of or specifically identified in the Exchange Act
Filings;
(l) The
Company is not in default under or with respect to any provision of any of its
securities, organizational documents, or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument, document or
agreement to which it is a party or by which it or any of its property is bound
which, individually or together with all such defaults, could reasonably be
expected to have a material adverse effect;
(m) The
Company possess all material franchises, certificates, licenses, permits,
registrations, and other authorizations from Governmental Authorities, that are
necessary for the ownership, maintenance and operation of their respective
properties and assets, and for the conduct of its businesses as now conducted,
and the Company is not in violation of any thereof in any material
respect;
(n) The Company is not now
and has not been, at any time, during the past 10 years, a shell
company, as defined by Rule 405 of the Securities Act of 1933;
(o)
Neither this Agreement nor any other document, certificate or statement
furnished to the Purchaser by or on behalf of the Company in connection
herewith, including but not limited to the Memorandum, contained, as of its
respective date, or now contains, any untrue statement of a material fact or as
of any such date omitted, or now omits, to state a material fact necessary in
order to make the statements contained herein and therein not
misleading.
7. Covenants.
(a) The
Company hereby agrees that immediately following acceptance of this Subscription
Agreement and the execution and delivery to the Purchaser of the Note, Warrants
and Security Agreement, the Company shall, (i) upon written consent of holders
of a majority of the then outstanding principal amount of the 2009 Notes (of
which the Purchaser shall then constitute a majority), amend and restate all of
the 2009 Notes (including the Purchaser’s Note) (ii) and the Purchaser’s
Warrant, (iii) offer to amend the warrants held by each of the other holders of
the 2009 Notes (including the Purchaser), on terms substantially similar to the
Purchaser’s amended Warrant, and (iv) enter into a Registration Rights Agreement
with all of the holders of the 2009 Notes, all in the forms attached hereto as
Exhibit
A. The Company represents and warrants that such documents and
agreements are substantially similar to the documents, instruments and
agreements entered into with the holders of the 2008 Notes and that no other
consents or approvals are required to effectuate the foregoing.
(b) The
Company shall file with the Commission a Current Report on Form 8-K (“Form 8-K”)
disclosing the sale of unregistered securities to the Purchaser, the entry into
this Subscription Agreement and a press release announcing the sale of the Units
to the Purchaser within (2) business days of the date of the
Closing.
(c) Provided
the Purchaser has invested at least Two Million Five Hundred Thousand Dollars
($2,500,000) in the Company pursuant to this Offering or the Series A Preferred
Stock offering (the “Minimum Investment”), the Company hereby agrees to use its
reasonable best efforts to nominate a representative of the Purchaser to the
Company’s board of directors (the “Board) as soon as possible, but in no event
later than at its next annual meeting of its shareholders. In
addition, the Company hereby agrees that as soon as reasonably
possible and provided (i) the Company has received the Minimum
Investment from the Purchaser, (ii) the Board has had a
reasonable opportunity to review and vet information, submitted by
the Purchaser regarding an individual it wishes to designate as a non-voting
observer (the “Designated Observer); (iii) the Designated Observer has executed
and delivered to the Board, a confidentiality agreement in form and substance
equivalent to the confidentially obligation of a Board member of a publicly held
company and otherwise reasonably satisfactory to the Board and (iv) the Board
has approved the Designated Observer (which approval shall not be unreasonably
withheld), the Designated Observer shall thereafter be entitled to
attend all meetings of the Board and to receive notice of all meetings of the
Board, together with copies of the materials circulated to the members of the
Board in connection with such meetings. The Purchaser agrees to
submit such information regarding the Designated Observer as the Board may
reasonably request.
8. Indemnification. Each
of the parties hereto agrees to indemnify and hold harmless the other party
their respective officers, directors, employees, agents, control
persons and affiliates from and against all losses, liabilities, claims,
damages, costs, fees and expenses whatsoever (including, but not limited
to, any and all expenses incurred in investigating, preparing or defending
against any litigation commenced or threatened) based upon or arising
out of any actual or alleged false acknowledgment, representation or
warranty, or misrepresentation or omission to state a material fact, or
breach by such party of any covenant or agreement made by such party herein
or in any other document delivered in connection with the Transaction
Documents.
