Contract
Exhibit
4.2
THIS NOTE
AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF THIS NOTE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS (THE “STATE ACTS”), AND MAY NOT BE OFFERED,
SOLD, OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
8%
CONVERTIBLE SENIOR SECURED NOTE
DUE
[24 Months from Issuance]
Date:
_________,
2008 $_________
For value
received, Z TRIM HOLDINGS, INC., an Illinois corporation (the “Company”), hereby
promises to pay to the order of [INVESTOR], a __________
(together with its successors and permitted assigns, the “Holder”), in
accordance with the terms hereinafter provided, the principal amount of
_______________ ($___________) (the “Principal
Amount”). The Company is issuing this convertible senior
secured note (this “Note” and,
collectively with all other notes issued in connection with the Offering
Memorandum, the “Notes”) to the Holder pursuant
to the Subscription Agreement (the “Subscription
Agreement”) executed
and delivered in connection with the Offering Memorandum (the “Private
Offering”). As used herein, the term “Issuance Date” means
_________, 2008.
The
Company hereby promises to pay to the order of the Holder the Principal Amount
in United States Dollars in immediately available funds to the Holder at the
address of the Holder as set forth in the Security Agreement (as defined below),
or at such other place as the Holder may designate from time to time in writing
to the Company, on [24 months
from issuance] (the “Maturity Date”) or
such earlier date as the Holder elects, with interest to the Holder on the
aggregate unconverted and then outstanding Principal Amount in accordance with
the provisions hereof. All interest payments under or pursuant to
this Note shall be made in Common Shares (as defined below) pursuant to Section
1.1 hereof.
This Note
is secured by a Security Agreement dated the date hereof (the “Security
Agreement”) among
the Company and Holder in favor of the Holder covering certain collateral (the
“Collateral”), all
as more particularly described and provided therein, and is entitled to the
benefits thereof. The Security Agreement, the Uniform Commercial Code
financing statements on form UCC-1 filed in connection with the Security
Agreement and any and all other documents executed and delivered by the Company
to the Holder under which the Holder is granted Liens on assets of the Company
are collectively referred to as the “Security
Documents.”
1
(a) Except
as set forth on Schedule 1 attached
hereto, no indebtedness of the Company or any subsidiary of the Company is
senior to this Note in right of payment, whether with respect to interest,
damages or upon liquidation or dissolution or otherwise. Until this
Note is fully paid and discharged in full, the Company shall not, and shall not
permit any subsidiary of the Company to, directly or indirectly, incur any
indebtedness for borrowed money (excluding accounts payable incurred in the
ordinary course of business) unless such indebtedness is expressly subordinated
to this Note pursuant to a written subordination agreement acceptable in form,
scope and substance to the Holder in its sole and absolute
discretion. Notwithstanding the foregoing, the Company may enter into
an additional $__________ offering of 8% convertible senior secured notes (the
“Additional
Offering”) on substantially similar terms and conditions as this Note,
except that such notes shall be convertible for Common Shares at the lower of
$.50 per share or the volume weighted average price of the Common Shares on the
primary trading market on which the Common Shares are listed or quoted, for the
ten (10) trading day period ending on October 1, 2008. The Notes and
any note issued by the Company pursuant to the Additional Offering shall rank
pari passu with the Company’s obligations under this Note and may be secured
equally and ratably by Xxxxx, on or with respect to any of the Company’s
property or assets now owned or hereafter acquired or any interest therein or
any income or profits therefrom and shall have the benefit, to the full extent
that and with such priority as the obligations under this Note.
(b) Except
for Permitted Liens (as defined in Section 6.14 below) and Liens granted in
connection with the Additional Offering, until this Note is fully paid and
discharged in full, the Company shall not, and shall not permit any subsidiary
of the Company to, directly or indirectly, incur any Lien (as defined in Section
6.14 below) on or with respect to any of the Collateral now owned or hereafter
acquired, or any interest therein or any income or profits therefrom, without
the prior written consent of the Holder.
(c) Until
this Note is fully paid and discharged in full, the Company shall not, and shall
not permit any subsidiary of the Company to, directly or indirectly, without the
prior written consent of the Holder, redeem, purchase or otherwise acquire any
of the Company’s capital stock or set aside any monies for such a redemption,
purchase or other acquisition.
