EXHIBIT 10.4

Schedule Prepared in accordance with Instruction 2 to Item 601 of Regulation S-K

The Warrants dated February 20, 2007 are substantially identical in all material
respects except as to the holder and the number of shares for which the warrant
is exercisable.

Holder
Number of shares
   
Gemini Master Fund, Ltd.
150,000
Grey K Offshore Fund, Ltd.
114,240
Grey K Fund, LP
49,560
Grey K Offshore Leveraged Fund, Ltd.
46,200

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THIS WARRANT (THIS “WARRANT”) AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR
SALE OR SOLD UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER OR SALE. THIS WARRANT AND THE SECURITIES
ISSUABLE UPON EXERCISE HEREOF (I) MAY BE PLEDGED OR HYPOTHECATED IN CONNECTION
WITH A BONA FIDE MARGIN LOAN OR OTHER FINANCING SECURED BY SUCH SECURITIES OR
(II) MAY BE TRANSFERRED OR ASSIGNED TO AN AFFILIATE OF THE HOLDER HEREOF WITHOUT
THE NECESSITY OF AN OPINION OF COUNSEL OR THE CONSENT OF THE ISSUER HEREOF.

 
WARRANT
 
TO PURCHASE COMMON STOCK

OF
 
ZAP
 
 
Issue Date: February 20, 2007Warrant No. 1A
 
THIS CERTIFIES that GEMINI MASTER FUND, LTD. or any permitted subsequent holder
hereof (the “Holder”), has the right to purchase from ZAP, a California
corporation (the “Company”), up to 150,000 fully paid and nonassessable shares
of the Company’s common stock, no par value (the “Common Stock”), subject to
adjustment as provided herein, at a price per share equal to the Exercise Price
(as defined below), at any time and from time to time beginning on the date on
which this Warrant is issued (the “Issue Date”) and ending at 5:00 p.m., New
York City time, on the fifth (5th) anniversary of the Issue Date or, if such day
is not a Business Day, on the next succeeding Business Day (the “Expiration
Date”). This Warrant is issued pursuant to a Securities Purchase Agreement,
dated as of December 5, 2006, as amended by the Purchase and Amendment Agreement
dated as of February 20, 2007 (the “Securities Purchase Agreement”). Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Securities Purchase Agreement.

1.     EXERCISE.

(a)    Right to Exercise; Exercise Price. The Holder shall have the right to
exercise this Warrant at any time and from time to time during the period
beginning on the Issue Date and ending at 5 p.m., New York City time, on the
Expiration Date as to all or any part of the shares
 
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of Common Stock covered hereby (the “Warrant Shares”). The “Exercise Price” for
each Warrant Share purchased by the Holder upon the exercise of this Warrant
shall be $1.32, subject to adjustment for the events specified in Section 6 of
this Warrant.

(b)    Exercise Notice. In order to exercise this Warrant, the Holder shall (i)
send by facsimile transmission (followed by a telephonic or email confirmation
that such facsimile was sent), at any time prior to 5:00 p.m., New York City
time, on the Business Day on which the Holder wishes to effect such exercise
(the “Exercise Date”), to the Company an executed copy of the notice of exercise
in the form attached hereto as Exhibit A (the “Exercise Notice”) and (ii) in the
case of a Cash Exercise (as defined below), deliver the Exercise Price to the
Company by wire transfer of immediately available funds. The Holder shall
promptly thereafter deliver the original Warrant to the Company for cancellation
(and replacement with a new Warrant if exercised in part) pursuant to Section
1(d) of this Warrant. Subject to Section 8(d), the Exercise Notice shall also
state the name or names in which the Warrant Shares issuable on such exercise
shall be issued if other than the Holder. In the case of a dispute as to the
calculation of the Exercise Price or the number of Warrant Shares issuable
hereunder (including, without limitation, the calculation of any adjustment
pursuant to Section 6 below), the Company shall promptly issue to the Holder the
number of Warrant Shares that are not disputed, the Company and the Holder shall
provide each other with their respective calculations, and the Company shall
submit the disputed calculations to a certified public accounting firm of
national recognition (other than the Company’s independent accountants) within
two (2) Business Days following the later of the date on which the Holder
delivers its calculations to the Company and the date on which the Exercise
Notice is delivered to the Company. The Company shall use its best efforts to
cause such accountant to calculate the Exercise Price and/or the number of
Warrant Shares issuable hereunder and to notify the Company and the Holder of
the results in writing no later than two (2) Business Days following the day on
which such accountant received the disputed calculations (the “Dispute
Procedure”). Such accountant’s calculation shall be deemed conclusive absent
manifest error. The fees of any such accountant shall be borne by the party
whose calculations were most at variance with those of such accountant.