9. Legal Opinion. The
Company shall have procured and delivered an opinion of counsel in form and
substance reasonably acceptable to the Purchaser.
10. Irrevocability; Binding Effect.
The Purchaser hereby acknowledges and agrees that the subscription
hereunder is irrevocable by the Purchaser, except as required by
applicable law, and that this Subscription Agreement shall survive the
death or disability of the Purchaser and shall be binding upon and inure to
the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives, and permitted assigns. If the
Purchaser is more than one person, the obligations of the Purchaser
hereunder shall be joint and several and the agreements, representations,
warranties, and acknowledgments herein shall be deemed to be made by and be
binding upon each such person and such person’s heirs, executors,
administrators, successors, legal representatives, and permitted
assigns.
11. Modification. This
Subscription Agreement shall not be modified or waived except by an
instrument in writing signed by the party against whom any such modification
or waiver is sought.
12. Notices. Any notice
or other communication required or permitted to be given hereunder shall be
in writing and shall be mailed by certified mail, return receipt requested,
or delivered against receipt to the party to whom it is to be given (a) if
to the Company, at the address set forth above or (b) if to the Purchaser,
at the address set forth on the signature page hereof (or, in either case,
to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 12). Any notice or other
communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party’s address which
shall be deemed given at the time of receipt thereof.
13. Assignability. This
Subscription Agreement and the rights, interests and obligations hereunder
are not transferable or assignable by the Purchaser and the transfer
or assignment of the Units, the Notes, the Security Agreement, the Warrants
the Registration Rights and the shares of Common Stock issuable by
the Company upon the conversion of or payment of interest on the Notes, or
upon exercise of the Warrants shall be made only in accordance with all
applicable laws.
14. Applicable
Law. This Subscription Agreement shall be governed by
and construed under the laws of the State of Illinois as applied to
agreements among Illinois residents entered into and to be performed
entirely within Illinois. Each of the parties hereto (1) agree that any
legal suit, action or proceeding arising out of or relating to this Agreement
shall be instituted exclusively in the 19th
Judicial Circuit Court of Lake County, Illinois, or in the United
States District Court for the Northern District of Illinois, (2) waive any
objection which the Company may have now or hereafter to the
venue of any such suit, action or
proceeding, and (3) irrevocably consent to the jurisdiction of the 19th
Judicial Circuit Court of Lake County, Illinois, and the United States
District Court for the Northern District of Illinois in any such
suit, action or proceeding. Each of the parties hereto further agrees to
accept and acknowledge service of any and all process which may be served
in any such suit, action or proceeding in the 19th Judicial
Circuit Court of Lake County, Illinois, or in the United States District Court
for the Northern District of Illinois and agrees that service of process
upon it mailed by certified mail to its address shall be deemed in every
respect effective service of process upon it, in any such suit, action or
proceeding. THE PARTIES HERETO AGREE TO WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON
OR ARISING OUT OF THIS SUBSCRIPTION AGREEMENT OR ANY DOCUMENT OR AGREEMENT
CONTEMPLATED HEREBY.
15. Blue Sky Qualification. The
purchase of Units under this Subscription Agreement is expressly
conditioned upon the exemption from qualification of the offer and sale of
the Units from applicable Federal and state securities laws. The
Company shall not be required to qualify this transaction under the
securities laws of any jurisdiction and, should qualification be necessary,
the Company shall be released from any and all obligations to maintain its
offer, and may rescind any sale contracted, in the jurisdiction.
16. Use of
Pronouns. All pronouns and any variations thereof used herein
shall be deemed to refer to the masculine, feminine, neuter, singular or
plural as the identity of the person or persons referred to may
require.
