Document:

REGISTRATION RIGHTS AGREEMENT

      REGISTRATION  RIGHTS  AGREEMENT (this  "AGREEMENT"),  dated as of July 22,
2004, by and between ZAP, a California corporation,  (the "COMPANY"), and FUSION
CAPITAL  FUND  II,  LLC  (together  with it  permitted  assigns,  the  "BUYER").
Capitalized  terms used herein and not otherwise  defined  herein shall have the
respective  meanings  set forth in the Common  Stock  Purchase  Agreement by and
between the parties hereto,  dated as of the date hereof (as amended,  restated,
supplemented or otherwise modified from time to time, the "PURCHASE AGREEMENT").

                                    WHEREAS:

      A. The Company has agreed, upon the terms and subject to the conditions of
the Purchase Agreement, to issue to the Buyer (i) up to Twenty Four Million Five
Hundred  Thousand  Dollars  ($24,500,000)  of the Company's common stock, no par
value per share (the "COMMON  STOCK")  (the  "PURCHASE  SHARES"),  and (ii) such
number of shares of Common Stock as is required  pursuant to Section 4(f) of the
Purchase Agreement (the "COMMITMENT SHARES"); and

      B. To induce the Buyer to enter into the Purchase  Agreement,  the Company
has agreed to provide  certain  registration  rights under the Securities Act of
1933,  as  amended,  and the rules and  regulations  thereunder,  or any similar
successor  statute   (collectively,   the  "1933  ACT"),  and  applicable  state
securities laws.

      NOW, THEREFORE,  in consideration of the premises and the mutual covenants
contained  herein and other good and  valuable  consideration,  the  receipt and
sufficiency of which are hereby  acknowledged,  the Company and the Buyer hereby
agree as follows:

      1.    DEFINITIONS.

            As used in this  Agreement,  the  following  terms  shall  have  the
following meanings:

            a. "INVESTOR" means the Buyer, any transferee or assignee thereof to
whom a Buyer  assigns its rights under this  Agreement  and who agrees to become
bound by the provisions of this  Agreement in accordance  with Section 9 and any
transferee  or assignee  thereof to whom a  transferee  or assignee  assigns its
rights under this  Agreement and who agrees to become bound by the provisions of
this Agreement in accordance with Section 9.

            b. "PERSON" means any person or entity including any corporation,  a
limited liability company,  an association,  a partnership,  an organization,  a
business,  an individual,  a governmental or political  subdivision thereof or a
governmental agency.

            c.  "REGISTER,"   "REGISTERED,"  and   "REGISTRATION"   refer  to  a
registration   effected  by  preparing  and  filing  one  or  more  registration
statements of the Company in  compliance  with the 1933 Act and pursuant to Rule
415 under the 1933 Act or any successor rule  providing for offering  securities
on a  continuous  basis  ("RULE  415"),  and  the  declaration  or  ordering  of
effectiveness of such registration  statement(s) by the United States Securities
and Exchange Commission (the "SEC").

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            d.  "REGISTRABLE  SECURITIES"  means the Purchase  Shares which have
been, or which may from time to time be, issued or issuable upon purchases of up
to $24,500,000 of Common Stock under the Purchase  Agreement  (without regard to
any limitation or restriction on purchases)  (including,  without limitation the
Initial  Purchase  Shares),  the  Signing  Shares,  issued  or  issuable  to the
Investor,  the Warrant  Shares  issuable  upon  exercise of the Warrants and the
Commitment  Shares  issued or issuable to the Investor and any shares of capital
stock issued or issuable  with respect to the Purchase  Shares,  the  Commitment
Shares the  Signing  Shares,  issued or issuable  to the  Investor,  the Warrant
Shares  issuable  upon  exercise of the Warrants or the Purchase  Agreement as a
result of any stock split, stock dividend, recapitalization, exchange or similar
event or otherwise,  without  regard to any  limitation  on purchases  under the
Purchase Agreement.

            e. "REGISTRATION  STATEMENT" means the registration statement of the
Company covering the sale of the Registrable Securities.

      2.    REGISTRATION.

            a. Mandatory Registration. The Company shall by no later than August
20, 2004, (the "Filing Date") file with the SEC the Registration Statement.  The
Investor  and its  counsel  shall have a  reasonable  opportunity  to review and
comment upon such  registration  statement  or  amendment  to such  registration
statement and any related  prospectus prior to its filing with the SEC. Investor
shall furnish all information  reasonably requested by the Company for inclusion
therein.  The  Company  shall  use its best  efforts  to have  the  Registration
Statement or amendment  declared  effective by the SEC at the earliest  possible
date.  The Company shall use  reasonable  best efforts to keep the  Registration
Statement  effective  pursuant  to Rule 415  promulgated  under the 1933 Act and
available for sales of all of the Registrable  Securities at all times until the
earlier of (i) the date as of which the Investor may sell all of the Registrable
Securities  without  restriction  pursuant to Rule 144(k)  promulgated under the
1933 Act (or successor thereto) or (ii) the date on which (A) the Investor shall
have sold all the Registrable  Securities and no Available  Amount remains under
the Purchase Agreement (the "REGISTRATION  PERIOD").  The Registration Statement
(including  any  amendments or supplements  thereto and  prospectuses  contained
therein)  shall not contain any untrue  statement of a material  fact or omit to
state a material  fact required to be stated  therein,  or necessary to make the
statements  therein,  in light of the circumstances in which they were made, not
misleading  In the event  that the  Registration  Statement  is not filed by the
Filing Date or declared  effective by the SEC within (i) 30 days from the Filing
Date if there is no review of the registration  statement by the SEC or (ii) 120
days from Filing Date if there is a full review of the registration statement by
the SEC,  than, in addition to any other rights and remedies  available to Buyer
hereunder,  under the Purchase  Agreement or under  applicable  law, the Company
shall pay to the Investor an amount in cash, as liquidated  damages and not as a
penalty,  equal to 2% of the  aggregate  amount  paid  ($500,000  as of the date
hereof)  by the  Buyer  for the  Purchase  Shares on the last day of each 30 day
period or portion  thereof that such failure  continues paid on a pro rata basis
for the actual  number of days such  failure  existed.  If after a  Registration
Statement  is  first  declared   effective  by  the  SEC  it  ceases  to  remain
continuously  effective  and  available  for  use  by  the  Investor  as to  all
Registerable  Securities for 10  consecutive  Trading Days or an aggregate of 20
Trading Days during any 12 month  period,  than, in addition to any other rights
and remedies available to Buyer hereunder, under the Purchase Agreement or under
applicable  law,  the  Company  shall pay to the  Buyer an  amount  in cash,  as
liquidated  damages and not as a penalty,  equal to 2% of the  aggregate  amount
paid by the Buyer for the  Purchase  Shares then held by the Buyer,  on the last
day of each 30 day period or portion thereof that such failure continues paid on
a pro rata basis for the actual number of days such failure existed. The Company
shall not file another  registration  statement  registering  securities  of the
Company until a Registration  Statement  registering  the Purchase  Shares,  the
Warrant Shares, the Signing Shares and the Commitment Shares has been filed with
the SEC.

