EXHIBIT 10.1
------------
MUTUAL TERMINATION AGREEMENT
----------------------------
MUTUAL TERMINATION AGREEMENT (the "Agreement"), dated as of February
22, 2005, by and between ZAP, a California corporation, (the "Company"), and
FUSION CAPITAL FUND II, LLC, an Illinois limited liability company (the
"Buyer").
WHEREAS, the Buyer and the Company mutually desire to terminate the
Common Stock Purchase Agreement dated as of July 22, 2004, by and between the
Company and the Buyer (the "Purchase Agreement"). All capitalized terms used in
this Agreement that are not defined in this Agreement shall have the meanings
set forth in the Purchase Agreement;
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. RESCISSION OF THE INITIAL PURCHASE; TERMINATION OF THE
PURCHASE AGREEMENT.
The Company and the Buyer hereby rescind the purchase and sale of the
Initial Purchase Shares. Specifically, immediately upon the execution of this
Agreement, by both the Company and the Buyer, the Parties shall do the
following: (A) Buyer shall deliver the $200,000 Initial Purchase Shares ("IPS")
to its counsel Jenner & Block LLP to hold in trust; (B) the Company shall wire
transfer $500,000.00 to Buyer upon receipt of notification that Buyer has
delivered and Jenner & Block LLP has received the IPS pursuant to subparagraph A
above; and (C) Jenner & Block LLP shall forward the IPS to the Transfer Agent
for cancellation. Furthermore, the Purchase Agreement, and the other Transaction
Documents between the Buyer and the Company related to the Purchase Agreement
(other than this Agreement, the Warrants and that certain Registration Rights
Agreement between the Company and Buyer dated July 22, 2004, the "Registration
Rights Agreement") are hereby terminated effective as of the date hereof and any
and all rights, duties and obligations arising thereunder or in connection with
the Purchase Agreement, and the Transaction Documents (other then the Warrants,
the Registration Rights Agreement and this Agreement) are now and hereafter
fully and finally terminated, provided, however, that (i) the representations
and warranties of the Buyer and Company contained in Sections 2 and 3 of the
Purchase Agreement, (ii) the indemnification provisions set forth in Section 8
of the Purchase Agreement, (iii) the agreements and covenants set forth in
Section 4(h) and Section 11 of the Purchase Agreement, (iv) the Warrants, and
(v) the Registration Rights Agreement, shall survive such termination and shall
continue in full force and effect except as expressly amended hereby,
(collectively, the "Surviving Obligations").
2. MUTUAL GENERAL RELEASE.
The Company and the Buyer hereby release and forever discharge each
party hereto and its predecessors, successors and assigns, employees,
shareholders, partners, managing members, officers, directors, agents,
subsidiaries, divisions and affiliates from any and all claims, causes of
actions, suits, demands, debts, dues, accounts, bonds, covenants, contracts,
agreements, judgments whatsoever in law or in equity, whether known or unknown,
including, but not limited to, any claim arising out of or relating to the
transactions described in the Purchase Agreement and Transaction Documents which
any party hereto had, now has or which its heirs, executors, administrators,
successors or assigns, or any of them, hereafter can, shall or may have, against
any party hereto or such parties predecessors, successors and assigns,
employees, shareholders, partners, managing members, officers, directors,
agents, subsidiaries, divisions and affiliates, for or by reason of any cause,
matter or thing whatsoever, whether arising prior to, on or after the date
hereof. Provided, however, that (i) this Agreement and (ii) the Surviving
Obligations including, but not limited to, the Registration Rights Agreement,
shall continue in full force and effect as the legal, valid and binding
obligation of each party thereto enforceable against each such party in
accordance with its terms, and no claims arising under or in connection with
this Agreement or the Surviving Obligations, on or after the date of this
Agreement, are hereby released.
3. WARRANT EXERCISES; AMENDMENT OF WARRANTS.
The Buyer and the Company agree that none of the Warrants were
exercised prior to the date hereof. The Company shall immediately return to the
Buyer the original of the following Warrants previously delivered by the Buyer
to the Company: Warrant Xx. 00000, Xxxxxxx Xx. 00000 and Warrant No. 00301.