(c)    Holder of Record. The Holder shall, for all purposes, be deemed to have
become the holder of record of the Warrant Shares specified in an Exercise
Notice on the Exercise Date specified therein, irrespective of the date of
delivery of such Warrant Shares. Except as specifically provided herein, nothing
in this Warrant shall be construed as conferring upon the Holder hereof any
rights as a stockholder of the Company prior to the Exercise Date.

(d)    Cancellation of Warrant. This Warrant shall be canceled upon its exercise
and, if this Warrant is exercised in part, the Company shall, at the time that
it delivers Warrant Shares to the Holder pursuant to such exercise as provided
herein, issue a new warrant, and deliver to the Holder a certificate
representing such new warrant, with terms identical in all respects to this
Warrant (except that such new warrant shall be exercisable into the number of
shares of Common Stock with respect to which this Warrant shall remain
unexercised); provided, however, that the Holder shall be entitled to exercise
all or any portion of such new warrant at any time following the time at which
this Warrant is exercised, regardless of whether the Company has actually issued
such new warrant or delivered to the Holder a certificate therefor.

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2.     DELIVERY OF WARRANT SHARES UPON EXERCISE.

Upon receipt of an Exercise Notice pursuant to Section 1 of this Warrant, the
Company shall, (A) in the case of a Cash Exercise (as defined below) no later
than the close of business on the later to occur of (i) the sixth (6th) Business
Day following the Exercise Date set forth in such Exercise Notice and (ii) the
date on which the Company has received payment of the Exercise Price, (B) in the
case of a Cashless Exercise (as defined below), no later than the close of
business on the sixth (6th) Business Day following the Exercise Date set forth
in such Exercise Notice, and (C) with respect to Warrant Shares that are the
subject of a Dispute Procedure, the close of business on the sixth (6th)
Business Day following the determination made pursuant to Section 1(b) of this
Warrant (each of the dates specified in the foregoing clauses (A), (B) or (C)
being referred to as a “Delivery Date”), issue and deliver or cause to be
delivered to the Holder the number of Warrant Shares as shall be determined as
provided herein. The Company shall effect delivery of Warrant Shares to the
Holder, as long as the Company’s designated transfer agent or co-transfer agent
in the United States for the Common Stock (the “Transfer Agent”) participates in
the Depository Trust Company (“DTC”) Fast Automated Securities Transfer program
(“FAST”), by crediting the account of the Holder or its nominee at DTC (as
specified in the applicable Exercise Notice) with the number of Warrant Shares
required to be delivered, no later than the close of business on such Delivery
Date. In the event that the Transfer Agent is not a participant in FAST, or if
the Holder so specifies in an Exercise Notice or otherwise in writing on or
before the Exercise Date, the Company shall effect delivery of Warrant Shares by
delivering to the Holder or its nominee physical certificates representing such
Warrant Shares, no later than the close of business on such Delivery Date. If
any exercise would create a fractional Warrant Share, such fractional Warrant
Share shall be disregarded and the number of Warrant Shares issuable upon such
exercise, in the aggregate, shall be the nearest whole number of Warrant Shares.
Warrant Shares delivered to the Holder shall not contain any restrictive legend
unless such legend is required pursuant to the terms of the Securities Purchase
Agreement.

3.     FAILURE TO DELIVER WARRANT SHARES.

(a)    In the event that the Company fails for any reason (other than as a
result of the Holder’s failure, in the case of a Cash Exercise (as defined
below), to pay the aggregate Exercise Price for the Warrant Shares being
purchased) to deliver to the Holder the number of Warrant Shares specified in
the applicable Exercise Notice (without any restrictive legend to the extent
permitted by applicable law and the terms of the Securities Purchase Agreement)
on or before the Delivery Date therefor, or fails to remove any restrictive
legend from outstanding Warrant Shares at the request of the Holder in
accordance with Section 2.5 of the Securities Purchase Agreement on or before
the tenth (10th) Business Day following such request (an “Exercise Default”),
the Holder shall have the right to receive from the Company an amount equal to
(i) (N/365) multiplied by (ii) the aggregate Exercise Price of the Warrant
Shares which are the subject of such Exercise Default multiplied by (iii) the
lower of twelve percent (12%) and the maximum rate permitted by applicable law
or by the applicable rules or regulations of any Governmental Agency (the
“Default Interest Rate”), where “N” equals the number of days elapsed between
the original Delivery Date of such Warrant Shares (or from such tenth Business
Day in the event of a failure to remove a legend from outstanding Warrant
Shares) and the date on which such Exercise Default has been cured. In the event
that shares of Common Stock are
 
