Compensation Committee Charter

Z -Trim Holdings, Inc.

Compensation Committee of the Board of Directors

Membership. Except as provided below, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of Z-Trim Holdings, Inc., an Illinois corporation (the “Company”), shall consist entirely of directors who the Board determines (i) are “independent” in accordance with the American Stock Exchange listing standards, (ii) are “non employee directors” for purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and (iii) satisfy the requirements of an “outside director” for purposes of Section 162(m) of the Internal Revenue Code. Members shall serve at the pleasure of the Board and for such term or terms as the Board may determine.

If the Committee is comprised of at least three members, one director who is not independent and is not a current officer or employee, or an immediate family member of such person may be appointed to the Compensation Committee, if the Board, under exceptional and limited circumstances, determines that such individual’s membership on the Committee is required by the best interests of the Company and its shareholders, and the Board discloses, in the next annual meeting proxy statement (or its Annual Report on Form 10-K) subsequent to such determination, the nature of the relationship and the reasons for that determination. Any such member appointed to the Committee pursuant to this exception may not serve for in excess of two years.

Committee Purpose and Responsibilities. The purpose of the Committee shall be to discharge the Board’s responsibilities relating to executive compensation and to produce an annual compensation committee report on executive compensation to be included in the Company’s proxy statement in accordance with the applicable rules and regulations of the Securities and Exchange Commission. In furtherance of this purpose, the Committee shall have the following authority and responsibilities:

1. Review and approve corporate goals and objectives relevant to the compensation of the Company’s Chief Executive Officer (“CEO”), evaluate the CEO’s performance in light to those goals and objectives, and either as a committee or together with the other independent directors (as directed by the Board), determine, or recommend to the Board for determination, the CEO’s compensation level based on this evaluation. In determining or recommending the long-term incentive component of CEO compensation, the Committee shall consider, among other factors, the Company’s performance and relative shareholder return, the value of similar incentive awards to CEO’s at comparable companies, the awards given to the CEO in past years, and such other factors as the Committee shall so determine.
2. Either as a committee or together with the other independent directors (as directed by the Board), determine, or recommend to the Board for determination, the compensation of allother officers of the Company.
3. Make recommendations to the Board with respect to the Company’s incentive compensation plans and equity-based plans, oversee the activities of the individuals and committees responsible for administering these plans, and discharge any responsibilities imposed on the Committee by any of these plans.
4. In consultation with management, oversee regulatory compliance with respect to compensation matters, including overseeing the Company’s policies on structuring compensation programs to preserve tax deductibility, and, as and when required, establishing performance goals and certifying that performance goals have been attained for purposes of Section 162 (m) of the Internal Revenue Code.
5. To review and approve any severance or similar termination payments proposed to be made to any current or former officer of the Company.
6. Prepare an annual Report of the Compensation Committee on Executive Compensation for inclusion in the Company’s annual proxy statement in accordance with applicable SEC rules and regulations.
7. Periodically review and assess the adequacy of this charter and recommend any proposed changes to the Board for approval, including changes concerning the structure and operations of the Committee.
8. Perform any other duties or responsibilities expressly delegated to the Committee by the Board from time to time relating to the Company’s compensation programs.

Committee Structure and Operations. The Board shall designate one member of the Committee as its chairperson. A majority of the members of the Committee shall constitute a quorum. The Committee shall meet at least twice a year, and perhaps more frequently, in conjunction with regularly scheduled meetings of the Board at regularly scheduled times and places determined by the Committee chairperson, with further meetings to occur, or actions to be taken by unanimous written consent, when deemed necessary or desirable by the Committee or its chairperson. Members of the Committee may participate in a meeting of the Committee by means of conference call or similar communications equipment by means of which all persons participating in the meeting can hear each other.

The CEO may not be present during any voting or deliberations of the Committee regarding the CEO’s compensation.

Resources and Authority of the Committee. The Committee shall have the resources and authority appropriate to discharge its duties and responsibilities, including the authority to select, retain, terminate, and approve the fees and other retention terms of special counsel or other experts or consultants, as it deems appropriate, without seeking approval of the Board or management. With respect to compensation consultants retained to assist in the evaluation of director, CEO, or other executive officer compensation, this authority shall be vested solely in the Committee.