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            b. Rule 424 Prospectus. The Company shall, as required by applicable
securities  regulations,  from time to time file with the SEC,  pursuant to Rule
424 promulgated  under the 1933 Act, the prospectus and prospectus  supplements,
if any, to be used in connection with sales of the Registrable  Securities under
the Registration Statement. The Investor and its counsel shall have a reasonable
opportunity to review and comment upon such prospectus  prior to its filing with
the SEC. The Investor shall use its reasonable best efforts to comment upon such
prospectus  within one (1) Trading Day from the date the  Investor  receives the
final version of such prospectus.

            c. Sufficient Number of Shares  Registered.  In the event the number
of shares  available under the  Registration  Statement is insufficient to cover
all of the  Registrable  Securities,  the Company  shall amend the  Registration
Statement or file a new registration statement (a "NEW REGISTRATION STATEMENT"),
so as to cover all of such Registrable Securities as soon as practicable, but in
any event not later  than ten (10)  Trading  Days after the  necessity  therefor
arises. The Company shall use it reasonable best efforts to cause such amendment
and/or New  Registration  Statement to become  effective as soon as  practicable
following the filing thereof.

      3.    RELATED OBLIGATIONS.

      With respect to the  Registration  Statement and whenever any  Registrable
Securities  are to be registered  pursuant to Section 2(b)  including on any New
Registration  Statement,  the Company shall use its  reasonable  best efforts to
effect the  registration  of the  Registrable  Securities in accordance with the
intended method of disposition thereof and, pursuant thereto,  the Company shall
have the following obligations:

            a. The Company shall  prepare and file with the SEC such  amendments
(including  post-effective  amendments)  and  supplements  to  any  registration
statement  and  the  prospectus  used  in  connection  with  such   registration
statement,  which  prospectus  is to be filed  pursuant to Rule 424  promulgated
under the 1933 Act, as may be  necessary to keep the  Registration  Statement or
any New  Registration  Statement  effective at all times during the Registration
Period, and, during such period, comply with the provisions of the 1933 Act with
respect to the disposition of all Registrable  Securities of the Company covered
by the Registration  Statement or any New Registration Statement until such time
as all of such Registrable  Securities shall have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof as set
forth in such registration statement.

            b. The Company  shall permit the Investor to review and comment upon
the Registration  Statement or any New Registration Statement and all amendments
and supplements thereto at least two (2) Trading Days prior to their filing with
the SEC,  and not  file any  document  in a form to  which  Investor  reasonably
objects.  The Investor shall use its reasonable best efforts to comment upon the
Registration  Statement or any New Registration  Statement and any amendments or
supplements  thereto  within  two (2)  Trading  Days from the date the  Investor
receives the final version  thereof.  The Company shall furnish to the Investor,
without  charge any  correspondence  from the SEC or the staff of the SEC to the
Company or its representatives relating to the Registration Statement or any New
Registration Statement.

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            c. Upon request of the  Investor,  the Company  shall furnish to the
Investor,  (i)  promptly  after the same is prepared  and filed with the SEC, at
least one copy of such  registration  statement  and any  amendment(s)  thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits,  (ii) upon the  effectiveness of any registration
statement,  ten (10)  copies of the  prospectus  included  in such  registration
statement and all  amendments and  supplements  thereto (or such other number of
copies as the Investor may reasonably  request) and (iii) such other  documents,
including  copies of any  preliminary or final  prospectus,  as the Investor may
reasonably  request from time to time in order to facilitate the  disposition of
the Registrable Securities owned by the Investor.

            d. The Company shall use reasonable best efforts to (i) register and
qualify the  Registrable  Securities  covered by a registration  statement under
such other  securities  or "blue sky" laws of such  jurisdictions  in the United
States as the  Investor  reasonably  requests,  (ii)  prepare  and file in those
jurisdictions,   such  amendments  (including  post-effective   amendments)  and
supplements  to such  registrations  and  qualifications  as may be necessary to
maintain the effectiveness  thereof during the Registration  Period,  (iii) take
such other  actions as may be  necessary  to  maintain  such  registrations  and
qualifications in effect at all times during the Registration  Period,  and (iv)
take all  other  actions  reasonably  necessary  or  advisable  to  qualify  the
Registrable Securities for sale in such jurisdictions;  provided,  however, that
the  Company  shall not be required in  connection  therewith  or as a condition
thereto to (x)  qualify to do business  in any  jurisdiction  where it would not
otherwise be required to qualify but for this Section 3(d),  (y) subject  itself
to general taxation in any such  jurisdiction,  or (z) file a general consent to
service of process in any such  jurisdiction.  The Company shall promptly notify
the Investor who holds  Registrable  Securities of the receipt by the Company of
any  notification  with  respect  to  the  suspension  of  the  registration  or
qualification of any of the Registrable Securities for sale under the securities
or "blue sky" laws of any  jurisdiction  in the United  States or its receipt of
actual  notice of the  initiation  or  threatening  of any  proceeding  for such
purpose.

            e. As promptly as practicable  after becoming aware of such event or
facts,  the Company shall notify the Investor in writing of the happening of any
event or existence of such facts as a result of which the prospectus included in
any registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements  therein,  in light of the circumstances  under
which they were made,  not  misleading,  and promptly  prepare a  supplement  or
amendment to such  registration  statement  to correct such untrue  statement or
omission,  and deliver ten (10) copies of such  supplement  or  amendment to the
Investor  (or such  other  number  of  copies  as the  Investor  may  reasonably
request).  The Company  shall also  promptly  notify the Investor in writing (i)
when a prospectus or any prospectus  supplement or post-effective  amendment has
been filed, and when a registration  statement or any  post-effective  amendment
has become effective  (notification of such effectiveness  shall be delivered to
the Investor by facsimile on the same day of such effectiveness and by overnight
mail),  (ii) of any  request by the SEC for  amendments  or  supplements  to any
registration  statement or related prospectus or related information,  and (iii)
of the Company's reasonable  determination that a post-effective  amendment to a
registration statement would be appropriate.

            f. The Company shall use its reasonable  best efforts to prevent the
issuance  of  any  stop  order  or  other  suspension  of  effectiveness  of any
registration   statement,   or  the  suspension  of  the  qualification  of  any
Registrable  Securities  for sale in any  jurisdiction  and, if such an order or
suspension  is issued,  to obtain the  withdrawal of such order or suspension at
the earliest  possible moment and to notify the Investor of the issuance of such
order  and the  resolution  thereof  or its  receipt  of  actual  notice  of the
initiation or threat of any proceeding for such purpose.

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            g. The Company shall (i) cause all the Registrable  Securities to be
listed on each  securities  exchange  on which  securities  of the same class or
series  issued by the  Company are then  listed,  if any, if the listing of such
Registrable  Securities is then permitted  under the rules of such exchange,  or
(ii) secure  designation and quotation of all the Registrable  Securities on the
Principal Market. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section.

            h. The Company shall  cooperate  with the Investor to facilitate the
timely  preparation  and delivery of  certificates  (not bearing any restrictive
legend)  representing  the Registrable  Securities to be offered pursuant to any
registration  statement and enable such certificates to be in such denominations
or amounts as the Investor may  reasonably  request and registered in such names
as the Investor may request.

            i. The  Company  shall at all  times  provide a  transfer  agent and
registrar with respect to its Common Stock.

            j. If reasonably  requested by the  Investor,  the Company shall (i)
immediately  incorporate in a prospectus supplement or post-effective  amendment
such information as the Investor believes should be included therein relating to
the  sale  and  distribution  of  Registrable  Securities,   including,  without
limitation,  information  with respect to the number of  Registrable  Securities
being sold,  the purchase  price being paid  therefor and any other terms of the
offering of the Registrable  Securities;  (ii) make all required filings of such
prospectus  supplement  or  post-effective  amendment as soon as notified of the
matters to be  incorporated  in such  prospectus  supplement  or  post-effective
amendment;   and  (iii)  supplement  or  make  amendments  to  any  registration
statement.

            k. The Company  shall use its  reasonable  best efforts to cause the
Registrable   Securities  covered  by  the  any  registration  statement  to  be
registered with or approved by such other  governmental  agencies or authorities
as  may  be  necessary  to  consummate  the  disposition  of  such   Registrable
Securities.

            l. Within one (1) Trading Day after any registration statement which
includes the Registrable Securities is ordered effective by the SEC, the Company
shall deliver,  and shall cause legal counsel for the Company to deliver, to the
transfer  agent for such  Registrable  Securities  (with copies to the Investor)
confirmation that such registration statement has been declared effective by the
SEC in the form attached hereto as Exhibit A.

            m. The Company shall take all other reasonable  actions necessary to
expedite and facilitate  disposition  by the Investor of Registrable  Securities
pursuant to any registration statement.