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purchased by or on behalf of the Holder in order to make delivery on a sale
effected in anticipation of receiving Warrant Shares upon an exercise, and there
is an Exercise Default with respect to such exercise, the Holder shall have the
right to receive from the Company, in addition to the foregoing amounts, (i) the
aggregate amount paid by or on behalf of the Holder for such shares of Common
Stock minus (ii) the aggregate amount of net proceeds, if any, received by the
Holder from the sale of the Warrant Shares issued by the Company pursuant to
such exercise. Amounts payable under this Section 3(a) shall be paid to the
Holder in immediately available funds on or before the second (2nd) Business Day
following written notice from the Holder to the Company specifying the amount
owed to it by the Company pursuant to this Section 3(a) and, if an Exercise
Default continues to exist thereafter, at the end of each period of thirty (30)
days following such second Business Day.
 
(b)    In addition to its rights under Section 3(a) of this Warrant, the Holder
shall have the right to pursue all other remedies available to it at law or in
equity (including, without limitation, a decree of specific performance and/or
injunctive relief).  
 
4.     EXERCISE LIMITATION.

In no event shall the Holder be permitted to exercise this Warrant, or part
thereof, if, upon such exercise, the number of shares of Common Stock
beneficially owned by the Holder (other than shares which may be deemed
beneficially owned except for being subject to a limitation on exercise or
exercise analogous to the limitation contained in this Section 4, would
exceed 4.99% of the number of shares of Common Stock then issued and
outstanding, it being the intent of the Company and the Holder that the Holder
not be deemed at any time to have the power to vote or dispose of greater than
4.99% of the number of shares of Common Stock issued and outstanding at any
time. Nothing contained herein shall be deemed to restrict the right of the
Holder to exercise this Warrant at such time as such exercise will not violate
the provisions of this Section 4. As used herein, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act. To the extent
that the limitation contained in this Section 4 applies (and without limiting
any rights the Company may otherwise have), the submission of an Exercise Notice
by the Holder shall be deemed to be the Holder’s representation that this
Warrant is exercisable pursuant to the terms hereof, the Company may rely on the
Holder’s representation that this Warrant is exercisable pursuant to the terms
hereof, and the Company shall have no obligation whatsoever to verify or confirm
the accuracy of such representation. The Company shall have no liability to any
person if the Holder’s determination of whether this Warrant is exercisable
pursuant to the terms hereof is incorrect. The holders of Common Stock are to be
deemed third-party beneficiaries of the limitation imposed hereby and,
accordingly, this Section 4 may not be amended without the consent of the
holders of a majority of the shares of Common Stock then outstanding; provided,
however, that the Holder shall have the right, upon sixty (60) days’ prior
written notice to the Company, to waive the provisions of this Section 4,
without obtaining such consent.

5.     PAYMENT OF THE EXERCISE PRICE; CASHLESS EXERCISE.

The Holder may pay the Exercise Price in either of the following forms or, at
the election of Holder, a combination thereof:

(a)    through a cash exercise (a “Cash Exercise”) by delivering immediately
available
 
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funds, or

(b)    through a cashless exercise (a “Cashless Exercise”) if an effective
Registration Statement is not available for the resale of all of the Warrant
Shares issuable hereunder at the time an Exercise Notice is delivered to the
Company, or if the Company otherwise consents in writing. The Holder shall
effect a Cashless Exercise by surrendering this Warrant to the Company and
noting on the Exercise Notice that the Holder wishes to effect a Cashless
Exercise, upon which the Company shall issue to the Holder a number of Warrant
Shares determined as follows:
 

      X = Y x (A-B)/A 

       

where:      X = the number of Warrant Shares to be issued to the Holder; 

       

     
Y = the number of Warrant Shares with respect to which this Warrant is being
exercised;

     
A = the Market Price as of the Exercise Date; and

     
B = the Exercise Price.

It is intended and acknowledged that the Warrant Shares issued in a Cashless
Exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares required by Rule 144 shall be deemed,
subject to applicable law, to have been commenced, on the Issue Date.

