WWW.EXFILE.COM, INC. -- 888-775-4789 -- ZAP -- EXHIBIT 10.3 TO FORM 8-K


     

    EXHIBIT
      10.3



    November
      5, 2007

    


    
      	
              Mr.
                Eqbal Al Yousuf

              Al
                Yousuf L.L.C.

              P.O.
                Box 25

              Dubai,
                UAE

               

            	 
	
              ZAP

              501
                Fourth Street

              Santa
                Rosa, CA 95401

              Attn:  Mr.
                Steven M. Schneider

            	
              Mr.
                Steven M. Schneider

              501
                Fourth Street

              Santa
                Rosa, CA 95401

            


    

    


    Subject:
      Side Letter Agreement

    


    Gentlemen:

    


    This
      Side
      Letter Agreement (the “Letter Agreement”) is made by and between Al Yousuf LLC
      (the “Investor”), ZAP (the “Company”) and Steven M. Schneider
      (“Schneider”).  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:

    


    
      	
              1)  

            	
              So
                long as this Letter Agreement is in effect, the Investor and Schneider
                hereby agree that Schneider 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:

            


    

     

    
      	
              a)  

            	
              that
                the number of members of the Board of Directors of the Company (the
                “Board”) will be between five and seven
                persons;

            


    

     

    
      	
              b)  

            	
              the
                Investor will select one member of the Board (the “Al Yousuf Director”)
                which shall be appointed without undue
                delay;

            


    

     

    
      	
              c)  

            	
              the
                Al Yousuf 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;

            


    

     

    
      	
              d)  

            	
              in
                the case of a proposed sale or transfer of shares or equity interests
                in
                the Company by Schneider (other than transfers among Schneider’s 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 Schneider 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 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 Los
                  Angeles,
                  California and Dubai, United Arab Emirates) after receipt by Investor
                  of
                  Schneider’s notice to Investor of a proposed sale or transfer subject to
                  the right of first refusal;

              


      

       

    

    
      	
              e)  

            	
              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 Schneider (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 Schneider 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

            


    

     

    
      	
              f)  

            	
              any
                person or entity purchasing any of the shares or other equity interests
                in
                the Company owned by Schneider 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 Schneider which as contained in this Section
                1 of
                this Letter Agreement.

            


    

     

    
      	
              2)  

            	
              So
                long as this Letter Agreement is in effect, Schneider 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.

            


    

     

    
      	
              3)  

            	
              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.

              


      

       

    

    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 Schneider 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 Schneider 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.

    


    
      	
              AL
                YOUSUF LLC

               

               

              By:

              
                

              

              Eqbal
                Al Yousuf,

              President

            	
              ZAP

               

               

              By:

              
                

              

              Steven
                M. Schneider,

              Chief
                Executive
                Officer

            
	 	
               

               

               

               
                

              

              Steven
                M. Schneider, an individual

               

            


    

     

    
      
         

      

      
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