      4.    OBLIGATIONS OF THE INVESTOR.

            a.  The  Company  shall  notify  the  Investor  in  writing  of  the
information the Company reasonably requires from the Investor in connection with
any registration statement hereunder.  The Investor shall furnish to the Company
such information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such  documents in connection  with such  registration  as the
Company may reasonably request.

            b. The Investor  agrees to cooperate  with the Company as reasonably
requested by the Company in connection  with the  preparation  and filing of any
registration statement hereunder.

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            c. The  Investor  agrees  that,  upon receipt of any notice from the
Company  of the  happening  of any  event  or  existence  of  facts  of the kind
described  in Section  3(f) or the first  sentence of 3(e),  the  Investor  will
immediately  discontinue  disposition of Registrable  Securities pursuant to any
registration   statement(s)  covering  such  Registrable  Securities  until  the
Investor's  receipt of the  copies of the  supplemented  or  amended  prospectus
contemplated  by Section  3(f) or the first  sentence  of 3(e).  Notwithstanding
anything to the contrary, the Company shall cause its transfer agent to promptly
deliver shares of Common Stock without any restrictive legend in accordance with
the terms of the Purchase  Agreement in connection  with any sale of Registrable
Securities  with  respect to which an Investor  has entered  into a contract for
sale  prior to the  Investor's  receipt  of a notice  from  the  Company  of the
happening  of any  event of the kind  described  in  Section  3(f) or the  first
sentence of 3(e) and for which the Investor has not yet settled.

      5.    EXPENSES OF REGISTRATION.

            All reasonable expenses,  other than sales or brokerage commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including,  without limitation, all registration,  listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company, shall be paid by the Company.

      6.    INDEMNIFICATION.

            a. To the fullest  extent  permitted by law, the Company  will,  and
hereby does, indemnify,  hold harmless and defend the Investor,  each Person, if
any, who controls the Investor, the members, the directors,  officers, partners,
employees, agents,  representatives of the Investor and each Person, if any, who
controls  the  Investor  within the  meaning  of the 1933 Act or the  Securities
Exchange  Act of 1934,  as  amended  (the "1934  ACT")  (each,  an  "INDEMNIFIED
PERSON"), against any losses, claims, damages,  liabilities,  judgments,  fines,
penalties,  charges,  costs,  attorneys'  fees,  amounts paid in  settlement  or
expenses, joint or several, (collectively,  "CLAIMS") incurred in investigating,
preparing  or  defending  any  action,   claim,   suit,   inquiry,   proceeding,
investigation  or appeal  taken  from the  foregoing  by or before  any court or
governmental,  administrative  or  other  regulatory  agency,  body or the  SEC,
whether pending or threatened,  whether or not an indemnified party is or may be
a party thereto ("INDEMNIFIED DAMAGES"), to which any of them may become subject
insofar  as such  Claims  (or  actions  or  proceedings,  whether  commenced  or
threatened,  in respect  thereof) arise out of or are based upon: (i) any untrue
statement or alleged  untrue  statement of a material  fact in the  Registration
Statement,  any  New  Registration  Statement  or any  post-effective  amendment
thereto  or in any  filing  made in  connection  with the  qualification  of the
offering  under the securities or other "blue sky" laws of any  jurisdiction  in
which Registrable Securities are offered ("BLUE SKY FILING"), or the omission or
alleged  omission  to state a material  fact  required  to be stated  therein or
necessary  to make the  statements  therein  not  misleading,  (ii)  any  untrue
statement or alleged untrue  statement of a material fact contained in the final
prospectus  (as  amended or  supplemented,  if the Company  files any  amendment
thereof or supplement  thereto with the SEC) or the omission or alleged omission
to state  therein  any  material  fact  necessary  to make the  statements  made
therein,  in light of the circumstances  under which the statements therein were
made, not misleading, (iii) any violation or alleged violation by the Company of
the 1933 Act, the 1934 Act, any other law, including,  without  limitation,  any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable  Securities pursuant to the Registration Statement or
any New Registration  Statement or (iv) any material violation by the Company of
this  Agreement  (the matters in the  foregoing  clauses (i) through (iv) being,
collectively, "VIOLATIONS"). The Company shall reimburse each Indemnified Person
promptly as such  expenses are  incurred and are due and payable,  for any legal
fees  or  other  reasonable   expenses  incurred  by  them  in  connection  with
investigating  or  defending  any such  Claim.  Notwithstanding  anything to the
contrary  contained  herein,  the  indemnification  agreement  contained in this
Section 6(a):  (i) shall not apply to a Claim by an  Indemnified  Person arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information  furnished in writing to the Company by such Indemnified Person
expressly  for  use in  connection  with  the  preparation  of the  Registration
Statement,  any New  Registration  Statement  or any such  amendment  thereof or
supplement  thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) or Section  3(e);  (ii) with respect to any  superceded
prospectus,  shall not inure to the  benefit  of any such  person  from whom the
person  asserting any such Claim purchased the  Registrable  Securities that are
the subject thereof (or to the benefit of any person controlling such person) if
the untrue  statement or omission of material fact  contained in the  superceded
prospectus  was  corrected  in  the  revised  prospectus,  as  then  amended  or
supplemented,  if such  revised  prospectus  was timely  made  available  by the
Company pursuant to Section 3(c) or Section 3(e), and the Indemnified Person was
promptly advised in writing not to use the incorrect prospectus prior to the use
giving rise to a violation and such  Indemnified  Person,  notwithstanding  such
advice,  used it; (iii) shall not be available to the extent such Claim is based
on a  failure  of the  Investor  to  deliver  or to  cause to be  delivered  the
prospectus  made  available by the Company,  if such  prospectus was timely made
available  by the Company  pursuant to Section  3(c) or Section  3(e);  and (iv)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected  without the prior written consent of the Company,  which consent shall
not be  unreasonably  withheld.  Such  indemnity  shall remain in full force and
effect regardless of any  investigation  made by or on behalf of the Indemnified
Person and shall  survive the  transfer  of the  Registrable  Securities  by the
Investor pursuant to Section 9.