6.     ANTI-DILUTION ADJUSTMENTS; DISTRIBUTIONS; OTHER EVENTS.

The Exercise Price and the number of Warrant Shares issuable hereunder shall be
subject to adjustment from time to time as provided in this Section 6.

(a)    Stock Splits, Stock Interests, Etc. If, at any time on or after the Issue
Date, the number of outstanding shares of Common Stock is increased by a stock
split, stock dividend, reclassification or other similar event, the Exercise
Price shall be proportionately reduced, or if the number of outstanding shares
of Common Stock is decreased by a reverse stock split, combination,
reclassification or other similar event, the Exercise Price shall be
proportionately increased. In such event, the Company shall notify the Company’s
transfer agent of such change on or before the effective date thereof.
 
(b)    Major Transactions. If, at any time after the Issue Date, any Major
Transaction shall occur, then the Holder shall thereafter have the right to
receive upon exercise, in lieu of the shares of Common Stock otherwise issuable
upon exercise of this Warrant, such shares of stock, securities and/or other
property as would have been issued or payable upon such Major Transaction with
respect to or in exchange for the number of shares of Common Stock which would
have been issuable upon exercise of this Warrant had such Major Transaction not
taken place (without giving effect to any limitations on such exercise contained
in this Warrant or the Securities Purchase Agreement). The Company shall not
effect any Major Transaction unless (i)
 
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the Holder has received written notice of such transaction at least thirty (30)
days prior thereto (which period shall be increased to sixty one (61) days if,
at such time, without giving effect to the limitation on exercise contained in
Section 4 hereof, the Holder would beneficially own more than 4.99% of the
Common Stock then outstanding, and the Holder has notified the Company in
writing of such circumstance) but in no event later than fifteen (15) days prior
to the record date for the determination of stockholders entitled to vote with
respect thereto; provided, however, that the Company shall publicly disclose the
material terms of any such Major Transaction on or before the date on which it
delivers notice of a Major Transaction to the Holder, and (ii) the resulting
successor or acquiring entity (if not the Company) assumes by written instrument
(in form and substance reasonable satisfactory to the Holder) the obligations of
the Company under this Warrant. The above provisions shall apply regardless of
whether or not there would have been a sufficient number of shares of Common
Stock authorized and available for issuance upon exercise of this Warrant as of
the date of such transaction, and shall similarly apply to successive Major
Transactions.
 
(c)    Distributions. If, at any time after the Issue Date, the Company declares
or makes any distribution of cash or any other assets (or rights to acquire such
assets) to holders of Common Stock, including without limitation any dividend or
distribution to the Company’s stockholders in shares (or rights to acquire
shares) of capital stock of a subsidiary) (a “Distribution”), the Company shall
deliver written notice of such Distribution (a “Distribution Notice”) to the
Holder at least fifteen (15) days prior to the earlier to occur of (i) the
record date for determining stockholders entitled to such Distribution (the
“Record Date”) and (ii) the date on which such Distribution is made (the
“Distribution Date”) (the earlier of such dates being referred to as the
“Determination Date”). Upon receipt of the Distribution Notice, the Holder shall
promptly (but in no event later than three (3) Business Days) notify the Company
whether it has elected (A) to receive the same amount and type of assets
(including, without limitation, cash) being distributed as though the Holder
were, on the Determination Date, a holder of a number of shares of Common Stock
into which this Warrant is exercisable as of such Determination Date (such
number of shares to be determined without giving effect to any limitations on
such exercise) or (B) upon any exercise of this Warrant on or after the
Distribution Date, to reduce the Exercise Price in effect on the Business Day
immediately preceding the Record Date by an amount equal to the fair market
value of the assets to be distributed divided by the number of shares of Common
Stock as to which such Distribution is to be made, such fair market value to be
reasonably determined in good faith by the independent members of the Company’s
Board of Directors. Upon receipt of such election notice from the Holder, the
Company shall timely effectuate the transaction or adjustment contemplated in
the foregoing clause (A) or (B), as applicable.  If the Holder does not notify
the Company of its election pursuant to the preceding sentence on or prior to
the Determination Date, the Holder shall be deemed to have elected clause (A) of
the preceding sentence.
 
