November 5, 2007
EXHIBIT
10.3
November
5, 2007
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Xx.
Xxxxx Xx Xxxxxx
Xx
Xxxxxx L.L.C.
X.X.
Xxx 00
Xxxxx,
XXX
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000
Xxxxxx Xxxxxx
Xxxxx
Xxxx, XX 00000
Attn: Xx.
Xxxxxx X. Xxxxxxxxx
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Xx.
Xxxxxx X. Xxxxxxxxx
000
Xxxxxx Xxxxxx
Xxxxx
Xxxx, XX 00000
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Subject:
Side Letter Agreement
Gentlemen:
This
Side
Letter Agreement (the “Letter Agreement”) is made by and between Xx Xxxxxx LLC
(the “Investor”), ZAP (the “Company”) and Xxxxxx X. Xxxxxxxxx
(“Xxxxxxxxx”). Reference is made to the purchase of shares of ZAP
(the “Shares”), a public company organized under the laws of California whose
shares trade over the counter on OTCBB, by the Investor in accordance with
the
Securities Purchase Agreement and associated documents between the parties
(the
“Investment Documents”). This Agreement, when accepted by the
parties, will become part of the Investment Documents and will evidence our
further agreement with respect to the matters set forth below. All
terms used and not defined herein, shall have the same meaning as in the
Investment Documents. If there is any inconsistency between the terms of this
Agreement and the other Investment Documents, the terms of this Agreement will
govern.
The
parties hereby clarify the Investment Documents and confirm as
follows:
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1)
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So
long as this Letter Agreement is in effect, the Investor and Xxxxxxxxx
hereby agree that Xxxxxxxxx shall vote his Shares in a manner intended
to
cause the following, and the Company shall take or cause to be taken
all
action permissible in accordance with applicable law and within its
power
to effect the following:
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a)
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that
the number of members of the Board of Directors of the Company (the
“Board”) will be between five and seven
persons;
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b)
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the
Investor will select one member of the Board (the “Xx Xxxxxx Director”)
which shall be appointed without undue
delay;
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c)
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the
Xx Xxxxxx Director shall have similar indemnification, director and
officer insurance coverage and similar compensation for service as
a
director as other directors of the Company and reimbursement of expenses
in connection with his service on the Board of Directors of the
Company;
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d)
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in
the case of a proposed sale or transfer of shares or equity interests
in
the Company by Xxxxxxxxx (other than transfers among Xxxxxxxxx’x family
members, for estate planning purposes or sales or transfers the proceeds
of which are to be used for paying the exercise price of options
or
warrants to purchase voting capital stock of the Company) where the
sum of
i) the affected shares or equity interests of such sale or transfer
and
ii) the aggregate amount of shares or equity interests in the Company
sold
or transferred by Xxxxxxxxx over the preceding 12 month period is
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equal
to or greater than 1% of the outstanding equity interests in the
Company
on a fully diluted basis the Investor shall have, in its sole discretion,
a right of first refusal to purchase such shares or equity interests
on
the same terms as in the proposed sale or transfer. Such right
shall be exercised within ten (10) Business Days (where “Business Day”
refers to a day during which banks are open for business in Xxx
Xxxxxxx,
Xxxxxxxxxx xxx Xxxxx, Xxxxxx Xxxx Xxxxxxxx) after receipt by Investor
of
Xxxxxxxxx’x notice to Investor of a proposed sale or transfer subject to
the right of first refusal;
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e)
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the
Investor shall have the right, exercisable in its sole discretion,
to tag
along on a pro rata basis and on similar terms with any sale or transfer
of shares by Xxxxxxxxx (other than sales or transfers the proceeds
of
which are to be used for paying the exercise price of options or
warrants
to purchase voting capital stock of the Company) where the sum of
i) the
affected shares or equity interests of such sale or transfer and
ii) the
aggregate amount of shares or equity interests in the Company sold
or
transferred by Xxxxxxxxx over the preceding 12 month period is equal
to or
greater than 1% of the outstanding equity interests in the Company
on a
fully diluted basis; and
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f)
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any
person or entity purchasing any of the shares or other equity interests
in
the Company owned by Xxxxxxxxx as of the date of this Agreement (other
than sales or transfers the proceeds of which are to be used for
paying
the exercise price of options or warrants to purchase capital stock
of the
Company) in the aggregate equal to or greater than 1% of the outstanding
equity interests in the Company on a fully diluted basis, whether
pursuant
to a single transaction or multiple transactions, shall be required
to
become a party to a separate agreement and to agree expressly to
comply
with the obligations of Xxxxxxxxx which as contained in this Section
1 of
this Letter Agreement.