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            b.  In  connection  with  the  Registration  Statement  or  any  New
Registration  Statement,  the  Investor  agrees  to  severally  and not  jointly
indemnify,  hold harmless and defend,  to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement or any New Registration Statement,
each Person, if any, who controls the Company within the meaning of the 1933 Act
or the 1934 Act  (collectively  and  together  with an  Indemnified  Person,  an
"INDEMNIFIED  PARTY"),  against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise,  insofar
as such  Claim  or  Indemnified  Damages  arise  out of or are  based  upon  any
Violation,  in each  case to the  extent,  and  only to the  extent,  that  such
Violation  occurs in reliance  upon and in conformity  with written  information
about the Investor set forth on Exhibit B attached  hereto and  furnished to the
Company by the Investor  expressly for use in connection with such  registration
statement;  and,  subject to Section 6(d), the Investor will reimburse any legal
or other expenses  reasonably  incurred by them in connection with investigating
or defending any such Claim;  provided,  however,  that the indemnity  agreement
contained in this Section 6(b) and the  agreement  with respect to  contribution
contained  in Section 7 shall not apply to  amounts  paid in  settlement  of any
Claim if such  settlement is effected  without the prior written  consent of the
Investor, which consent shall not be unreasonably withheld;  provided,  further,
however, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified  Damages as does not exceed the net proceeds to
the Investor as a result of the sale of Registrable  Securities pursuant to such
registration  statement.  Such  indemnity  shall remain in full force and effect
regardless of any  investigation  made by or on behalf of such Indemnified Party
and shall  survive the transfer of the  Registrable  Securities  by the Investor
pursuant to Section 9.

            c. Promptly  after receipt by an  Indemnified  Person or Indemnified
Party  under  this  Section  6 of notice of the  commencement  of any  action or
proceeding  (including any governmental action or proceeding) involving a Claim,
such  Indemnified  Person or  Indemnified  Party  shall,  if a Claim in  respect
thereof is to be made  against  any  indemnifying  party  under this  Section 6,
deliver to the indemnifying party a written notice of the commencement  thereof,
and the  indemnifying  party shall have the right to participate in, and, to the
extent the indemnifying  party so desires,  jointly with any other  indemnifying
party similarly  noticed,  to assume control of the defense thereof with counsel
mutually  satisfactory to the indemnifying  party and the Indemnified  Person or
the  Indemnified  Party,  as  the  case  may  be;  provided,  however,  that  an
Indemnified  Person or Indemnified  Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying  party, if, in
the  reasonable  opinion of counsel  retained  by the  indemnifying  party,  the
representation  by such counsel of the Indemnified  Person or Indemnified  Party
and the  indemnifying  party would be  inappropriate  due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party  represented  by such counsel in such  proceeding.  The  Indemnified
Party or Indemnified Person shall cooperate fully with the indemnifying party in
connection  with any  negotiation  or defense of any such action or claim by the
indemnifying  party and shall furnish to the indemnifying  party all information
reasonably  available  to the  Indemnified  Party or  Indemnified  Person  which
relates  to such  action  or  claim.  The  indemnifying  party  shall  keep  the
Indemnified  Party or  Indemnified  Person fully apprised at all times as to the
status of the defense or any settlement  negotiations  with respect thereto.  No
indemnifying  party shall be liable for any  settlement of any action,  claim or
proceeding  effected without its written consent,  provided,  however,  that the
indemnifying  party shall not  unreasonably  withhold,  delay or  condition  its
consent.  No  indemnifying  party shall,  without the consent of the Indemnified
Party or Indemnified Person,  consent to entry of any judgment or enter into any
settlement or other compromise  which does not include as an unconditional  term
thereof the giving by the  claimant or plaintiff  to such  Indemnified  Party or
Indemnified  Person of a release from all  liability in respect to such claim or
litigation.   Following   indemnification   as  provided  for   hereunder,   the
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified  Person with  respect to all third  parties,  firms or  corporations
relating to the matter for which  indemnification  has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified  Person or Indemnified  Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action.

                                       7
<PAGE>

            d. The  indemnification  required by this Section 6 shall be made by
periodic  payments of the amount thereof during the course of the  investigation
or defense, as and when bills are received or Indemnified Damages are incurred.

            e. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the  indemnifying  party or others,  and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.

      7.    CONTRIBUTION.

            To the  extent  any  indemnification  by an  indemnifying  party  is
prohibited or limited by law, the indemnifying  party agrees to make the maximum
contribution  with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable  Securities guilty of fraudulent  misrepresentation
(within  the  meaning of Section  11(f) of the 1933 Act)  shall be  entitled  to
contribution  from any seller of  Registrable  Securities  who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds  received by
such seller from the sale of such Registrable Securities.  The relative fault of
such  indemnifying  party and indemnified party shall be determined by reference
to, among other things, whether any action in question,  including any untrue or
alleged  untrue  statement  of a  material  fact,  has been taken or made by, or
relates to  information  supplied  by, such  indemnifying  party or  indemnified
party, and the parties'  relative intent,  knowledge,  access to information and
opportunity to correct or prevent such action, statement or omission.

                                       8
<PAGE>

      8.    REPORTS AND DISCLOSURE UNDER THE SECURITIES ACTS.

            With a view to making available to the Investor the benefits of Rule
144  promulgated  under the 1933 Act or any other  similar rule or regulation of
the SEC that may at any time  permit  the  Investor  to sell  securities  of the
Company to the public without  registration ("RULE 144"), the Company agrees, at
the Company's sole expense, to:

            a. make and keep public  information  available,  as those terms are
understood and defined in Rule 144;

            b.  file  with the SEC in a timely  manner  all  reports  and  other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such  requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and

            c. furnish to the Investor so long as the Investor owns  Registrable
Securities,  promptly upon request,  (i) a written statement by the Company that
it has complied with the reporting and or disclosure provisions of Rule 144, the
1933 Act and the 1934 Act,  (ii) a copy of the most recent  annual or  quarterly
report of the  Company  and such other  reports  and  documents  so filed by the
Company,  and (iii) such other  information  as may be  reasonably  requested to
permit  the  Investor  to sell  such  securities  pursuant  to Rule 144  without
registration.

            d. take such  additional  action as is  requested by the Investor to
enable the Investor to sell the  Registerable  Securities  pursuant to Rule 144,
including,  without  limitation,  delivering all such legal opinions,  consents,
certificates,  resolutions and  instructions to the Company's  Transfer Agent as
may be requested from time to time by the Investor and otherwise fully cooperate
with Investor and Investor's  broker to effect such sale of securities  pursuant
to Rule 144.

            The Company agrees that damages may be an inadequate  remedy for any
breach of the terms and  provisions of this Section 8 and that  Investor  shall,
whether or not it is pursuing  any  remedies  at law,  be entitled to  equitable
relief in the form of a preliminary or permanent injunctions,  without having to
post any bond or other  security,  upon any breach or  threatened  breach of any
such terms or provisions.

      9.    ASSIGNMENT OF REGISTRATION RIGHTS.

            The  Company  shall  not  assign  this  Agreement  or any  rights or
obligations  hereunder  without  the  prior  written  consent  of the  Investor,
including  by merger or  consolidation.  The  Investor may not assign its rights
under this Agreement  without the written consent of the Company,  other than to
an  affiliate  of the  Investor  controlled  by  Steven  G.  Martin or Joshua B.
Scheinfeld.

                                       9
<PAGE>

      10.   AMENDMENT OF REGISTRATION RIGHTS.

            Provisions  of this  Agreement  may be  amended  and the  observance
thereof may be waived (either  generally or in a particular  instance and either
retroactively  or  prospectively),  only with the written consent of the Company
and the Investor.