(d)    Convertible Securities; Options. If, at any time after the Issue Date,
the Company issues Convertible Securities or Options to the record holders of
the Common Stock, whether or not such Convertible Securities or Options are
immediately convertible, exercisable or exchangeable, then the Holders shall be
entitled, upon any exercise of this Warrant after the date of record for
determining stockholders entitled to receive such Convertible Securities or
Options (or if no such record is taken, the date on which such Convertible
Securities or Options are issued), to receive the aggregate number of
Convertible Securities or Options which the Holder
 
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would have received with respect to the shares of Common Stock issuable upon
such exercise (without giving effect to any limitations on such exercise
contained in this Warrant or the Securities Purchase Agreement) had the Holder
been the holder of such shares of Common Stock on the record date for the
determination of stockholders entitled to receive such Convertible Securities or
Options (or if no such record is taken, the date on which such Convertible
Securities or Options were issued).
 
(e)    Dilutive Issuances.
 

 
(i)
Adjustment Upon Dilutive Issuance. If, at any time after the Issue Date, and on
or prior to the date that is the later of (1) the earlier of (x) the Effective
Date and (y) two years from the Issue Date, and (2) the six month anniversary of
the Issue Date, the Company issues or sells, or in accordance with Section
6(e)(ii) is deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share less than the Exercise Price on
the date of such issuance or sale (or deemed issuance or sale) (a “Dilutive
Issuance”), then the Exercise Price shall be adjusted so as to equal 110% of the
consideration received or receivable by the Company (on a per share basis) for
the additional shares of Common Stock so issued, sold or deemed issued or sold
in such Dilutive Issuance (which, in the case of a deemed issuance or sale,
shall be calculated in accordance with Section 6(e)(ii) of this Warrant).

 
Notwithstanding the foregoing, no adjustment shall be made pursuant to this
Section 6(e)(i) if such adjustment would result in an increase in the Exercise
Price.
 
(ii)    Effect On Exercise Price Of Certain Events. For purposes of determining
the adjusted Exercise Price under Section 6(e)(i) of this Warrant, the following
will be applicable:
 
(A)    Issuance Of Options. If the Company issues or sells any Options, whether
or not immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such Options (and the price of any conversion
of Convertible Securities, if applicable) is less than the Exercise Price in
effect on the date of issuance or sale of such Options, then the maximum total
number of shares of Common Stock issuable upon the exercise of all such Options
(assuming full conversion, exercise or exchange of Convertible Securities, if
applicable) shall, as of the date of the issuance or sale of such Options, be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of the preceding sentence, the “price per
share for which Common Stock is issuable upon the exercise of such Options”
shall be determined by dividing (x) the total amount, if any, received or
receivable by the Company as consideration for the issuance or sale of all such
Options, plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the exercise of all such Options, plus, in the case
of Convertible Securities issuable upon the exercise of such Options, the
minimum aggregate amount of
 
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additional consideration payable upon the conversion, exercise or exchange
thereof (determined in accordance with the calculation method set forth in
Section 6(e)(ii)(B) below) at the time such Convertible Securities first become
convertible, exercisable or exchangeable, by (y) the maximum total number of
shares of Common Stock issuable upon the exercise of all such Options (assuming
full conversion, exercise or exchange of Convertible Securities, if applicable).
No further adjustment to the Exercise Price shall be made upon the actual
issuance of such Common Stock upon the exercise of such Options or upon the
conversion, exercise or exchange of Convertible Securities issuable upon
exercise of such Options. To the extent that shares of Common Stock or
Convertible Securities are not delivered pursuant to such Options, upon the
expiration or termination of such Options, the Exercise Price shall be
readjusted to the Exercise Price that would then be in effect had the
adjustments made upon the issuance of such Options been made on the basis of
delivery of only the number of shares of Common Stock actually delivered.
 
(B)    Issuance Of Convertible Securities. If the Company issues or sells any
Convertible Securities, whether or not immediately convertible, exercisable or
exchangeable, and the price per share for which Common Stock is issuable upon
such conversion, exercise or exchange is less than the Exercise Price in effect
on the date of issuance or sale of such Convertible Securities, then the maximum
total number of shares of Common Stock issuable upon the conversion, exercise or
exchange of all such Convertible Securities shall, as of the date of the
issuance or sale of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. If the
Convertible Securities so issued or sold do not have a fluctuating conversion or
exercise price or exchange ratio, then for the purposes of the immediately
preceding sentence, the “price per share for which Common Stock is issuable upon
such conversion, exercise or exchange” shall be determined by dividing (A) the
total amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion, exercise or exchange thereof (determined in accordance with
the calculation method set forth in this Section 6(e)(ii)(B)) at the time such
Convertible Securities first become convertible, exercisable or exchangeable, by
(B) the maximum total number of shares of Common Stock issuable upon the
exercise, conversion or exchange of all such Convertible Securities. If the
Convertible Securities so issued or sold have a fluctuating conversion or
exercise price or exchange ratio (a “Variable Rate Convertible Security”), then
for purposes of the first sentence of this Section 6(e)(ii)(B), the “price per
share for which Common Stock is issuable upon such conversion, exercise or
exchange” shall be deemed to be the lowest price per share which would be
applicable (assuming all holding period and other conditions to any discounts
contained in such Variable Rate Convertible Security have been satisfied) if the
conversion price of such Variable Rate Convertible Security on the date of
issuance or sale thereof were equal to the actual conversion price on such date
(or such higher minimum conversion price if such Variable Rate Convertible
Security is subject to a minimum conversion price) (the “Assumed Variable Market
Price”), and, further, if the conversion price of such Variable Rate Convertible
Security at any time or times thereafter is less than or equal to the Assumed
Variable Market Price last used for making any adjustment under this Section
6(e) with respect to
 