Section 2 of each of the five Warrants is hereby amended and restated in its
entirety as follows:
SECTION 2. EXERCISE OF WARRANT.
2.1 MANNER OF EXERCISE. The Holder may exercise this Warrant,
in whole or in part, immediately, but not after the Expiration Date,
during normal business hours on any Trading Day by surrendering this
Warrant to the Company at the principal office of the Company,
accompanied by a Warrant Exercise Form in substantially the form
annexed hereto duly executed by the Buyer and by payment of the Warrant
Exercise Price for the number of shares of Warrant Shares for which
this Warrant is then exercisable, either (i) in immediately available
funds, (ii) by delivery of an instrument evidencing indebtedness owing
by the Company to the Holder in the appropriate amount, (iii) at any
time on or after September 1, 2005 by authorizing the Company to retain
shares of Common Stock which would otherwise be issuable upon exercise
of this Warrant in accordance with Section 2.4 hereof or (iv) in a
combination of (i), (ii) or (iii) above, provided, however, that in no
event shall the Holder be entitled to exercise this Warrant for a
number of Warrant Shares in excess of that number of Warrant Shares
which, upon giving effect to such exercise, would cause the aggregate
number of shares of Common Stock beneficially owned by the Holder to
exceed 9.9% of the outstanding shares of the Common Stock following
such exercise.
For purposes of the foregoing proviso, the aggregate number of shares
of Common Stock beneficially owned by the Holder shall include the
number of shares of Common Stock issuable upon exercise of this Warrant
with respect to which determination of such proviso is being made, but
shall exclude the shares of Common Stock which would be issuable upon
(i) exercise of the remaining, unexercised Warrants beneficially owned
by the Holder and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company beneficially
owned by the Holder subject to a limitation on conversion or exercise
analogous to the limitation contained herein. Except as set forth in
the preceding sentence, for purposes of this paragraph, beneficial
ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended. The Holder may waive the
foregoing limitation by written notice to the Company upon not less
than 61 days prior written notice (with such waiver taking effect only
upon the expiration of such 61 day notice period).
2.2 WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant
shall be deemed to have been effected on the day on which all
requirements of Section 2.1 shall have been met with respect to such
exercise. At such time the person in whose name any certificate for
shares of Warrant Shares shall be issuable upon such exercise shall be
deemed for all corporate purposes to have become the Holder of record
of such shares, regardless of the actual delivery of certificates
evidencing such shares.
2.3 DELIVERY OF STOCK CERTIFICATES. As soon as practicable
after each exercise of this Warrant, and in any event no later than 3
days after such exercise, the Company at its expense will issue Warrant
Shares via credit to the Buyer's account with DTC for the number of
Warrant Shares to which such Buyer is entitled upon such Buyer's
submission of the applicable Warrant Exercise Form or, if the Transfer
Agent is not participating in The DTC Fast Automated Securities
Transfer Program and DWAC system, issue and surrender to the address as
specified in the Warrant Exercise Form, a certificate, registered in
the name of the Buyer or its designee, for the number of shares of
Common Stock to which the Buyer shall be entitled to upon such
exercise.
2.4 CASHLESS EXERCISE. In the event that the Registration
Statement (as defined in the Registration Rights Agreement) is not
declared effective by the SEC on or before September 1, 2005, or in the
event that the Registration Statement is declared effective by the SEC
on or before September 1, 2005, and at any time after the Registration
Statement is declared effective, the Registration Statement ceases to
remain continuously effective and available for use by the Buyer as to
any of the Warrant Shares, the Signing Shares or the Commitment Shares,
then at any time 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 closing sale price of the Common Stock for the one Trading
Day immediately prior to the notice of exercise of the Warrant.
4. WAIVER OF LIQUIDATED DAMAGES; AMENDMENT TO THE REGISTRATION
RIGHTS AGREEMENT.
