EXHIBIT 10.1
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MUTUAL TERMINATION AGREEMENT
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MUTUAL TERMINATION AGREEMENT (the "Agreement"), dated as of
February
22, 2005, by and between ZAP, a California
corporation, (the "Company"), and
FUSION CAPITAL FUND II, LLC, an Illinois
limited liability company (the
"Buyer").
WHEREAS, the Buyer and the Company mutually desire to terminate
the
Common Stock Purchase Agreement dated as of
July 22, 2004, by and between the
Company and the Buyer (the "Purchase
Agreement"). All capitalized terms used in
this Agreement that are not defined in this
Agreement shall have the meanings
set forth in the Purchase Agreement;
NOW THEREFORE, the Company and the Buyer hereby agree as
follows:
1.
RESCISSION OF THE INITIAL PURCHASE; TERMINATION OF THE
PURCHASE AGREEMENT.
The Company and the Buyer hereby rescind the purchase and sale of
the
Initial Purchase Shares. Specifically,
immediately upon the execution of this
Agreement, by both the Company and the
Buyer, the Parties shall do the
following: (A) Buyer shall deliver the
$200,000 Initial Purchase Shares ("IPS")
to its counsel Jenner & Block LLP to
hold in trust; (B) the Company shall wire
transfer $500,000.00 to Buyer upon receipt
of notification that Buyer has
delivered and Jenner & Block LLP has
received the IPS pursuant to subparagraph A
above; and (C) Jenner & Block LLP shall
forward the IPS to the Transfer Agent
for cancellation. Furthermore, the Purchase
Agreement, and the other Transaction
Documents between the Buyer and the Company
related to the Purchase Agreement
(other than this Agreement, the Warrants
and that certain Registration Rights
Agreement between the Company and Buyer
dated July 22, 2004, the "Registration
Rights Agreement") are hereby terminated
effective as of the date hereof and any
and all rights, duties and obligations
arising thereunder or in connection with
the Purchase Agreement, and the Transaction
Documents (other then the Warrants,
the Registration Rights Agreement and this
Agreement) are now and hereafter
fully and finally terminated, provided,
however, that (i) the representations
and warranties of the Buyer and Company
contained in Sections 2 and 3 of the
Purchase Agreement, (ii) the
indemnification provisions set forth in Section 8
of the Purchase Agreement, (iii) the
agreements and covenants set forth in
Section 4(h) and Section 11 of the Purchase
Agreement, (iv) the Warrants, and
(v) the Registration Rights Agreement,
shall survive such termination and shall
continue in full force and effect except as
expressly amended hereby,
(collectively, the "Surviving
Obligations").
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2.
MUTUAL GENERAL RELEASE.
The Company and the Buyer hereby release and forever discharge
each
party hereto and its predecessors,
successors and assigns, employees,
shareholders, partners, managing members,
officers, directors, agents,
subsidiaries, divisions and affiliates from
any and all claims, causes of
actions, suits, demands, debts, dues,
accounts, bonds, covenants, contracts,
agreements, judgments whatsoever in law or
in equity, whether known or unknown,
including, but not limited to, any claim
arising out of or relating to the
transactions described in the Purchase
Agreement and Transaction Documents which
any party hereto had, now has or which its
heirs, executors, administrators,
successors or assigns, or any of them,
hereafter can, shall or may have, against
any party hereto or such parties
predecessors, successors and assigns,
employees, shareholders, partners, managing
members, officers, directors,
agents, subsidiaries, divisions and
affiliates, for or by reason of any cause,
matter or thing whatsoever, whether arising
prior to, on or after the date
hereof. Provided, however, that (i) this
Agreement and (ii) the Surviving
Obligations including, but not limited to,
the Registration Rights Agreement,
shall continue in full force and effect as
the legal, valid and binding
obligation of each party thereto
enforceable against each such party in
accordance with its terms, and no claims
arising under or in connection with
this Agreement or the Surviving
Obligations, on or after the date of this
Agreement, are hereby released.
3.
WARRANT EXERCISES; AMENDMENT OF WARRANTS.