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any Variable Rate Convertible Security, the Exercise Price in effect at such
time shall be readjusted to equal the Exercise Price which would have resulted
if the Assumed Variable Market Price at the time of issuance of the Variable
Rate Convertible Security had been equal to the actual conversion price of such
Variable Rate Convertible Security existing at the time of the adjustment
required by this sentence; provided, however, that if the conversion or exercise
price or exchange ratio of a Convertible Security may fluctuate solely as a
result of provisions designed to protect against dilution, such Convertible
Security shall not be deemed to be a Variable Rate Convertible Security. No
further adjustment to the Exercise Price shall be made upon the actual issuance
of such Common Stock upon conversion, exercise or exchange of such Convertible
Securities.
 
(C)    Change In Option Price Or Conversion Rate. If there is a change at any
time (including, without limitation, a change with respect to any Options or
Convertible Securities outstanding as of the Issue Date) in (x) the amount of
additional consideration payable to the Company upon the exercise of any
Options; (y) the amount of additional consideration, if any, payable to the
Company upon the conversion, exercise or exchange of any Convertible Securities;
or (z) the rate at which any Convertible Securities are convertible into or
exercisable or exchangeable for Common Stock (in each such case, other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change shall be readjusted to the
Exercise Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion, exercise or exchange rate, as the case may
be, at the time initially issued or sold.
 
(D)    Calculation Of Consideration Received. If any Common Stock, Options or
Convertible Securities are issued or sold for cash, the consideration received
therefor will be the amount received by the Company therefor. In case any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
part or all of which shall be other than cash, the amount of the consideration
other than cash received by the Company (including the net present value of the
consideration expected by the Company for the provided or purchased services)
shall be the fair market value of such consideration. In case any Common Stock,
Options or Convertible Securities are issued in connection with any merger or
consolidation in which the Company is the surviving corporation, the amount of
consideration therefor will be deemed to be the fair market value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The independent members of the Company’s Board of Directors shall
calculate reasonably and in good faith, using standard commercial valuation
methods appropriate for valuing such assets, the fair market value of any
consideration.

(iii)   Exceptions To Adjustment Of Exercise Price. Notwithstanding the
foregoing, no adjustment to the Exercise Price shall be made pursuant to this
Section 6(e) upon the issuance of any Excluded Securities.

(iv)   Notice Of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Exercise Price pursuant to this Section 6(e) resulting in a
change in the
 
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Exercise Price by more than one percent (1%), or any change in the number or
type of stock, securities and/or other property issuable upon exercise of this
Warrant, the Company, at its expense, shall promptly compute such adjustment,
readjustment or change and prepare and furnish to the Holder a certificate
setting forth such adjustment, readjustment or change and showing in detail the
facts upon which such adjustment, readjustment or change is based. The Company
shall, upon the written request at any time of the Holder, furnish to the Holder
a like certificate setting forth (i) such adjustment, readjustment or change,
(ii) the Exercise Price at the time in effect and (iii) the number of shares of
Common Stock and the amount, if any, of other securities or property which at
the time would be received upon exercise of this Warrant.
 
(f)    Adjustments; Additional Shares, Securities or Assets. In the event that
at any time, as a result of an adjustment made pursuant to this Section 6, the
Holder of this Warrant shall, upon exercise of this Warrant, become entitled to
receive securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock shall be deemed to
refer to and include such shares and/or other securities or assets; and
thereafter the number of such shares and/or other securities or assets shall be
subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 6. Any adjustment
made herein that results in a decrease in the Exercise Price shall also effect a
proportional increase in the number of shares of Common Stock into which this
Warrant is exercisable.
 