17. Confidentiality. The Purchaser
acknowledges and agrees that any information or data the Purchaser has
acquired from or about the Company, not otherwise properly in the public
domain, was received in confidence (the “Information’). The Purchaser agrees not
to divulge, communicate or disclose, except as may be required by law or
for the performance of this Subscription Agreement, or use to the detriment of
the Company or for the benefit of any other person or persons, or misuse in any
way, any confidential information of the Company, including any scientific,
technical, trade or business secrets of the Company and any scientific,
technical, trade or business materials that are treated by the Company as
confidential or proprietary, including, but not limited to, ideas, discoveries,
inventions, developments and improvements belonging to the Company and
confidential information obtained by or given to the Company about or belonging
to third parties. The Purchaser represents that each of its equity owners have
signed similar confidentiality agreements covering the
Information.
18 Miscellaneous.
(a) This
Subscription Agreement, together with the Warrants, the Notes, the Security
Agreements and the Registration Rights Agreement constitute the entire agreement
between the Purchaser and the Company with respect to the subject matter
hereof and supersede all prior oral or written agreements and understandings, if
any, relating to the subject matter hereof. The terms and provisions of this
Subscription Agreement may be waived, or consent for the departure therefrom
granted, only by a written document executed by the party entitled to the
benefits of such terms or provisions.
(b) Each
of the Purchaser’s and the Company’s representations and warranties made in
this Subscription Agreement shall survive the execution and delivery hereof and
delivery of the Notes, the Warrants, the Security Agreements, the Registration
Rights Agreement, and the Common Stock issuable upon conversion of the Notes, in
payment of the interest accrued thereon, or issuable upon the exercise of the
Warrants.
(c) Each
of the parties hereto shall pay its own fees and expenses (including the
fees of any attorneys, accountants, appraisers or others engaged by such party)
in connection with this Subscription Agreement and the transactions
contemplated hereby whether or not the transactions contemplated hereby are
consummated.
(d) This
Subscription Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
(e) Each
provision of this Subscription Agreement shall be considered separable and,
if for any reason any provision or provisions hereof are determined to be
invalid or contrary to applicable law, such invalidity or illegality shall not
impair the operation of or affect the remaining portions of this
Subscription Agreement.
(f) Paragraph
titles are for descriptive purposes only and shall not control or alter the
meaning of this Subscription Agreement as set forth in the text.
[REMAINDER
OF THIS PAGE IS BLANK]
ANTI-MONEY
LAUNDERING REQUIREMENTS
|
The
USA PATRIOT Act
|
What
is money laundering?
|
How
big is the problem and why is it important?
|
|
The
USA PATRIOT Act is designed to detect, deter, and punish terrorists in the
United States and abroad. The Act imposes new anti-money
laundering requirements on brokerage firms and financial
institutions. Since April 24, 2002 all brokerage firms have
been required to have new, comprehensive anti-money laundering
programs.
To
help you understand theses efforts, we want to provide you with some
information about money laundering and our steps to implement the USA
PATRIOT Act.
|
Money
laundering is the process of disguising illegally obtained money so that
the funds appear to come from legitimate sources or
activities. Money laundering occurs in connection with a wide
variety of crimes, including illegal arms sales, drug trafficking,
robbery, fraud, racketeering, and terrorism.
|
The
use of the U.S. financial system by criminals to facilitate terrorism or
other crimes could well taint our financial markets. According
to the U.S. State Department, one recent estimate puts the amount of
worldwide money laundering activity at $1 trillion a
year.
|
|
Under
new rules required by the USA PATRIOT Act, our anti-money laundering
program must designate a special compliance officer, set up employee
training, conduct independent audits, and establish policies and
procedures to detect and report suspicious transaction and ensure
compliance with the new laws.
|
As
part of our required program, we may ask you to provide various
identification documents or other information. Until you
provide the information or documents we need, we may not be able to effect
any transactions for you.
|
SIGNATURE
PAGE TO
SUBSCRIPTION
AGREEMENT, SECURITY AGREEMENT, PATENT SECURITY AGREEMENT AND TRADEMARK SECURITY
AGREEMENT
Purchaser
hereby elects to purchase a total of 185.25 Units at a
price of $10,000 per Unit
(NOTE: to be completed by the Purchaser).