(d) The
Company shall perform any and all acts and execute any and all documents
(including, without limitation, the execution, amendment or supplementation of
any financing statement and continuation statement) for filing under the
provisions of the Uniform Commercial Code (the “UCC”), and the rules
and regulations thereunder, or any other statute, rule or regulation of any
applicable jurisdiction which are necessary at the request of the Holder or its
counsel in order to maintain in favor of the Holder of the Note, a valid and
perfected Lien on and security interest in the Collateral.
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ARTICLE
II
(a) Any
default in the payment of (i) the Principal Amount or (ii) Interest Amount on,
or liquidated damages in respect of, any Note, in each case free of any claim of
subordination, as and when the same shall become due and payable (whether on a
Conversion Date or the Maturity Date or by acceleration or otherwise) which
default, solely in the case of a default under clause (ii) above, is not cured
within five Trading Days;
(b) the
Company’s notice to the Holder, including by way of public announcement, at any
time, of its inability to comply or its intention not to comply with proper
requests for conversion of this Note into Common Shares; or
(c) the
Company shall fail for any reason to deliver certificates to a Holder prior to
the fifth Trading Day after a Conversion Date pursuant to and in accordance with
Section 3.3 or the Company shall provide notice to the Holder, including by way
of public announcement, at any time, of its intention not to comply with the
requests for conversion of any Notes in accordance with the terms hereof;
or
(d) default
shall be made in the performance or observance of (i) any covenant,
condition or agreement contained in this Note or any of the other Transaction
Documents (other than a breach by the Company of its obligations to deliver
Common Shares to the Holder upon conversion which breach is addressed in clause
(c) above) which failure is not cured within the earlier to occur of (A) five
(5) Trading Days after the Holder delivers written notice to the Company of the
occurrence thereof or (B) ten (10) Trading Days after the Company shall
become or should have become aware of such failure;
(e) a
default or event of default (subject to any grace or cure period provided for in
the applicable agreement, document or instrument) shall occur under (i) any of
the Transaction Documents other than the Notes, or (ii) any other material
agreement, lease, document or instrument to which the Company or any subsidiary
is bound, which default, solely in the case of a default under (ii) above, is
not cured, within 10 Trading Days;
(f) any
representation or warranty made by the Company herein or in the Security
Documents, the Registration Rights Agreement, or any other Transaction Document
or other report, financial statement or certificate made or delivered to the
Holder or other holder of Notes shall prove to have been false or incorrect or
breached in a material respect on the date as of which made; or
(g) the
Company or any subsidiary shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or liquidator
of itself or of all or a substantial part of its property or assets,
(ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary case under the United States Bankruptcy Code (as
now or hereafter in effect) or under the comparable laws of any jurisdiction
(foreign or domestic), (iv) file a petition seeking to take advantage of
any bankruptcy, insolvency, moratorium, reorganization or other similar law
affecting the enforcement of creditors’ rights generally, (v) acquiesce in
writing to any petition filed against it in an involuntary case under United
States Bankruptcy Code (as now or hereafter in effect) or under the comparable
laws of any jurisdiction (foreign or domestic), (vi) issue a notice of
bankruptcy or winding down of its operations or issue a press release regarding
same, (vii) fail to pay, or shall state that it is unable to pay, or shall be
unable to pay, its debts generally as they become due, (viii) call a meeting of
its creditors with a view to arranging a composition, adjustment or
restructuring of its debts, (ix) by any act or failure to act expressly indicate
its consent to, approval of or acquiescence in any of the foregoing, or (x) take
any corporate or other action for the purpose of effecting any of the
foregoing;
3
(h) a
proceeding or case shall be commenced in respect of the Company or any
subsidiary, without its application or consent, in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, moratorium,
dissolution, winding up, or composition or readjustment of its debts,
(ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of it or of all or any substantial part of its assets in connection with
its liquidation or dissolution or (iii) similar relief in respect of it
under any law providing for the relief of debtors, and such proceeding or case
described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed
and in effect, for a period of thirty (30) days or any order for relief shall be
entered in an involuntary case under United States Bankruptcy Code (as now or
hereafter in effect) or under the comparable laws of any jurisdiction (foreign
or domestic) against the Company or any subsidiary or action under the laws of
any jurisdiction (foreign or domestic) analogous to any of the foregoing shall
be taken with respect to the Company or any subsidiary and shall continue
undismissed, or unstayed and in effect for a period of thirty (30)
days;
(i) the