7.    FORCED EXERCISE.
 
(a)    Forced Exercise. Subject to the terms and conditions of this Section
7(a), the Company shall have the right, exercisable at any time after December
31, 2007, to require exercise of this Warrant in whole or in part (a “Forced
Exercise”). In order to effect a Forced Exercise, (i) the daily VWAP must, on
each of twenty (20) Trading Days occurring during any period of thirty (30)
consecutive Trading Days (such period of thirty Trading Days, a “Forced Exercise
Period”), be equal to or greater than the Forced Exercise Price (as defined
below) and (ii) each of the Equity Conditions must be satisfied on each Trading
Day occurring during the Forced Exercise Period and through and including the
Forced Exercise Date. For purposes hereof, “Forced Exercise Price” means, as of
any date, the lesser of (i) $2.64 and (ii) two hundred percent (200%) of the
Exercise Price in effect as of such date (provided that the Forced Exercise
Price shall be appropriately adjusted for any stock dividend, stock split,
reverse stock split or other similar transaction). Notwithstanding the
foregoing, in no event shall the Company be permitted to effect a Forced
Exercise to the extent that, upon receipt of the shares of Common Stock
deliverable thereby, the Holder would beneficially own more than 4.99% of the
number of shares of Common Stock then outstanding.

(b)    Forced Exercise Notice; Number of Warrant Shares. In order to effect a
Forced Exercise hereunder, the Company must deliver to the Holder written notice
thereof (a “Forced Exercise Notice”) at any time after the fifth (5th) Business
Day immediately following the last Trading Day of the Forced Exercise Period but
not later than the tenth (10th) Business Day following such last Trading Day. A
Forced Exercise Notice shall specify the number of Warrant Shares that the
Company elects to submit to a Forced Exercise. Within three (3) Business Days
after its receipt of a Forced Exercise Notice, the Holder shall deliver to the
Company, in accordance with Section 1 of this Warrant, an Exercise Notice and,
if applicable, the Exercise Price for the
 
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number of Warrant Shares specified in the Forced Exercise Notice. On the date
that is the third (3rd) Trading Day immediately following delivery of such
Exercise Notice by the Holder (the “Forced Exercise Date”), the Company must
deliver the specified shares of Common Stock to the Holder in accordance with
the provisions of Section 2 of this Warrant, with the Forced Exercise Date being
deemed the Delivery Date for purposes hereof. If any fractional share would be
issuable upon a Forced Exercise, such fractional shares shall be disregarded and
the number of shares issuable shall, in the aggregate, be equal to the nearest
whole number of shares.

(c)    Notwithstanding the delivery by the Company of a Forced Exercise Notice,
nothing contained herein shall be deemed to limit in any way (x) the right of
the Holder to exercise this Warrant prior to the Forced Exercise Date or (y) the
availability of any and all remedies that are provided to the Holder hereunder,
including without limitation in the event that the Company fails to deliver
Warrant Shares upon a Forced Exercise as required by the terms of Section 3 of
this Warrant, provided, that, in the event of such failure, the Forced Exercise
shall be terminated with respect to the Holder upon the delivery of written
notice thereof by the Holder to the Company, and the Company shall forfeit its
right to require a Forced Exercise of the Warrants thereafter. In the event of
multiple Forced Exercises, at least sixty (60) days must elapse between Forced
Exercise Dates.

8.     MISCELLANEOUS.
 
(a)    Failure to Exercise Rights not Waiver. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude any other or further exercise thereof.
All rights and remedies of the Holder hereunder are cumulative and not exclusive
of any rights or remedies otherwise available. In the event that the Company
breaches any of its obligations hereunder to issue Warrant Shares or pay any
amounts as and when due, the Company shall bear all costs incurred by the Holder
in collecting such amount, including without limitation reasonable legal fees
and expenses.
 