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2)
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So
long as this Letter Agreement is in effect, Xxxxxxxxx shall vote
his
Shares in a manner intended to cause none of the following actions
to be
taken, and the Company shall take or cause to be taken all action
permissible in accordance with applicable law and within its power
to
effect that none of the following actions are taken, without the
prior
written approval of the Investor (such approval not to be unreasonably
withheld): (i) liquidate, dissolve or wind up the affairs of the
Company,
or effect any event which would constitute a liquidation, except
as
required by law; (ii) create or authorize the creation of any new
class of
equity security having rights, preferences or privileges senior to
or on
parity with the Shares; (iii) issue convertible notes or grant warrants
or
options (other than to the Company’s employees, consultants or service
providers where the aggregate amount of shares of any class contemplated
by all such convertible notes, warrants and options issued or granted
to
the Company’s employees, consultants or service providers during any 12
month period does not exceed 1,500,000 shares within any 12 month
period);
(iv) purchase or redeem, or pay any dividend or distribution
on, any capital shares or other equity interest in the Company, except
as
required by any existing contractual rights; (v) create or authorize
the
creation of any indebtedness for money borrowed, or grant any guarantees,
liens or other security interests in respect thereof in an amount
in
aggregate in excess of US$1,500,000, except in the ordinary course
of
business; or (vi) sell all or substantially all of the assets of
the
Company or enter into any merger, consolidation, business combination,
or
recapitalization, whether in any single transaction or series of
related
transactions occurring within a 12 month period; provided,
however, that such prior written approval of the Investor shall
not
be required to take an action described in clause (ii) or clause
(iii) of
this Paragraph 2 to the extent the Investor has been given the right
of
first refusal, exercisable within ten (10) Business Days of notice,
to
subscribe to such new class of equity or such convertible note, warrant
or
option, as the case may, on terms similar
thereto.
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3)
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So
long as this Letter Agreement is in effect, the Company shall notify
the
Investor at least thirty business days prior to the filing of a
registration statement with respect to any offering of
the
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Company’s
shares, for its own account or for the account of any shareholder,
and
shall offer the Investor the opportunity to register such number
of Shares
as the Investor may request in writing within five days after the
above-described notice. The Company shall include in such registration
statement all such Shares which are requested to be included therein,
on
the same terms and conditions as the shares otherwise being sold
in such
registration; except that in any registration statement of a firm
commitment underwriting of shares offered for the account of the
Company,
Investor shall be subject to customary underwriters’ cutback. If the
Investor decides not to include all of its Shares in any registration,
the
Investor shall nevertheless continue to have the right to include
any
Shares in any registration as may be filed by the Company, all
upon the
terms and conditions set forth herein. The rights granted by this
paragraph 3 shall not apply to any registration statement previously
filed
or any amendments thereto.
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This
Letter Agreement will expire and be of no force and effect as of the earlier
of
(a) the seventh anniversary of the date hereof or (b) the first date on which
Investor’s beneficial ownership, as calculated in accordance with regulations
under Section 13 of the Securities Exchange Act of 1934, as amended, of the
common stock of the Company is less than 5% of the issued and outstanding common
stock of the Company.
The
Company and Xxxxxxxxx each represent and warrant that (a) it/he has the relevant
power and authority necessary to execute and deliver this Letter Agreement
and
(b) this Letter Agreement has been duly authorized, executed, and delivered
by,
and is enforceable against, it/him. The Company and Xxxxxxxxx each
further represent and warrant that the execution and the delivery of this Letter
Agreement by it/him and the performance of their respective obligations
hereunder will not (a) breach any law or order to which it/he is subject or
any
provision of the Company’s organizational documents, (b) breach any contract to
which it/he is a party or by which it/he is bound, or (c) require any further
consent.
This
Agreement is made and shall be enforced under the laws of the State of
California. In the event of any conflict between the terms of this
Letter Agreement and any provisions of the Investment Documents or any other
agreement between the parties, this Letter Agreement shall control.
This
Letter Agreement supersedes any and all prior dated letter agreements among
the
parties hereto relating to the purchase of the Shares by the
Investor.
If
the
foregoing correctly sets forth your understanding of our agreement with respect
to the matters addressed above, please indicate your acceptance and approval
below.
ACCEPTED
AND AGREED AS OF THE 5th DAY OF
NOVEMBER
2007.
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XX
XXXXXX LLC
By:
Xxxxx
Xx Xxxxxx,
President
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By:
Xxxxxx
X. Xxxxxxxxx,
Chief
Executive
Officer
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Xxxxxx
X. Xxxxxxxxx, an individual
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