The Buyer and the Company agree that none of the Warrants were
exercised prior to the date hereof. The
Company shall immediately return to the
Buyer the original of the following
Warrants previously delivered by the Buyer
to the Company: Warrant No. 00300, Warrant
No. 00034 and Warrant No. 00301.
Section 2 of each of the five Warrants is
hereby amended and restated in its
entirety as follows:
SECTION 2.
EXERCISE OF WARRANT.
2.1 MANNER OF
EXERCISE. The Holder may exercise this Warrant,
in whole or in part, immediately, but not after the Expiration
Date,
during normal business hours on any Trading Day by surrendering
this
Warrant to the Company at the principal office of the Company,
accompanied by a Warrant Exercise Form in substantially the
form
annexed hereto duly executed by the Buyer and by payment of the
Warrant
Exercise Price for the number of shares of Warrant Shares for
which
this Warrant is then exercisable, either (i) in immediately
available
funds, (ii) by delivery of an instrument evidencing indebtedness
owing
by the Company to the Holder in the appropriate amount, (iii) at
any
time on or after September 1, 2005 by authorizing the Company to
retain
shares of Common Stock which would otherwise be issuable upon
exercise
of this Warrant in accordance with Section 2.4 hereof or (iv) in
a
combination of (i), (ii) or (iii) above, provided, however, that in
no
event shall the Holder be entitled to exercise this Warrant for
a
number of Warrant Shares in excess of that number of Warrant
Shares
which, upon giving effect to such exercise, would cause the
aggregate
number of shares of Common Stock beneficially owned by the Holder
to
exceed 9.9% of the outstanding shares of the Common Stock
following
such exercise.
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For purposes of the foregoing proviso, the aggregate number of
shares
of Common Stock beneficially owned by the Holder shall include
the
number of shares of Common Stock issuable upon exercise of this
Warrant
with respect to which determination of such proviso is being made,
but
shall exclude the shares of Common Stock which would be issuable
upon
(i) exercise of the
remaining, unexercised Warrants beneficially owned
by the Holder and (ii) exercise or conversion of the unexercised
or
unconverted portion of any other securities of the Company
beneficially
owned by the Holder subject to a limitation on conversion or
exercise
analogous to the limitation contained herein. Except as set forth
in
the preceding sentence, for purposes of this paragraph,
beneficial
ownership shall be calculated in accordance with Section 13(d) of
the
Securities Exchange Act of 1934, as amended. The Holder may waive
the
foregoing limitation by written notice to the Company upon not
less
than 61 days prior written notice (with such waiver taking effect
only
upon the expiration of such 61 day notice period).
2.2 WHEN EXERCISE
EFFECTIVE. Each exercise of this Warrant
shall be deemed to have been effected on the day on which all
requirements of Section 2.1 shall have been met with respect to
such
exercise. At such time the person in whose name any certificate
for
shares of Warrant Shares shall be issuable upon such exercise shall
be
deemed for all corporate purposes to have become the Holder of
record
of such shares, regardless of the actual delivery of
certificates
evidencing such shares.
2.3 DELIVERY OF STOCK
CERTIFICATES. As soon as practicable
after each exercise of this Warrant, and in any event no later than
3
days after such exercise, the Company at its expense will issue
Warrant
Shares via credit to the Buyer's account with DTC for the number
of
Warrant Shares to which such Buyer is entitled upon such
Buyer's
submission of the applicable Warrant Exercise Form or, if the
Transfer
Agent is not participating in The DTC Fast Automated Securities
Transfer Program and DWAC system, issue and surrender to the
address as
specified in the Warrant Exercise Form, a certificate, registered
in
the name of the Buyer or its designee, for the number of shares
of
Common Stock to which the Buyer shall be entitled to upon such
exercise.
2.4 CASHLESS EXERCISE.
In the event that the Registration
Statement (as defined in the Registration Rights Agreement) is
not
declared effective by the SEC on or before September 1, 2005, or in
the
event that the Registration Statement is declared effective by the
SEC
on or before Sep