      11.   MISCELLANEOUS.

            a. A Person  is  deemed  to be a holder  of  Registrable  Securities
whenever  such  Person  owns or is  deemed  to own of  record  such  Registrable
Securities.  If  the  Company  receives  conflicting  instructions,  notices  or
elections  from  two or  more  Persons  with  respect  to the  same  Registrable
Securities,  the  Company  shall act upon the basis of  instructions,  notice or
election received from the registered owner of such Registrable Securities.

            b. Any notices,  consents,  waivers or other communications required
or  permitted to be given under the terms of this  Agreement  must be in writing
and will be deemed to have been  delivered:  (i) upon  receipt,  when  delivered
personally;  (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending  party);  or (iii) one (1) Trading Day after  deposit  with a nationally
recognized  overnight  delivery service,  in each case properly addressed to the
party to  receive  the  same.  The  addresses  and  facsimile  numbers  for such
communications shall be:

         If to the Company:

                  Zap
                  501 Fourth Street
                  Santa Rosa, California 95401
                  Telephone:        707-525-8658
                  Facsimile:        707-525-8692
                  Attention:        President

         With a copy to:

                  Richardson & Patel, LLP
                  10900 Wilshire Blvd. Ste 500
                  Los Angles, CA  90024
                  Telephone:        (310) 208-1182
                  Facsimile:        (310) 208-1154
                  Attention:        Nimish Patel

         If to the Investor:

                  Fusion Capital Fund II, LLC
                  222 Merchandise Mart Plaza, Suite 9-112
                  Chicago, IL 60654
                  Telephone:        312-644-6644
                  Facsimile:        312-644-6244
                  Attention:        Steven G.  Martin

or at such other address and/or facsimile number and/or to the attention of such
other person as the  recipient  party has  specified by written  notice given to
each other  party  three (3)  Trading  Days prior to the  effectiveness  of such
change.  Written  confirmation  of receipt  (A) given by the  recipient  of such
notice,   consent,   waiver  or  other   communication,   (B)   mechanically  or
electronically  generated by the sender's facsimile machine containing the time,
date,  recipient  facsimile  number  and an  image  of the  first  page  of such
transmission  or (C)  provided by a  nationally  recognized  overnight  delivery
service, shall be rebuttable evidence of personal service,  receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

                                       10
<PAGE>

            c.  Failure of any party to exercise  any right or remedy under this
Agreement or otherwise,  or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

            d. The corporate  laws of the State of  California  shall govern all
issues concerning the relative rights of the Company and its  stockholders.  All
other  questions   concerning  the  construction,   validity,   enforcement  and
interpretation  of this Agreement  shall be governed by the internal laws of the
State of Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other  jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of  Illinois.  Each party  hereby  irrevocably  submits  to the  exclusive
jurisdiction  of the state and federal courts  sitting the City of Chicago,  for
the adjudication of any dispute hereunder or in connection  herewith or with any
transaction  contemplated  hereby or discussed  herein,  and hereby  irrevocably
waives,  and agrees not to assert in any suit,  action or proceeding,  any claim
that it is not personally  subject to the  jurisdiction of any such court,  that
such suit, action or proceeding is brought in an inconvenient  forum or that the
venue of such  suit,  action  or  proceeding  is  improper.  Each  party  hereby
irrevocably  waives  personal  service of process and consents to process  being
served in any such suit,  action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient  service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve  process in any  manner  permitted  by law.  If any  provision  of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or  unenforceability  shall not affect the  validity  or  enforceability  of the
remainder  of  this   Agreement  in  that   jurisdiction   or  the  validity  or
enforceability  of any  provision of this  Agreement in any other  jurisdiction.
EACH PARTY HEREBY  IRREVOCABLY  WAIVES ANY RIGHT IT MAY HAVE,  AND AGREES NOT TO
REQUEST,  A JURY  TRIAL FOR THE  ADJUDICATION  OF ANY  DISPUTE  HEREUNDER  OR IN
CONNECTION  HEREWITH  OR  ARISING  OUT OF  THIS  AGREEMENT  OR  ANY  TRANSACTION
CONTEMPLATED HEREBY.

            e. This Agreement,  and the Purchase Agreement constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions,  promises, warranties or undertakings, other
than those set forth or referred to herein and therein.  This  Agreement and the
Purchase Agreement  supersede all prior agreements and understandings  among the
parties hereto with respect to the subject matter hereof and thereof.

            f. Subject to the  requirements  of Section 9, this Agreement  shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.

            g. The headings in this  Agreement are for  convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

            h. This Agreement may be executed in identical counterparts, each of
which shall be deemed an original but all of which shall  constitute one and the
same agreement.  This Agreement,  once executed by a party,  may be delivered to
the other party hereto by  facsimile  transmission  of a copy of this  Agreement
bearing the signature of the party so delivering this Agreement.

                                       11
<PAGE>

            i.  Each  party  shall  do and  perform,  or  cause  to be done  and
performed,  all such further acts and things,  and shall execute and deliver all
such other  agreements,  certificates,  instruments and documents,  as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

            j. The  language  used in this  Agreement  will be  deemed to be the
language  chosen by the parties to express  their mutual  intent and no rules of
strict construction will be applied against any party.

            k. This  Agreement is intended for the benefit of the parties hereto
and  their  respective  permitted  successors  and  assigns,  and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

                                   * * * * * *

                                       12
<PAGE>

      IN WITNESS  WHEREOF,  the parties  have caused  this  Registration  Rights
Agreement to be duly executed as of day and year first above written.

                                  THE COMPANY:
                                  ------------

                                  ZAP

                                  By: /s/ Steven Schneider
                                     ------------------------------------
                                  Name: Steven Schneider
                                  Title: Chief Executive Officer

                                  BUYER:
                                  ------

                                  FUSION CAPITAL FUND II, LLC
                                  BY: FUSION CAPITAL PARTNERS, LLC
                                  BY: SGM HOLDINGS CORP.

                                  By: /s/ Steven Martin
                                     ------------------------------------
                                  Name: Steven Martin
                                  Title: President

                                       13FORM OF WARRANT

THIS WARRANT (THIS  "WARRANT") HAS NOT BEEN REGISTERED  UNDER THE SECURITIES ACT
OF 1933,  AS AMENDED  (THE "ACT"),  OR ANY STATE  SECURITIES  LAW.  NEITHER THIS
WARRANT NOR ANY WARRANT SHARES ISSUABLE UPON EXERCISE HEREOF NOR ANY INTEREST OR
PARTICIPATION  HEREIN OR  THEREIN  MAY BE SOLD,  ASSIGNED,  MORTGAGED,  PLEDGED,
HYPOTHECATED,  ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE
ACT AND APPLICABLE STATE SECURITIES LAWS.

                          ZAP, A CALIFORNIA CORPORATION

                          COMMON STOCK PURCHASE WARRANT

ORIGINAL ISSUE DATE: JULY 20, 2004                              WARRANT NO. ____

      This  Warrant is issued in  connection  with and  pursuant to that certain
Common Stock Purchase Agreement (the "PURCHASE  AGREEMENT") dated as of July 20,
2004, by and between ZAP, a California  corporation  (the  "Company") and FUSION
CAPITAL FUND II, LLC (the "Buyer").