Company or any subsidiary shall default in any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there
may be secured or evidenced any indebtedness for borrowed money or money due
under any long term leasing or factoring arrangement of the Company in an amount
exceeding $50,000, whether such indebtedness now exists or shall hereafter be
created and such default shall result in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become
due and payable;
(j) the
Common Shares shall not be eligible for quotation on or quoted for trading on a
trading market and shall not again be eligible for and quoted or listed for
trading thereon within five Trading Days;
(k) the
Company shall redeem or repurchase more than a de minimis number of its
outstanding Common Shares or other equity securities of the Company (other than
redemptions of Conversion Shares and repurchases of Common Shares or other
equity securities of departing officers and directors of the Company; provided
that such repurchases shall not exceed $50,000, in the aggregate, for all
officers and directors during the term of this Note;
(l) the
effectiveness of the applicable Registration Statement required to be maintained
effective pursuant to the terms of the Registration Rights Agreement lapses for
any reason (including, without limitation, the issuance of a stop order) or is
unavailable to the Holder for sale of such Holder’s Registrable Securities (as
defined in the Registration Rights Agreement) in accordance with the terms of
the Registration Rights Agreement, and such lapse or unavailability continues
for a period of five (5) consecutive Trading Days or for more than an aggregate
of ten (10) Trading Days in any 365-day period (other than days during an
Allowed Delay (as defined in the Registration Rights Agreement);
(m) any
change in the composition, form of business association or ownership of the
Company, without Xxxxxx’s prior consent;
(n) if
the Company ceases conducting its operations as currently in effect as of the
date hereof;
(o) the
Company shall fail for any reason to pay in full the amount of cash due pursuant
to a Buy-In within five Trading Days after notice therefore is delivered
hereunder or shall fail to pay all amounts owed on account of an Event of
Default within five days of the due date.
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(a) demand
that the principal amount of this Note then outstanding shall be converted into
shares of Common Stock at the Conversion Price (as defined in Section 3.2(a)
below) then in effect; or declare immediately due and payable the full Principal
Amount of this Note, together with the Interest Amount and other amounts owing
in respect thereof, in cash, which aggregate amount payable upon an Event of
Default shall be equal to the Mandatory Repayment amount, defined below; provided, however, that upon
the occurrence of an Event of Default described in paragraphs (g) and (h) of
Section 2.1, the outstanding principal balance and accrued interest hereunder
shall be automatically due and payable. Commencing five (5) days
after the occurrence of any Event of Default that results in the eventual
acceleration of this Note, the Interest Rate shall accrue at a rate of 18% per
annum, or such lower maximum amount of interest permitted to be charged under
applicable law. All Notes for which the full Mandatory Repayment
amount hereunder shall have been paid in accordance herewith shall promptly be
surrendered to or as directed by the Company. The Holder need not
provide and the Company hereby waives any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without expiration of any
grace period enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law. Such
declaration may be rescinded and annulled by Xxxxxx at any time prior to payment
hereunder and the Holder shall have all rights as a Note holder until such time,
if any, as the full payment under this Section shall have been received by
it. No such rescission or annulment shall affect any subsequent Event
of Default or impair any right consequent thereon.
(b) exercise
or otherwise enforce any one or more of the Holder’s rights, powers, privileges,
remedies and interests under this Note, the Security Agreement, or applicable
law.
In
connection with the Holder’s exercise of any of its remedies hereunder, the
Company shall use its reasonable best efforts to cooperate with the Holder to
the end that the Holder’s rights hereunder will be effectuated.
ARTICLE
III
5
(a) The
term “Conversion
Price” shall
mean $0.26, subject to adjustment under Section 3.4
hereof. References herein to the Conversion Price mean the Conversion
Price as from time to time adjusted pursuant to the provisions of Section 3.4
and in effect on the applicable date.
(b) The
term “Conversion
Shares” shall
mean such Common Shares issuable upon conversion of this Note.
(a) The
Conversion Price shall be subject to adjustment from time to time as
follows:
(i) Adjustments for Stock Splits
and Combinations. If the Company shall at any time or from time to time
after the Issuance Date, effect a stock split of the outstanding Common Shares,
the applicable Conversion Price in effect immediately prior to the stock split
shall be proportionately decreased. If the Company shall at any time
or from time to time after the Issuance Date, combine the outstanding shares of
Common Stock, the applicable Conversion Price in effect immediately prior to the
combination shall be proportionately increased. Any adjustments under
this Section 3.4(a)(i) shall be effective at the close of business on the date
the stock split or combination occurs.