The Buyer hereby waives its rights to collect any liquidated damages
through the date hereof for the Company's failure to file the Registration
Statement. The Company shall not accrue any additional liquidated damages for
its failure to file the Registration Statement. Section 2 (a) of the
Registration Rights Agreement is hereby amended and restated in its entirety as
follows:
a. Mandatory Registration. The Company shall use its best
efforts to file with the SEC the Registration Statement as soon as
practicable. 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 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 the Investor shall have
sold all the Registrable Securities (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 The
Company shall not file another registration statement registering
securities of the Company until a Registration Statement registering
the Warrant Shares, the Signing Shares and the Commitment Shares has
been filed with the SEC.
5. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All 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 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.
(b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. 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.
(e) Notices. 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 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
000 Xxxxxx Xxxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: President
If to the Buyer:
Fusion Capital Fund II, LLC
000 Xxxxxxxxxxx Xxxx Xxxxx, Xxxxx 0-000
Xxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxxxx
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.
(f) Publicity; Non-Disclosure. The Company agrees to issue the
press release set forth on Exhibit A hereto by no later than 9:00 am Eastern
Time, February 24, 2005. The Company also agrees to file with the SEC the Report
on Form 8-K set forth on Exhibit B hereto by no later than 5:00 pm Eastern Time,
February 23, 2005. Both the Buyer and the Company hereby unconditionally agree
that without the prior written consent of the other party, neither party shall
issue any other press release or make any other public disclosure of any kind
whatsoever with respect to (i) the other party, its employees, its managers, or
any of its affiliates, (ii) the Purchase Agreement or the transactions
contemplated under the Purchase Agreement, (iii) this Agreement, and (iv) the
termination of the Purchase Agreement. In addition, the both the Buyer and the
Company unconditionally agree that without the prior written consent of the
other party, neither party shall make any other written or verbal communication
of any kind whatsoever with respect to (i) the other party, its employees, its
managers, or any of its affiliates, (ii) the Purchase Agreement or the
transactions contemplated under the Purchase Agreement, (iii) this Agreement,
and (iv) the termination of the Purchase Agreement.
(g) Rule 144. With a view to making available to the Buyer 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 Buyer to sell any of its
shares of Common Stock to the public without registration ("Rule 144"), the
Company agrees to fully cooperate in the prompt removal of
restrictive legend from any Common Stock share certificates delivered to the
Company by the Buyer together with an opinion of Buyer's counsel in customary
form that registration is not required under the Securities Act of 1933 or
similar state laws in compliance with Rule 144.
(h) Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Buyer, including
by merger or consolidation. The Buyer may not assign its rights or obligations
under this Agreement.
(i) No Third Party Beneficiaries. 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.
(j) Further Assurances. 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.
(k) No Strict Construction. The language used in this Agreement is
the language chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party.
(l) Changes to the Terms of this Agreement. This Agreement and any
provision hereof may only be amended by an instrument in writing signed by the
Company and the Buyer. The term "Agreement" and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or supplemented.
(m) Failure or Indulgence Not Waiver. No failure or delay in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
(n) Entire Agreement. This Agreement supersedes all other prior
oral or written agreements between the Buyer, the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and
this Agreement, the other Transaction Documents and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. The Company and
the Buyer acknowledge and agree that they have not relied on, in any manner
whatsoever, any representations or statements, written or oral, other than as
expressly set forth in this Agreement.
* * * *
IN WITNESS WHEREOF, the Buyer and the Company have caused this Mutual
Termination Agreement to be duly executed as of the date first written above.
THE COMPANY:
------------
ZAP, A CALIFORNIA CORPORATION
By: /s/ Xxxxxx Xxxxxxxxx
---------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Chief Executive Officer
BUYER:
------
FUSION CAPITAL FUND II, LLC
BY: FUSION CAPITAL PARTNERS, LLC
BY: SGM HOLDINGS CORP.
By: /s/ Xxxxxx X. Xxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