      FOR VALUE  RECEIVED,  the Buyer,  the  registered  holder  hereof,  or its
permitted  assigns  (the  "Holder"),  is entitled to purchase  from the Company,
during  the  period   specified  in  this   Warrant,   500,000  fully  paid  and
non-assessable  shares (subject to adjustment as hereinafter provided) of Common
Stock (the  "WARRANT  SHARES"),  of the Company at the purchase  price per share
provided in Section 1.2 of this  Warrant (the  "WARRANT  EXERCISE  PRICE"),  all
subject to the terms and  conditions  set forth in this  Warrant.  All terms not
otherwise defined herein shall have the meaning ascribed to them in the Purchase
Agreement.

SECTION 1. PERIOD FOR EXERCISE AND EXERCISE PRICE.

      1.1 PERIOD FOR EXERCISE.  The right to purchase  shares of Warrant  Shares
represented by this Warrant shall be immediately  exercisable,  and shall expire
at 5:00 p.m., Chicago local time, July 20, 2009, (the "EXPIRATION  DATE").  From
and after the  Expiration  Date  this  Warrant  shall be null and void and of no
further force or effect whatsoever.

      1.2  WARRANT  EXERCISE  PRICE.  The  Warrant  Exercise  Price per share of
Warrant  Shares  shall be  [$2.50]  [$2.50]  [$3.50]  [$4.50]  [5.50]  per share
(subject to adjustment as hereinafter provided).

                                       1
<PAGE>

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) 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. 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).  In the  event  that  prior  to the
Expiration  Date, (i) the Closing Sale Price of the Common Stock is greater than
$1.25 plus the Warrant  Exercise  Price for ten (10)  consecutive  Trading  Days
("Measurement  Period"),  (ii) no Event of Default has  occurred,  and (iii) the
Warrant  Shares can be issued to the Holder  without any transfer  restrictions,
then the Company may deliver written notice to the Holder,  not later than three
(3) days after the last Trading Day of the  Measurement  Period,  requiring  the
Holder to exercise the  unexercised  portion of this Warrant in full  ("Exercise
Demand  Notice").  An Exercise Demand Notice shall not be valid unless delivered
within such 3 day period. Upon receipt of the Exercise Demand Notice, the Holder
shall within twenty (20) Trading Days exercise the  unexercised  portion of this
Warrant in accordance  with this Section 2.1.  Upon receipt of a valid  Exercise
Demand Notice, in the event that the Warrant is not exercised by delivery of the
Warrant and Warrant  Exercise  Form within such twenty (20)  Trading Day period,
the Warrant shall expire.

      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
<PAGE>

      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.  At any time a registration  statement  registering
the Warrant  Shares is not effective  and  available for use by the Holder,  the
Holder may, by providing  notice  thereof to the Company  along with the Warrant
Exercise  Form,  elect to exercise  the  Warrant for a number of Warrant  Shares
determined in accordance with the following formula:

                     X = Y(A-B)
                         ------
                           A

                     Where:

                        X = The  number  of  Warrant  Shares to be issued to the
                        Holder.

                        Y = The number of Warrant Shares  purchasable under this
                        Warrant (at the date of such exercise).

                        A = The fair market  value of one share of Common  Stock
                        (or  other  security  for  which  the  Warrant  is  then
                        exercisable at the date of such exercise).

                        B =  Exercise  Price  (as  adjusted  to the date of such
                        exercise).

For purposes of this Section 2.4, the "fair market value" per share shall be the
arithmetic  average  of  closing  sale  prices of the  Common  Stock for the one
Trading Day immediately prior to the notice of exercise of the Warrant.

      SECTION 3. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES.  The Warrant
Exercise Price and the kind of securities  issuable upon exercise of the Warrant
shall be adjusted from time to time as follows:

      3.1 SUBDIVISION OR COMBINATION OF SHARES (STOCK SPLITS). If the Company at
any time effects a subdivision or combination  of the  outstanding  Common Stock
(through a stock  split or  otherwise),  the number of shares of Warrant  Shares
shall be  increased,  in the case of a  subdivision,  or the number of shares of
Warrant  Shares shall be decreased,  in the case of a  combination,  in the same
proportions  as the  Common  Stock  is  subdivided  or  combined,  in each  case
effective  automatically upon, and simultaneously with, the effectiveness of the
subdivision or combination which gives rise to the adjustment.

                                       3
<PAGE>

      3.2 STOCK DIVIDENDS.  If the Company at any time pays a dividend, or makes
any other  distribution,  to holders of Common Stock payable in shares of Common
Stock, or fixes a record date for the  determination  of holders of Common Stock
entitled to receive a dividend or other distribution payable in shares of Common
Stock,  then the number of shares of Warrant Shares in effect  immediately prior
to such action shall be proportionately  increased so that the Holder hereof may
receive upon  exercise of the Warrant the  aggregate  number of shares of Common
Stock which he or it would have owned  immediately  following such action if the
Warrant had been  exercised  immediately  prior to such action.  The  adjustment
shall  become  effective  immediately  as of the date the  Company  shall take a
record of the  holders of its Common  Stock for the  purpose of  receiving  such
dividend or distribution (or if no such record is taken, as of the effectiveness
of such dividend or distribution).

      3.3 RECLASSIFICATION, CONSOLIDATION OR MERGER. If at any time, as a result
of:

      (a)  a  capital   reorganization   or   reclassification   (other  than  a
subdivision,  combination or dividend provided for elsewhere in this Section 3),
or

      (b) a merger or  consolidation  of the Company  with  another  corporation
(whether or not the Company is the surviving corporation),

the Common Stock issuable upon exercise of the Warrants shall be changed into or
exchanged  for the same or a different  number of shares of any class or classes
of  stock  of  the  Company  or  any  other  corporation,  or  other  securities
convertible  into  such  shares,   then,  as  a  part  of  such  reorganization,
reclassification, merger or consolidation, appropriate adjustments shall be made
in the terms of the Warrants (or of any  securities  into which the Warrants are
exercised or for which the Warrants are exchanged), so that:

      (y) the  Holders  of  Warrants  or of  such  substitute  securities  shall
thereafter  be  entitled to receive,  upon  exercise of the  Warrants or of such
substitute securities, the kind and amount of shares of stock, other securities,
money and property  which such Holders  would have  received at the time of such
capital  reorganization,  reclassification,  merger, or  consolidation,  if such
Holders  had  exercised  their  Warrants   immediately  prior  to  such  capital
reorganization, reclassification, merger, or consolidation, and

      (z) the  Warrants  or  such  substitute  securities  shall  thereafter  be
adjusted on terms as nearly  equivalent as may be practicable to the adjustments
theretofore provided in this Section 3.3.

No consolidation or merger in which the Company is not the surviving corporation
shall be consummated  unless the surviving  corporation shall agree, in writing,
to the  provisions of this Section 3.3. The provisions of this Section 3.3 shall
similarly  apply  to  successive  capital  reorganizations,   reclassifications,
mergers and consolidations.

      3.4 OTHER ACTION  AFFECTING COMMON STOCK. If at any time the Company takes
any action affecting its Common Stock,  other than an action described in any of
Sections  3.1 - 3.3  which,  in the  opinion  of the Board of  Directors  of the
Company (the "BOARD"),  would have an adverse effect upon the exercise rights of
the Warrants, the Warrant Exercise Price or the kind of securities issuable upon
exercise of the Warrants,  or both, shall be adjusted in such manner and at such
time  as  the  Board  may  in  good  faith  determine  to be  equitable  in  the
circumstances; provided, however, that the purpose of this Section is to prevent
the Company  from taking any action  which has the effect of diluting the number
of shares of Warrant Shares issuable upon exercise of this Warrant.