(ii) Adjustments for Certain
Dividends and Distributions. If the Company shall at any time or from
time to time after the Issuance Date make or issue or set a record date for the
determination of holders of Common Shares entitled to receive a dividend or
other distribution payable in Common Shares, then, and in each event, the
applicable Conversion Price in effect immediately prior to such event shall be
decreased as of the time of such issuance or, in the event such record date
shall have been fixed, as of the close of business on such record date, by
multiplying the applicable Conversion Price then in effect by a
fraction:
(A) the
numerator of which shall be the total number of Common Shares issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date; and
(B) the
denominator of which shall be the total number of Common Shares issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of Common Shares issuable in
payment of such dividend or distribution.
(iii) Adjustments for
Reclassification, Exchange or Substitution. If the Common Shares issuable
upon conversion of this Note at any time or from time to time after the Issuance
Date shall be changed to the same or different number of shares of any class or
classes of stock, whether by reclassification, exchange, substitution or
otherwise (other than by way of a stock split or combination of shares or stock
dividends provided for in clauses (i) and (ii) of Section 3.4(a), or a
reorganization, merger, consolidation, or sale of assets provided for in Section
3.4(a)(iv)), then, and in each event, an appropriate revision to the Conversion
Price shall be made and provisions shall be made (by adjustments of the
Conversion Price or otherwise) so that the Holder shall have the right
thereafter to convert this Note into the kind and amount of shares of stock and
other securities receivable upon reclassification, exchange, substitution or
other change, by holders of the number of Common Shares into which such Note
might have been converted immediately prior to such reclassification, exchange,
substitution or other change, all subject to further adjustment as provided
herein.
6
(iv) Adjustments for
Reorganization, Merger, Consolidation or Sales of Assets. If at any time
or from time to time after the Issuance Date there shall be a capital
reorganization of the Company (other than by way of a stock split or combination
of shares or stock dividends or distributions provided for in clauses (i) and
(ii) of Section 3.4(a), or a reclassification, exchange or substitution provided
for in Section 3.4(a)(iii)), or a merger or consolidation of the Company with or
into another corporation where the holders of outstanding voting securities of
the Company prior to such merger or consolidation do not own over fifty percent
(50%) of the outstanding voting securities of the merged or consolidated entity,
immediately after such merger or consolidation, or any Asset Sale (an “Organic Change”),
then as a part of such Organic Change, (A) if the surviving entity in any
such Organic Change is a public company that is registered pursuant to the
Securities Exchange Act of 1934, as amended, and its common stock is listed or
quoted on a national exchange or the OTC Bulletin Board, an appropriate revision
to the Conversion Price shall be made and provision shall be made (by
adjustments of the Conversion Price) so that the Holder shall have the right
thereafter to convert such Note into the kind and amount of shares of stock and
other securities or property of the Company or any successor corporation as it
would have received as a result of such Organic Change if it had converted this
Note into Common Shares immediately prior to such Organic Change, and
(B) if the surviving entity in any such Organic Change is not a public
company that is registered pursuant to the Securities Exchange Act of 1934, as
amended, or its common stock is not listed or quoted on a national securities
exchange or the OTC Bulletin Board, the Holder shall have the right to demand
repayment of the then outstanding aggregate Principal Amount at 115% of the
Principal Amount thereof (“Mandatory
Repayment”). The Company shall give the Holder at least twenty
(20) day’s prior written notice of any Organic Change, during which time the
Holder shall have the right to convert any portion of the Note into Common
Shares. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 3.4(a)(iv) with respect to the
rights of the Holder after the Organic Change to the end that the provisions of
this Section 3.4(a)(iv) (including any adjustment in the applicable Conversion
Price then in effect and the number of shares of stock or other securities
deliverable upon conversion of this Note) shall be applied after that event in
as nearly an equivalent manner as may be practicable.
(v) Certain
Issuances. In the event that the Company sells or issues
Common Shares after the Issuance Date at a price less than the Conversion Price
in effect immediately prior to such sale or issuance, then the Conversion Price
shall be reduced immediately thereafter so that it shall equal the price at
which such Conversion Shares are sold or issued, as applicable.