(b)    Notices. Any notice, demand or request required or permitted to be given
by the Company or the Holder pursuant to the terms of this Warrant shall be in
writing and shall be deemed delivered (i) when delivered personally or by
verifiable facsimile transmission, unless such delivery is made on a day that is
not a Business Day, in which case such delivery will be deemed to be made on the
next succeeding Business Day, (ii) on the next Business Day after timely
delivery to an overnight courier and (iii) on the Business Day actually received
if deposited in the U.S. mail (certified or registered mail, return receipt
requested, postage prepaid), addressed as follows:

     
If to the Company:
     
ZAP
 
501 Fourth Street
 
Santa Rosa, California 95401
 
Attention:
Steven Kim
 
Telephone:
(707) 525-8658
 
Facsimile:
(707) 525-8692

 
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with a copy (for informational purposes only) to:
     
Donahue Gallagher Woods LLP
Suite 1900
300 Lakeside Drive
Oakland, CA 94612
Attn: Michael J. Dalton
Tel: (510) 451-0544
Fax: (510) 832-1486

 
and if to the Holder, to such address for such party as shall appear on the
signature page of the Securities Purchase Agreement executed by such party, or
as shall be designated by such party in writing to the other parties hereto in
accordance this Section 8(b).

(c)    Amendments and Waivers. No amendment, modification or other change to, or
waiver of any provision of, this Warrant or any other Warrant may be made unless
such amendment, modification or change, or request for waiver, is (A) set forth
in writing and is signed by the Company, (B) consented to in writing by the
holders of at least sixty-six percent (66%) of the Warrant Shares underlying the
Warrants then outstanding, and (C) applied to all of the Warrants. Upon the
satisfaction of the conditions described in (A), (B) and (C) above, this Warrant
shall be deemed to incorporate the amendment, modification, change or waiver
effected thereby as of the effective date thereof, even if the Holder did not
consent to such amendment, modification, change or waiver. Notwithstanding the
foregoing, the limitation on beneficial ownership set forth in Section 4 may not
be amended without the consent of the holders of a majority of the shares of
Common Stock then outstanding; provided, however, that such limitation may be
waived by the Holder upon sixty (60) days’ prior written notice to the Company,
and such waiver shall be valid and shall not require the consent of the Company
or any other holder of Common Stock or Warrants.
 
(d)    Transfer of Warrant. The Holder may sell, transfer or otherwise dispose
of all or any part of this Warrant (including without limitation pursuant to a
pledge) to any person or entity as long as such sale, transfer or disposition is
the subject of an effective registration statement under the Securities Act of
1933, as amended, and applicable state securities laws, or is exempt from
registration thereunder, and is otherwise made in accordance with the applicable
law and applicable provisions of the Securities Purchase Agreement. From and
after the date of any such sale, transfer or disposition, the transferee hereof
shall be deemed to be the holder of the portion of this Warrant acquired by such
transferee, and the Company shall, as promptly as practicable, issue and deliver
to such transferee a new Warrant identical in all respects to this Warrant, in
the name of such transferee. The Company shall be entitled to treat the original
Holder as the holder of this entire Warrant unless and until it receives written
notice of the sale, transfer or disposition hereof.
 
(e)    Lost or Stolen Warrant. Upon receipt by the Company of evidence of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of indemnity or security reasonably satisfactory to
the Company, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver to the Holder a
 
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new Warrant identical in all respects to this Warrant.
 
(f)    Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts made
and to be performed entirely within the State of California.
 
(g)    Successors and Assigns. The terms and conditions of this Warrant shall
inure to the benefit of and be binding upon the respective successors (whether
by merger or otherwise) and permitted assigns of the Company and the Holder. The
Company may not assign its rights or obligations under this Warrant except as
specifically required or permitted pursuant to the terms hereof.

  
 

[Signature Page to Follow]

 
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IN WITNESS WHEREOF, the Company has duly executed and delivered this Warrant as
of the Issue Date.

        ZAP    
   
    By:   /s/ Steven Schneider  

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Name: Steven Schneider   Title: Chief Executive Officer 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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EXHIBIT A to WARRANT

EXERCISE NOTICE

The undersigned Holder hereby irrevocably exercises the right to purchase
_________ of the shares of Common Stock (“Warrant Shares”) of ZAP evidenced by
the attached Warrant (the “Warrant”). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.

1.    Form of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:

______ a Cash Exercise with respect to _________________ Warrant Shares; and/or

______ a Cashless Exercise with respect to _________________ Warrant Shares, as
permitted by Section 5(b) of the attached Warrant.

2.    Payment of Exercise Price. In the event that the Holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the Holder shall pay the sum of $________________ to the Company in
accordance with the terms of the Warrant.

Date: ______________________

___________________________________
Name of Registered Holder

By: _______________________________
Name:
Title:

Holder Requests Delivery to be made: (check one)

ྐྵ
By Delivery of Physical Certificates to the Above Address

ྐྵ
Through Depository Trust Corporation

(Account ________________)

 

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