                                       4
<PAGE>

      3.5 NOTICE OF ADJUSTMENT  EVENTS.  Whenever the Company  contemplates  the
occurrence of an event which would give rise to  adjustments  under this Section
3, the Company shall mail to each Warrant Holder,  at least 20 days prior to the
record  date  with  respect  to such  event  or,  if no  record  date  shall  be
established,  at least 20 days prior to such event, a notice  specifying (i) the
nature of the contemplated  event, and (ii) the date on which any such record is
to be taken for the  purpose  of such  event,  and (iii) the date on which  such
event is expected to become effective, and (iv) the time, if any is to be fixed,
when the  holders  of  record of Common  Stock  (or other  securities)  shall be
entitled to exchange  their  shares of Common  Stock (or other  securities)  for
securities or other property deliverable in connection with such event.

      3.6  NOTICE OF  ADJUSTMENTS.  Whenever  the kind or  number of  securities
issuable upon exercise of the Warrants,  or both, shall be adjusted  pursuant to
Section 3, the Company shall deliver a certificate signed by its Chief Executive
Officer and by its Chief Financial Officer, setting forth, in reasonable detail,
the event requiring the adjustment,  the amount of the adjustment, the method by
which such  adjustment was  calculated  (including a description of the basis on
which the Board made any  determination  hereunder),  and the  Warrant  Exercise
Price and the kind of securities  issuable  upon exercise of the Warrants  after
giving effect to such adjustment,  and shall cause copies of such certificate to
be mailed (by first class mail postage  prepaid) to each Warrant Holder promptly
after each adjustment.

      SECTION 4.  RESERVATION  OF STOCK,  ETC. The Company  covenants and agrees
that it will at all times have  authorized,  reserve and keep available,  solely
for  issuance  and delivery  upon the  exercise of this  Warrant,  the number of
shares of Warrant  Shares from time to time  issuable  upon the exercise of this
Warrant.  The Company further covenants and agrees that this Warrant is, and any
Warrants  issued in  substitution  for or  replacement  of this  Warrant and all
Warrant Shares, will upon issuance be duly authorized and validly issued and, in
the case of Warrant Shares,  upon issuance will be fully paid and non-assessable
and free from all  preemptive  rights of any  stockholder,  and from all  taxes,
liens and charges with respect to the issue thereof (other than transfer  taxes)
and,  if the  Common  Stock  of the  Company  is  then  listed  on any  national
securities  exchanges  (as defined in the Exchange Act of 1934,  as amended (the
"EXCHANGE ACT")) or quoted on NASDAQ,  shall be, subject to the restrictions set
forth in Section 5, duly  listed or quoted  thereon,  as the case may be. In the
event that the number of  authorized  but  unissued  shares of such Common Stock
shall not be  sufficient  to effect the  exercise  of this entire  Warrant  into
Warrant Shares, then in addition to such other remedies as shall be available to
the Holder of this  Warrant,  the Company  shall  promptly  take such  corporate
action as may be  necessary to increase its  authorized  but unissued  shares of
such  Common  Stock to such  number of shares  as shall be  sufficient  for such
purpose.

                                       5
<PAGE>

SECTION 5. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.

      5.1 OWNERSHIP OF WARRANTS.  The Company may treat the person in whose name
any Warrant is registered  on the register  kept at the principal  office of the
Company as the owner and Holder  thereof for all purposes,  notwithstanding  any
notice to the contrary,  but in all events  recognizing  any  transfers  made in
accordance with the terms of this Warrant.

      5.2 TRANSFER AND EXCHANGE OF WARRANTS.  Upon the surrender of any Warrant,
properly endorsed, for registration of transfer or for exchange at the principal
office of the  Company,  the Company at its expense  will execute and deliver to
the Holder thereof,  upon the order of such Holder, a new Warrant or Warrants of
like tenor,  in the name of such  Holder or as such Holder may direct,  for such
number of shares with  respect to each such  Warrant,  the  aggregate  number of
shares in any event not to exceed the number of shares for which the  Warrant so
surrendered had not been exercised.

      5.3 REGISTRATION RIGHTS. THE HOLDER OF THIS WARRANT IS ENTITLED TO CERTAIN
REGISTRATION  RIGHTS WITH RESPECT TO THE WARRANT  SHARES  ISSUABLE UPON EXERCISE
THEREOF.  SAID  REGISTRATION  RIGHTS  ARE SET  FORTH  IN A  REGISTRATION  RIGHTS
AGREEMENT  BY AND  BETWEEN  THE  BUYER  AND  THE  COMPANY.  if the  registration
statement  contemplated in the registration rights agreement is not effective at
the time of any issuance and the shares are not exempt from  registration  under
Rule 144, the Warrant Shares shall be issued in certificated form and shall bear
the following restrictive legend:

            THE  SECURITIES  REPRESENTED  BY  THIS  CERTIFICATE  HAVE  NOT  BEEN
            REGISTERED  UNDER  THE  SECURITIES  ACT  OF  1933,  AS  AMENDED,  OR
            APPLICABLE  STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED
            FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
            ASSIGNED IN THE ABSENCE OF AN EFFECTIVE  REGISTRATION  STATEMENT FOR
            THE  SECURITIES  UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED,  OR
            APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF HOLDER'S COUNSEL,
            IN A CUSTOMARY  FORM,  THAT  REGISTRATION IS NOT REQUIRED UNDER SAID
            ACT OR APPLICABLE  STATE  SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
            RULE 144 UNDER SAID ACT.

      5.4 EXEMPTION FROM REGISTRATION. If an opinion of Buyer's counsel provides
that  registration is not required for the proposed exercise or transfer of this
Warrant or the  proposed  transfer of the Warrant  Shares and that the  proposed
exercise or transfer in the absence of registration would require the Company to
take any action including executing and filing forms or other documents with the
Securities and Exchange  Commission (the "SEC") or any state securities  agency,
or delivering to the Holder any form or document in order to establish the right
of the Holder to  effectuate  the  proposed  exercise or  transfer,  the Company
agrees promptly, at its expense, to take any such action; and provided, further,
that the Company will  reimburse the Holder in full for any expenses  (including
but not limited to the fees and  disbursements  of such  counsel,  but excluding
brokers'  commissions) incurred by the Holder or owner of Warrant Shares on his,
her or its behalf in connection with such exercise or transfer of the Warrant or
transfer of Warrant Shares.

                                       6
<PAGE>

SECTION 6. NO RIGHTS OR LIABILITIES AS  SHAREHOLDER.  Nothing  contained in this
Warrant shall be construed as conferring  upon the Holder hereof any rights as a
shareholder  of the Company or as  imposing  any  liabilities  on such holder to
purchase  any  securities  or as a  shareholder  of the  Company,  whether  such
liabilities are asserted by the Company or by creditors of the Company.

SECTION 7. RULE 144 SALES.  At the  request of any Holder who  proposes  to sell
securities  in  compliance  with  Rule  144 of the  SEC,  the  Company  will (i)
forthwith  furnish to such Holder a written  statement  of  compliance  with the
filing  requirements  of the SEC as set forth in Rule 144,  as such rules may be
amended from time to time and (ii) make  available to the public and such Holder
such information as will enable the Holder to make sales pursuant to Rule 144.

SECTION 8. MISCELLANEOUS.