(vi) Options, Rights, Warrants
and Convertible and Exchangeable Securities. In case the
Company shall at any time after the Issuance Date issue options, rights or
warrants to subscribe for Common Shares, or issue any securities convertible
into or exchangeable for Common Shares, for a consideration per share less than
the Conversion Price in effect immediately prior to the issuance of such
options, rights, warrants or such convertible or exchangeable securities, or
without consideration, the Conversion 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 Common Share.
7
8
9
ARTICLE
IV
(a) Consistent
with Section 1.2, enter into, create, incur, assume or suffer to exist any
indebtedness or Liens of any kind, on or with respect to any of its property or
assets or Collateral now owned or hereafter acquired or any interest therein or
any income or profits therefrom that is senior to, subordinated to or pari passu
with, in any respect, the Company’s obligations under the Notes other than
obligations under the Additional Offering;
(b) Consistent
with Section 1.2, repay, repurchase or offer to repay, repurchase, make any
payment in respect of or otherwise acquire any of its Common Shares or other
equity securities;
(c) authorize
or approve any reverse stock split of the Company Shares;
(d) amend
its certificate of incorporation, bylaws or charter documents so as to adversely
affect any rights of the Holder; provided that reincorporating the Company in
Delaware and eliminating cumulative voting rights for directors shall not be
deemed a violation of this covenant;
(e) create
or acquire any subsidiary after the date hereof unless (i) such subsidiary is a
wholly-owned subsidiary of the Company and (ii) such subsidiary becomes party to
the Security Documents (either by executing a counterpart thereof or an
assumption or joinder agreement in respect thereof) and, to the extent required
by the Holder, satisfied each condition of this Agreement as if such subsidiary
were a subsidiary on the Issuance Date;
(f) make
any capital expenditure in an amount greater than $1,500,000;
(g) engage
in any transactions with any officer, director, employee or any affiliate of the
Company, including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $10,000
other than (i) for payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and (iii) for
other employee benefits, including stock option agreements under any stock
option plan of the Company;
(h) consummate
any Organic Change without the prior consent of Holder; or
(i) enter
into any agreement with respect to any of the foregoing.
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ARTICLE
V
ARTICLE
VI
(a) Any
notice, demand, request, waiver or other communication required or permitted to
be given hereunder, including, without limitation, any Notice of Conversion,
shall be in writing and shall be delivered personally, by facsimile, or sent by
a nationally recognized overnight courier service, addressed to the Company at
the address set forth above, facsimile number (000) 000-0000, Attn: Xxxxxx X.
Xxxxx, or such other address or facsimile number as the Company may specify for
such purposes by notice to the Holders delivered in accordance with this
Section. Any and all notices or other communications or deliveries to
be provided by the Company hereunder shall be in writing and delivered
personally, by facsimile, or sent by a nationally recognized overnight courier
service addressed to each Holder at the facsimile number or address of such
Xxxxxx appearing on the books and records of the Company, or if no such
facsimile number or address appears, at the principal place of business of the
Holder. Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 5:30 p.m. (New York City
time), (ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section later than 5:30 p.m. (New York City time) on any date and earlier
than 11:59 p.m. (New York City time) on such date (iii) the second Trading Day
following the date of mailing, if sent by nationally recognized overnight
courier services, or (iv) upon actual receipt by the party to whom such notice
is required to be given.
(b) The
Company will give written notice to the Holder at least twenty (20) days prior
to the date on which the Company takes a record (i) with respect to any
dividend or distribution upon the Common Shares, (ii) with respect to any
pro rata subscription offer to holders of Common Shares or (z) for
determining rights to vote with respect to any Organic Change, dissolution,
liquidation or winding-up but in no event shall such notice be provided to the
Holder prior to such information being made known to the public. The
Company also will give written notice to the Holder at least twenty (20) days
prior to the date on which any Organic Change, dissolution, liquidation or
winding-up will take place but in no event shall such notice be provided to the
Holder prior to such information being made known to the public. The
Holder is entitled to convert Notes during the 20-day period commencing the date
of such notice to the effective date of the event triggering such
notice.