Date
(NOTE: To be completed by the Purchaser): October 15, 2009
If the
Purchaser is an INDIVIDUAL, and if purchased as JOINT TENANTS, as TENANTS IN
COMMON, or as COMMUNITY PROPERTY:
____________________________ ______________________________
Print
Name(s) Social Security
Number(s)
___________________________ ______________________________
Signature(s) of
Purchaser(s) Signature
____________________________ ______________________________
Date
Address
If the
Purchaser is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY or
TRUST:
BrightlineVentures I,
LLC ______________________________
By: Brightline GP,
LLC Federal
Taxpayer Identification Number
Managing
Member of the Purchaser
By:_________________________ ______________________________
Name: State of
Organization
Title:
____________________________ ______________________________
Date
Address
By: __________________________
Authorized Officer
ACCREDITED
INVESTOR CERTIFICATION
For
Individual Investors Only
(all
Individual Investors must INITIAL where
appropriate):
|
Initial
_______
|
I
certify that I have a net worth
(including home, furnishings and automobiles) in excess of $1 million
either individually or through aggregating my individual holdings and
those in which I have a joint, community property or other similar shared
ownership interest with my spouse.
|
|
Initial
_______
|
I
certify that I have had an
annual gross income for the past two calendar years of at least $200,000
(or $300,000 jointly with my spouse) and expect my income (or joint
income, as appropriate) to reach the same level in the current
year.
|
|
Initial
_______
|
I
certify that I am a director or
executive officer of Z Trim Holdings, Inc. (the “Company”).
|
|
|
For
Non-Individual Investors
|
|
|
(all
Non-Individual Investors must INITIAL where
appropriate):
|
|
Initial
_______
|
The
undersigned certifies that it is a partnership, corporation, limited
liability company or business trust that is 100% owned by persons who meet
one of the criteria for Individual Investors,
above.
|
|
Initial
_______
|
The
undersigned certifies that it is a partnership, corporation, limited
liability company or business trust that has total assets in excess $5
million and was not formed for the purpose of investing in the
Company.
|
|
Initial
_______
|
The
undersigned certifies that it is an employee benefit plan whose investment
decision is made by a plan fiduciary (as defined in ERISA §3(21)) that is
a bank, savings and loan association, insurance company or registered
investment adviser.
|
|
Initial
_______
|
The
undersigned certifies that it is an employee benefit plan whose total
assets exceed $5,000,000 as of the date of the Subscription
Agreement.
|
|
Initial
_______
|
The
undersigned certifies that it is a self-directed employee benefit plan
whose investment decisions are made solely by persons who meet either of
the criteria for Individual Investors,
above.
|
|
Initial
_______
|
The
undersigned certifies that it is a U.S. bank, U.S. savings and loan
association or other similar U.S. institution acting in its individual or
fiduciary capacity.
|
|
Initial
_______
|
The
undersigned certifies that it is a broker-dealer registered pursuant to
§15 of the Securities Exchange Act of
1934.
|
|
Initial
_______
|
The
undersigned certifies that it is an organization described in §501(c)(3)
of the Internal Revenue Code with total assets exceeding $5,000,000 and
not formed for the specific purpose of investing in the
Company.
|
|
Initial
_______
|
The
undersigned certifies that it is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of investing in the
Company, and whose purchase is directed by a person with such knowledge
and experience in financial and business matters that he is capable of
evaluating the merits and risks of the prospective
investment.
|
|
Initial
_______
|
The
undersigned certifies that it is a plan established and maintained by a
state or its political subdivisions, or any agency or instrumentality
thereof, for the benefit of its employees, and which has total assets in
excess of $5,000,000.
|
|
Initial
_______
|
The
undersigned certifies that it is an insurance company as defined in §2(13)
of the Securities Act of 1933, as amended, or a registered investment
company.
|