8.1 AMENDMENT AND WAIVER.  This Warrant may be amended with,  and only with, the
written consent of the Company and the Holder. Any waiver of any term, covenant,
agreement or condition contained in this Warrant shall not be deemed a waiver of
any other term, covenant,  agreement or condition, and any waiver of any default
in any such term, covenant,  agreement or condition shall not be deemed a waiver
of any later  default  thereof or of any  default of any other  term,  covenant,
agreement or condition.

      8.2   REPRESENTATIONS    AND   WARRANTIES   TO   SURVIVE   CLOSING.    All
representations,  warranties  and covenants  contained  herein shall survive the
execution  and delivery of this  Warrant and the issuance of any Warrant  Shares
upon the exercise hereof.

      8.3  SEVERABILITY.  In the  event  that  any  court  or  any  governmental
authority  or agency  declares all or any part of any Section of this Warrant to
be unlawful or  invalid,  such  unlawfulness  or  invalidity  shall not serve to
invalidate  any other  Section  of this  Warrant,  and in the event  that only a
portion  of  any  Section  is  so  declared  to be  unlawful  or  invalid,  such
unlawfulness  or invalidity  shall not serve to  invalidate  the balance of such
Section.

      8.4 BINDING EFFECT; NO THIRD PARTY  BENEFICIARIES.  All provisions of this
Warrant  shall be binding upon and inure to the benefit of the parties and their
respective heirs, legatees,  executors,  administrators,  legal representatives,
successors,  and  permitted  transferees  and assigns.  No person other than the
holder of this Warrant and the Company shall have any legal or equitable  right,
remedy or claim under or in respect of, this Warrant.

      8.5  NOTICES.  Any  notices,  consents,  waivers  or other  communications
required or  permitted  to be given under the terms of this  Warrant  must be in
writing  and will be deemed  to have  been  delivered:  (i) upon  receipt,  when
delivered  personally;  (ii)  upon  receipt,  when sent by  facsimile  (provided
confirmation of transmission  is  mechanically or  electronically  generated and
kept on file by the sending party);  or (iii) one Trading Day after deposit with
a  nationally  recognized  overnight  delivery  service,  in each case  properly
addressed to the party to receive the same. The addresses and facsimile  numbers
for such communications shall be:

                                       7
<PAGE>

           If to the Company:

                     ZAP
                     501 Fourth Street
                     Santa Rosa, California 95401
                     Telephone:      707-525-8658
                     Facsimile:      707-525-8692
                     Attention:      President

           With a copy to:

                     Richardson & Patel LLP
                     10900 Wilshire Blvd. Ste 500
                     Los Angles, CA  90024
                     Telephone:    (310) 208-1182
                     Facsimile:    (310) 208-1154
                     Attention:      Nimish Patel

           If to the Buyer:

                     Fusion Capital Fund II, LLC
                     222 Merchandise Mart Plaza, Suite 9-112
                     Chicago, IL 60654
                     Telephone:      312-644-6644
                     Facsimile:      312-644-6244
                     Attention:  Steven G. Martin

           If to the Transfer Agent:

                     Computershare Trust Company
                     350 Indiana Street, #800
                     Golden, CO 80401
                     Telephone:    (303) 262-0600
                     Facsimile:    (303) 262-0700
                     Attention:     Janine DeMark

or at such other address and/or facsimile number and/or to the attention of such
other person as the  recipient  party has  specified by written  notice given to
each other  party  three (3)  Trading  Days prior to the  effectiveness  of such
change.  Written  confirmation  of receipt  (A) given by the  recipient  of such
notice,   consent,   waiver  or  other   communication,   (B)   mechanically  or
electronically  generated by the sender's facsimile machine containing the time,
date, and recipient facsimile number or (C) provided by a nationally  recognized
overnight  delivery service,  shall be rebuttable  evidence of personal service,
receipt by facsimile or receipt from a nationally  recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.

                                       8
<PAGE>

      8.6 TAXES,  COSTS AND EXPENSES.  The Company  covenants and agrees that it
will pay when due and payable any and all federal,  state and local taxes (other
than  income  taxes) and any other  costs and  expenses  which may be payable in
respect of the preparation,  issuance, delivery, exercise, surrender or transfer
of this  Warrant  pursuant to the terms of this  Warrant or the  issuance of any
shares  of  Warrant  Shares  as a  result  thereof.  If any  suit or  action  is
instituted  or attorneys  employed to enforce this Warrant or any part  thereof,
the  Company  promises  and  agrees  to pay all costs  and  expenses  associated
therewith, including reasonable attorneys' fees and court costs.

      8.7 GOVERNING  LAW;  JURISDICTION;  JURY TRIAL.  The corporate laws of the
State of California  shall govern all issues  concerning the relative  rights of
the  Company  and  its   shareholders.   All  other  questions   concerning  the
construction,  validity, enforcement and interpretation of this Warrant shall be
governed by the internal laws of the State of Illinois, without giving effect to
any choice of law or conflict of law  provision or rule (whether of the State of
Illinois or any other  jurisdictions)  that would cause the  application  of the
laws of any  jurisdictions  other than the State of Illinois.  Each party hereby
irrevocably  submits  to the  exclusive  jurisdiction  of the state and  federal
courts  sitting in the City of  Chicago,  for the  adjudication  of any  dispute
hereunder or under the other Transaction  Documents or in connection herewith or
therewith, or with any transaction  contemplated hereby or discussed herein, and
hereby  irrevocably  waives,  and  agrees  not to assert in any suit,  action or
proceeding,  any claim that it is not personally  subject to the jurisdiction of
any  such  court,  that  such  suit,  action  or  proceeding  is  brought  in an
inconvenient  forum or that the  venue of such  suit,  action or  proceeding  is
improper.  Each party hereby  irrevocably waives personal service of process and
consents  to process  being  served in any such suit,  action or  proceeding  by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall be deemed
to limit in any way any right to serve  process in any manner  permitted by law.
EACH PARTY HEREBY  IRREVOCABLY  WAIVES ANY RIGHT IT MAY HAVE,  AND AGREES NOT TO
REQUEST,  A JURY  TRIAL FOR THE  ADJUDICATION  OF ANY  DISPUTE  HEREUNDER  OR IN
CONNECTION  HEREWITH  OR  ARISING  OUT OF  THIS  AGREEMENT  OR  ANY  TRANSACTION
CONTEMPLATED HEREBY.

      8.8 LOSS OF WARRANT.  Upon  receipt by the Company of evidence  reasonably
satisfactory  to it of the  loss,  theft,  destruction  or  mutilation  of  this
Warrant,  and (in the case of loss, theft or destruction) of  indemnification in
form and substance acceptable to the Company in its reasonable  discretion,  and
upon surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date.

      8.9  ENTIRE  AGREEMENT.  This  Warrant,  the  Purchase  Agreement  and the
Registration  Rights  Agreement  of even  date  herewith  represent  the  entire
agreement and  understanding  between the parties  concerning the subject matter
hereof and supercede all prior and contemporaneous  agreements,  understandings,
representations and warranties with respect thereto.

                                       9
<PAGE>

      8.10 HEADINGS.  The headings used herein are used for convenience only and
are not to be considered in construing or interpreting this Warrant.

                                         COMPANY:

                                         ZAP

                                         BY:______________________

                                         NAME____________________

                                         TITLE: CHIEF EXECUTIVE OFFICER

                                       10

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