Section
6.2 Governing Law; Consent to
Jurisdiction. The parties acknowledge and agree that any claim,
controversy, dispute or action relating in any way to this agreement or the
subject matter of this agreement shall be governed solely by the laws of the
State of Delaware, without regard to any conflict of laws
doctrines. The parties irrevocably consent to being served with legal
process issued from the state and federal courts located in Delaware and
irrevocably consent to the exclusive personal jurisdiction of the federal and
state courts situated in the State of Delaware. The parties
irrevocably waive any objections to the personal jurisdiction of these
courts. Said courts shall have sole and exclusive jurisdiction over
any and all claims, controversies, disputes and actions which in any way relate
to this Note or the subject matter of this agreement. The parties
also irrevocably waive any objections that these courts constitute an
oppressive, unfair, or inconvenient forum and agree not to seek to change venue
on these grounds or any other grounds. Nothing in this Section 6.2
shall affect or limit any right to serve process in any other manner permitted
by law.
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“THIS
NOTE AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF THIS NOTE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS (THE “STATE ACTS”), AND MAY NOT BE OFFERED,
SOLD, OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHICATED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.”
12
(a) Except
as otherwise specifically provided herein, the Company and all others that may
become liable for all or any part of the obligations evidenced by this Note,
hereby waive presentment, demand, notice of nonpayment, protest and all other
demands’ and notices in connection with the delivery, acceptance, performance
and enforcement of this Note, and do hereby consent to any number of renewals of
extensions of the time or payment hereof and agree that any such renewals or
extensions may be made without notice to any such persons and without affecting
their liability herein and do further consent to the release of any person
liable hereon, all without affecting the liability of the other persons, firms
or Company liable for the payment of this Note, AND DO HEREBY WAIVE TRIAL BY
JURY.
(b) THE
COMPANY ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A
COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY
WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY
WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.
“Asset Sale” means (i)
in one or more transactions, the sale, lease, conveyance or other disposition of
any assets or rights other than in the ordinary course of business, and (ii) the
sale of debt or equity interests in any of the Company’s
subsidiaries.
“Lien” means any mortgage,
charge, pledge, lien (statutory or other), security interest, hypothecation,
assignment for security, claim or preference or priority or other encumbrance
upon or with respect to any property of any kind. A Person shall be
deemed to own subject to a Lien any property which such Person has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement.
“Offering Memorandum”
means that certain Confidential Private Placement Memorandum of the Company,
dated __________, 2008.
“Permitted Liens” shall
have the meaning given such term in the Security Agreement. “Person” shall have the meaning
given such term in the Security Agreement.
“Registration Rights
Agreement” shall mean that Registration Rights Agreement of even date
herewith, between the Company and the Holder.
“Trading Day” means
(a) a day on which the Common Shares are traded on the OTC Bulletin Board,
or (b) if the Common Shares are not traded on the OTC Bulletin Board, a day
on which the Common Shares are quoted in the over-the-counter market as reported
by the Pink Sheets LLC (or any similar organization or agency succeeding its
functions of reporting prices); provided, however, that in
the event that the Common Shares are not listed or quoted as set forth in (a) or
(b) hereof, then Trading Day shall mean any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of Delaware are authorized or required by law or other government action
to close.
“Transaction
Documents” means the offering documents entered into in connection with
the Private Offering by the Company of Units to be placed by ________ as
placement agent, which offering documents include, without limitation, the
Subscription Agreement, the Security Documents, the Registration Rights
Agreement, and the Notes and warrants issued in connection with the Private
Offering.
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As used
herein, the term “applicable law” shall mean all applicable provisions of
constitutions, statutes, laws, rules and regulations in effect as of the date
hereof, provided, however, that in the event there is a change in such
applicable law which results in a higher permissible rate of interest, then this
Note shall be governed by such new law as of its effective date. This
provision shall control every other provision of all agreements between the
Company and the Holder.
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EXHIBIT
A
WIRE
INSTRUCTIONS
Payee: ________________________________________________________
Bank:
_________________________________________________________
Address:_______________________________________________________
Bank
No.:______________________________________________________
Account
No.:____________________________________________________
Account
Name:__________________________________________________
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EXHIBIT
B
FORM
OF NOTICE OF CONVERSION INTO SHARES OF COMMON STOCK
(To be
Executed by the Registered Holder in order to Convert the Note into Common
Shares)
The
undersigned hereby irrevocably elects to convert $_____ of the principal amount
of the above Note into Common Shares of Z TRIM HOLDINGS, INC. (the “Company”) according
to the conditions hereof, as of the date written below.
Date of
Conversion:_______________________________________________________________
Applicable
Conversion
Price:_________________________________________________________
Signature:_______________________________________________________________________
[Print
Name]:____________________________________________________________________
Address: _______________________________________________________________________
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